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US Debt Could Double in 25 Years With Current Policies

Definition of 'Keynesian Economics'
An*economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.

Read more: Keynesian Economics Definition | Investopedia

With all due respect, the Investopedia definition is a caricature. Keynesian economics lays out a role for government in helping manage the economy. It argues for an expansionary fiscal policy during periods of economic weakness to address an output gap and for mopping up the stimulus during periods of growth. U.S. policy makers have had a bias for accommodation. They've focused on the first element, but ignored the latter one. Due to that bias for accommodation, once the economy has strengthened, one has not seen a concerted policy effort to mop up the stimulus. As a result, temporary spending measures have often been extended, as have temporary tax cuts. The end result has been a greater accumulation of public debt than would have been the case were the latter aspect of Keynesian economics applied.

For those who are interested, Keynes's classic work, The General Theory of Employment, Interest, and Money can be found here: http://cas.umkc.edu/economics/peopl.../courses/econ645/Winter2011/GeneralTheory.pdf
 
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With all due respect, the Investopedia definition is a caricature. Keynesian economics lays out a role for government in helping manage the economy. It argues for an expansionary fiscal policy during periods of economic weakness to address an output gap and for mopping up the stimulus during periods of growth. U.S. policy makers have had a bias for accommodation. They've focused on the first element, but ignored the latter one. Due to that bias for accommodation, once the economy has strengthened, one has not seen a concerted policy effort to mop up the stimulus. As a result, temporary spending measures have often been extended, as have temporary tax cuts. The end result has been a greater accumulation of public debt than would have been the case were the latter aspect of Keynesian economics applied.

For those who are interested, Keynes's classic work, The General Theory of Employment, Interest, and Money can be found here: http://cas.umkc.edu/economics/peopl.../courses/econ645/Winter2011/GeneralTheory.pdf

Very well stated, thanks
 
Yes, World War II got the United States out of the Depression. No, FDR did not cause the Depression. That is just false.

He didn't cause it, but he extended it, and created generations of Americans who have fed off the government teet since. It was the beginning of oversized government, which the Constitution was written to prevent.
 
With all due respect, the Investopedia definition is a caricature. Keynesian economics lays out a role for government in helping manage the economy. It argues for an expansionary fiscal policy during periods of economic weakness to address an output gap and for mopping up the stimulus during periods of growth. U.S. policy makers have had a bias for accommodation. They've focused on the first element, but ignored the latter one. Due to that bias for accommodation, once the economy has strengthened, one has not seen a concerted policy effort to mop up the stimulus. As a result, temporary spending measures have often been extended, as have temporary tax cuts. The end result has been a greater accumulation of public debt than would have been the case were the latter aspect of Keynesian economics applied.

For those who are interested, Keynes's classic work, The General Theory of Employment, Interest, and Money can be found here: http://cas.umkc.edu/economics/peopl.../courses/econ645/Winter2011/GeneralTheory.pdf

With respect - I understand that a definition is a simplification; as I typed in a post above:

'obviously ANY definition will not encompass an entire theory...it is a simplification.'

But my point was the New Deal DEFINITELY was - as you typed - 'an expansionary fiscal policy during periods of economic weakness'.

If running yearly deficits for almost a decade that averaged 3.5% of GDP to try and stimulate an economy is not Keynesian economics (or, part of it) then I do not know what it is.
 
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From CNBC:



News Headlines

The CBO's entire report can be found at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-05-Long-Term_Budget_Outlook.pdf

Supplemental material accompanying the report can be found at: CBO | The 2012 Long-Term Budget Outlook

The aggregate value of the debt is not the issue, its the ratio of the debt to the GDP. As long as the economy grows at 2.5% or better, a doubling of the debt in 25 years means we are no worse off then than now.

Many people carry a mortgage on their 2nd house that is much bigger than their first, but they make more money as their career matures and that bigger mortgage is actually a smaller burden than the original.
 
DA60 said:
But my point was the New Deal DEFINITELY was - as you typed - 'an expansionary fiscal policy during periods of economic weakness'.

The above quote is true. The leap that the New Deal was Keynesian in nature is not.

Increased spending is not inherently Keynesian. Increased spending in a time of economic contraction is not inherently Keynesian. "Economic stimulus" is not inherently Keynesian.

If running yearly deficits for almost a decade that averaged 3.5% of GDP to try and stimulate an economy is not Keynesian economics (or, part of it) then I do not know what it is.

You're absolutely right: you don't.
 
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The above quote is true. The leap that the New Deal was Keynesian in nature is not.

Increased spending is not inherently Keynesian. Increased spending in a time of economic contraction is not inherently Keynesian. "Economic stimulus" is not inherently Keynesian.



You're absolutely right: you don't.
Have I read the book you speak of? Nope.

But I understand it fairly well, imo.



I see you avoided answering my above question.

I will ask it again...

'You disagree with definitions from dozens of respected online publications (including the Financial Times, apparently) as to the simplified definition of Keynesian economics.

They are respected (some more then others).

You are not.

Whom should we believe?

You or them?'


I see from some of your other posts that you seem to revel in misinformation, inexactitude and just looking to fight.

I asked you a simple question - which you dodged.

You refuse to deal with facts or providing links to unbiased sources to make your point.

Imo, you are a juvenile poster and basically a troll.

You do not debate - you misinterpret, rant and judge.

I have better things to do then waste my time with people like you.


When you learn to treat others with respect and to post links to back up your rants - then I will pay attention to you.

Until then - why should I?


Have a nice day.
 
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Have I read the book you speak of?

Yes, actually I have studied Keynesian and post-Keynesian economics for quite some time so I know exactly what I am talking about, especially something so elementary as to what it actually is.

But I understand it fairly well, imo.

If you understood it fairly well then you wouldn't be appealing to incorrect dictionary definitions but rather arguing your point yourself. You're very clearly misinformed on what Keynes asserted.

The fact that don and I are on the same side on this issue is pretty telling. It's because this is economics 101.
 
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Yes, actually I have studied Keynesian and post-Keynesian economics for quite some time so I know exactly what I am talking about, especially something so elementary as to what it actually is.



If you understood it fairly well then you wouldn't be appealing to incorrect dictionary definitions but rather arguing your point yourself. You're very clearly misinformed on what Keynes asserted.

The fact that don and I are on the same side on this issue is pretty telling. It's because this is economics 101.

I see you avoided answering my above question...again.

I will ask it again...

'You disagree with definitions from dozens of respected online publications (including the Financial Times, apparently) as to the simplified definition of Keynesian economics.

They are respected (some more then others).

You are not.

Whom should we believe?

You or them?'
 
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He didn't cause it, but he extended it, and created generations of Americans who have fed off the government teet since. It was the beginning of oversized government, which the Constitution was written to prevent.

Wrong again. In fact FDR's pro-growth policies were working very well ... until conservatives talked him into going to austerity mode before the recovery was on solid ground. THAT caused the economy to backslide until it was bailed out by the biggest stimulus package of all time: WWII.
 
Wrong again. In fact FDR's pro-growth policies were working very well ... until conservatives talked him into going to austerity mode before the recovery was on solid ground. THAT caused the economy to backslide until it was bailed out by the biggest stimulus package of all time: WWII.

Ummm...he cut the budget for only one year.

And because the economy had grown SO dependent on government stimulus - it fell back into a recession.

All FDR did was artificially prop up the economy on debt.

And as soon as the debt crutch was removed - it collapsed.

Hardly a ringing endorsement for his Keynesianism-style polices.


FDR took office in March, 1933.

So how did the unemployment rate and the DOW from then until WW2 (for America)?

He introduced the banking Act which caused a big (temporary) jump in the DOW.

But after that - what happened?

From mid '33 until mid '42, the DOW went down.

Dow Jones Industrial Average (1900 - Present Monthly) - Charting Tools - StockCharts.com

And from 1933 until 1941, the unemployment rate averaged over 17%. Even in 1939 it was still 17.2%.


The Great Depression Statistics


And what happened during the 1920/21 Depression - which was handled by the government basically budding out and a slashing of the budget?

Within 3 1/2 years both the unemployment rate AND the Dow were back to near pre-Depression levels.

And the national debt actually went down.


THAT is how you handle a recession/depression.


BTW - if you look at Britain during the Great Depression; they also had mid-20% unemployment rate.

But they spent FAR less then America did, yet they recovered FAR faster.


The lesson - massive government spending does not work during a recession/depression.

It gives a quick fix - but then it just ends up making things MUCH worse in the long run.
 
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And what happened during the 1920/21 Depression...

The causes of the Great Depression and the causes of the 1920-21 contraction were different. The former had far more systemic and structural causes. The latter was largely the consequence of the post-WW I scale-down. If one looks at Pre-WW II U.S. history, one finds numerous significant economic downturns following the end of the nation's wars.
 
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Have I read the book you speak of? Nope.

But I understand it fairly well, imo.

If you haven't read Keynes or studied Keynesian economics, how can you understand it well? Just because one hears about it, even if quoted accurately, does not mean one understands it well. Absent the context and details, one can have a superficial understanding.

Finally, even as KC and I have disagreed on numerous issues, I strongly disagree with you that he is trolling. He is insisting on precision that is essential to discussing/debating Keynesian economics in a rigorous sense.
 
The causes of the Great Depression and the causes of the 1920-21 contraction were different. The former had far more systemic and structural causes. The latter was largely the consequence of the post-WW I scale-down. If one looks at Pre-WW II U.S. history, one finds numerous significant economic downturns following the end of the nation's wars.

I have four comments to this:

1) Were my statements about how quickly the DOW and the unemployment rate and the massive reduction of government spending during that time accurate?

BTW - the answer is 'yes'.

2) EVERY single recession/depression is different - no two are alike. They were both huge economic corrections (granted - the great Depression was definitely larger). And they were both handled MASSIVELY different.

The result?

The 1920/21 version ended quickly and actually saved the country money.

The Great Depression dragged on and on and on and cost the country (in the form of a greater national debt) BIG time.


3) Do you have links to unbiased, factual statistics that prove that the two were so dissimilar that to compare the two in the way I did is completely ineffective?

Because if you cannot - i am really not interested in your (or anyone else's) opinion. Everyone in this forum has an opinion. I can get 500 different opinions on this if I ask enough people for it.

That teaches me nothing.

I am only truly interested in unbiased facts.

If you have them - please present them and I will definitely view them.

Otherwise - it's just more endless debate.

I realize a ton of people on here seem to love that - I am NOT one of them.

I am here to learn and teach and pass the time - not to chatter on infinitum (no offense).


And, 4) as I typed, the fact that the British had mid-20's unemployment during the Great Depression as well, spend a fraction of what America did and yet, recovered FAR faster yet again shows that Keynesian-style policies (i.e. MASSIVE government spending to stimulate an economy) do not work.

They are not working now. And they did not work during the Great Depression.
 
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If you haven't read Keynes or studied Keynesian economics, how can you understand it well? Just because one hears about it, even if quoted accurately, does not mean one understands it well. Absent the context and details, one can have a superficial understanding.
I said 'fairly well' - not 'well'.

Please do not misquote me.

'Fairly well' means (to me) a basic understanding.

'Well' means (to me) a thorough understanding.


Besides - the definiton from the Financial Times disagrees with you and the other guy's opinions.

You honestly think I should take two faceless, nameless people on a chat forum's word over the Financial Times?

Not to mention noted economists I respect like Marc Faber, Jim Rogers, Peter Schiff?

No offense, but come on now.

Finally, even as KC and I have disagreed on numerous issues, I strongly disagree with you that he is trolling. He is insisting on precision that is essential to discussing/debating Keynesian economics in a rigorous sense.

Precision?

I have seen him deal in in-exactitude on numerous occasions with myself and other posters he has dealt with - and I have only been here a few days.

You seem a reasonable debater - he does not.

I believe he is inexact, condescending, combative, closed-minded and far more interested in putting people down then dealing in an open dialogue.

You disagree?

Noted.

Now can we please move on?
 
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3) Do you have links to unbiased, factual statistics that prove that the two were so dissimilar that to compare the two in the way I did is completely ineffective?

Some starting points:

Kindleberger, C. Manias, Panics, and Crashes: A Hstory of Financial Crises, 3rd edition, New York: Wiley, 1996.

Shiller, R. Irrational Exuberance, 2nd edition, Princeton University Press, 2005

Meltzer, A. A History of the Federal Reserve, Volume I 1913-1951, Chicago, The University of Chicago Press, 2003
 
Besides - the definiton from the Financial Times disagrees with you and the other guy's opinions.

You honestly think I should take two faceless, nameless people on a chat forum's word over the Financial Times?

Nothing KC or I said contradicts the FT definition. Your error is in assuming that the definition is an end point, and no context beyond the words of the definition is necessary. If you read Keynes's General Theory (and I posted the link), you will gain insight into that context and, therefore, have a much improved understanding of Keynesian economics.

Finally, I'm not at all suggesting that you take my word literally. I am suggesting that you take a look at what Keynes wrote rather than relying on brief definitions that cannot, by their brevitiy, provide the context and nuance that is essential to understanding Keynesian economics.
 
Nothing KC or I said contradicts the FT definition. Your error is in assuming that the definition is an end point, and no context beyond the words of the definition is necessary.

The New Deal is clearly an example of Keynesian-style government stimulus of an economy in recession/depression - not the entire Keynes 'philosophy', but the part related to this aspect.

The FT definition bares that out.

You two disagree?

Fine...whatever.
 
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Some starting points:

Kindleberger, C. Manias, Panics, and Crashes: A Hstory of Financial Crises, 3rd edition, New York: Wiley, 1996.

Shiller, R. Irrational Exuberance, 2nd edition, Princeton University Press, 2005

Meltzer, A. A History of the Federal Reserve, Volume I 1913-1951, Chicago, The University of Chicago Press, 2003
Come on now?

I said 'links to unbiased, factual statistics'...not suggest entire books.

Almost anyone can do the latter.

But if that is the best you can do...so be it.



Btw - imo, the Great Depression was caused by the Fed increasing the money supply in the mid-late 20's by 62% more then anything else.




BTW - the two worst economic downturns of the 20th century happened within 20 years of the creation of the Fed.

Coincidence?

I think not.
 
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BTW - the two worst economic downturns of the 20th century happened within 20 years of the creation of the Fed.

Coincidence?

I think not.


I suspected that you might hold to the fallacy that the institution of central banks/central banking has made things worse, hence I suggested the first volume of the Meltzer book. That volume covers the time period in question. To be sure, the Fed has made mistakes, but the Great Depression was not largely or wholly the Fed's creation. Many other factors led to the credit boom and mania that it financed, including the role of gold. The disproportionate role of gold also reduced U.S. flexibility to deal with the economic crisis once it was underway.
 
I suspected that you might hold to the fallacy that the institution of central banks/central banking has made things worse, hence I suggested the first volume of the Meltzer book. That volume covers the time period in question. To be sure, the Fed has made mistakes, but the Great Depression was not largely or wholly the Fed's creation. Many other factors led to the credit boom and mania that it financed, including the role of gold. The disproportionate role of gold also reduced U.S. flexibility to deal with the economic crisis once it was underway.

I strongly recommend watching this video.

"Why Was the Fed Created?" with George Selgin -- Ron Paul Fed Lecture Series, Pt 1/3 - YouTube
 
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well if we let the tax cuts expire,umm wouldnt even raise enough to fund the government by far.

at our current rate of spending,well probably have to run 75% tax rates for everyone to pay down this debt without cutting costs.

god forbid we cut programs america survived without,because not handing out stimulous checks and funding deads green companies and buying frivilous military gear will turn america into somalia:confused:


I like this plan to cut our debt in half this year.

Both political parties when in power have continued to charge on the US credit card and have increased the debt.

So you ask – How can we pay down the debt? How can we eliminate the $13 trillion and start over?

Well the answer comes from the Ronald Reagan former Director of the Budget – David Stockman. He says tax the personal net wealth of the richest 5% of Americans. What is the personal net wealth of the top 5%?

Stockman estimates that the richest 5% or approximately 1.5 million Americans are worth $40 trillion in net wealth. Net wealth is the amount a person is worth after all debts are subtracted from all the assets, cash, stock, real estate, etc. The top 5% are richer than the bottom 95% of all Americans, 308.5 million.

In 1985 this top 5% had a net wealth of just $8 trillion. Most of the gain in wealth is directly from low tax rates.

Keep in mind this is “personal” wealth not corporate wealth and has NO affect on corporations or business.

Stockman says we should have a one- time 15% tax on this net wealth that would bring in approximately $6 trillion and use this to pay down the debt. We would still have about $7 trillion in debt.
How the US Nation Debt could be paid-off NOW

Those people would never miss that 15%. Since we have been so nice as to allow their net worth to increase by 5 times since 1985 with our ever lowering tax rates, don't you think they could help old uncle sam out of this pickle?
I'm tired of people ranting about how the rich CAN'T bail us out if we needed them too. It's a lie
I don't want them to but they could pay off our debt tommorow and not change one thing in their life. Where do you think alot of that money we owe was spent?
The right way out of the debt problem is growth, nothing shrinks our debt faster than rising GDP's We certainly can't do what the Europeans did and make severe cuts.
 
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A ****en ron paul video ??? boy that’s gotta put the rubes in their place.:lamo

It's not a Ron Paul video.

It's a video from a man who worked for Ron Paul's campaign outside of his normal career.
 
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