Thursday, April 22, 2010

Refuting Keynes with Hyperbole, and the Economy

This is my first double post, so I hope I make it worth your while.

For those that have read either Keynes or Bastiat, you ought to have heard ot the Broken Window Fallacy, either through its actual use or refutation. I would like to take that fallacy to an extreme, that the Keynesian theory of economics would say that crime, just like war, supports the economy.

The fallacy of the Broken Window involves the idea that a boy breaking a window results in a window maker making money, therefore the economy is stimulated by a petty crime. Keynes actually admits that war stimulates economy, because government spending stimulates the economy through its spending. If war stimulates the economy, and petty crimes stimulates the economy, then surely murder, theft, robbery, arson, and assault stimulate the economy in the eyes of Keynes.

For all violent crime, the private prisons would get paid more for those who are imprisoned there, thus allowing the prisons to buy more food and other supplies and equipment. For theft and robbery, the victim would have to pay more money to replace that which was stolen, which means that more of that particular good is bought than would otherwise occur. For arson, the property owner would have to pay for another building and all of the property inside, thus causing more money to also be borrowed from the financial system, thus increasing velocity of the monetary policy of the current administration. For assault, the hospital would get more money for treating the injured victim of assault or even battery. All of these crimes boost agregate demand.

This vision of crime is clearly perverse, because it would mean that criminals in general are justified in their crimes, if the goal government at that time is to stimulate the economy. Anyone who find that Keynesianism is correct, they ought to look at more than just the mathematical nature of Keynes's general theory, because the economy is not lead by machines. I will admit that Keynesianism does not treat humans as machines; Keynesiansim treats humans like herbivores of the field and of the forest: the Bear and the Bull.

There ought be no reason to justify war, digging ditches, public works, and breaking windows just to stimulate the economy. While no politician would run on advocating crime and war to stimulate the economy, it is nonetheless necessary to look to the extremities, as it is the extremities of every entity where you see the absurdity or profundity of the particular theory or entity.

Often, when I argue with my older brother, he gets mad at me for using extreme examples in an attempt to refute his points. I will admit that hyperbole is sometimes wasteful, but it is dangerous to posit infrequently what the extremes of a particular viewpoint. For instance, socialism ambiguously offers equality for all, but it fails to mention that when taken to its extremes, socialism results in moral stupidity, as is seen in Europe, the Middle East, and Russia. The reason for this is that if no one has a reason to compete, then the reason to excel in anything whatsoever is pointless. However, if religion is allowed, then Salvation is a possible motivation for moral intelligence, but the majority will avoid such out of a desire for equality or instant gratification as Socialism prefers for the people.

Hyperbole is a mental exercise that helps one to look at the principles of a particualr idea with remarkable clarity, and sometimes disgust. Further, if we did not use byperbole in combat, that is, if we did not look at extremities during combat, then we would fail to notice that very existence of our enemy's hands and therefore his armaments. We would see the enemiy's armor, his facial expression, and his stance, but our puritanical deisre to not watch his extremities would result in us never see the rusty machete slash our shoulder.

Keynes is merely a good example of a popularly held view of economics, which seems to be have a sociopathic view of government, war, and crime. I realize that to tear down one economic theory, you must have something better to replace it with. So far, I can only point out that everything that Keynes suggests to do when a bust occurs is in fact mal-investment, which lead to the bust through a binge in the first place. Why is the economy so bad toady? It is due to the mal-investment of mortgagors, home buyers, speculators (a.k.a. full-time investors), and government spending in general. To solve such a situation, interest rates must become fixed for a decade at least, government spending must be limited to military spending, public salaries, and other miscellaneous obligations, like welfare checks. The reason it is acceptable to maintain the current obligation-spending, is due to the fact that when the economy rebounds due to a fixed interest rate from the Fed and static taxation levels. Yes, if Congress spends no more than they had promised to up until today, then the increase in tax revenue could eventually pay back the total Federal debt. More government spending is mal-investment and is therefore depressionary.

I cannot see government spending decreasing anytime within the next two decades, so I see America experiencing another Great Depression. There need not be WW3, though that is still in the cards with Iran, North Korea, China, India, and Russia all very ablt to wage war at a moments notice if America or Israel invade Iran. Any nation, that is watching America as she has been invading various nations around the world, must be wondering who is the next nation to be liberated from its tyrannical government. Mexico, Cuba, China, Russia, Britain, France, Libya, Spain, Canada, Iran, North Korea, Italy, Germany, Saudi Arabia, most nations in South America and Africa; all of these nations and more are either already qualified or are becoming qualified to be liberated from each their government. I am not suggesting that America will invade any of these nations, but nations must be wonder who is next if they think that America is somehow an empire.

I would love to see a movement in poitics that makes the Democrats impossible to elect outside of the largest and oldest of cities. If Republicans get it into their heads that Democrat light makes them lose their seats in Congress, then maybe, just maybe, our nation can avoid catastrophe. I realize that the word catastrophe has been used frequently in response to the situation of the American economy, but realize that the US $ is looking like a ticking pipe-bomb to foreign investors and that commodities are doing very well compared to most stocks aside from the big technology giants, like Apple, Microsoft, and Adobe.

If I am wrong, then you only lost a couple of minutes to read my thoughts on the economy. If I am right, and you do nothing to prepare, then you might just find yourself at best in line for a soup kitchen, and at worst fighting local gangs, Federal troops, UN troops, or even your neighbors, for everything you hold dear, and maybe your Liberty too.

I must emphasize that if you are not willing to proclaim, "give me Liberty or give me Death", to all of your friends and family, then you are not yet prepared to survive anything that might come your way, whether that be unemployment, violent gangs, or some Federal agent looking to take anything you can use to fight them with.

Give me Liberty or Give me Death!
Joe, a Texan