Some ideas are so stupid, only a “highly educated” person could believe them. Mish heaps scorn and ridicule upon one of these Ivy League douchebags.
“Libertarian Turned Keynesian” Responds
Hello Mish
I want you to publish this rebuttal to your post.
You can use my first name if you’d like with Libertarian-turned-Keynsian in brackets.Let’s say there are 8 million healthy, unemployed people in US.
The Treasury can simply print 4 million pieces of IOU claiming that the holder of this piece of paper is entitled to a free massage or a free cleaning services or free haircut or free baby-sitting or free moving (basically any service worth $50 with negligible raw material) from another unemployed person and simply distribute it to unemployed people.
What happens? On Day 1, the 4 million who got the coupons tender their coupons and receive services (increase in daily GDP 4 million * 50 == 200 Million).
On Day 2, the opposite happens and this goes on quite a while. Now, lets say the economy improves and 2 Million get employed. Now essentially we have 1 Million extra coupons (inflation). Treasury will tax the lucky/rich people who have a job and a coupon and essentially retire them.
Or, let’s say the economy deteriorates and 2 more more million get unemployed. Now there are few coupons and some may be willing to do the job for 3/4th of a coupon (deflation). Now essentially Treasury can print extra 1 million and distribute them.
Notes:
1) We need flexible money supply.
2) Having gold standard is stupid. What does amount of gold supply have to do with anything?
3) We increased GDP by simply printing pieces of paper.Bonus:
Let’s say someone comes with a brilliant idea that one unemployed can actually perform two jobs a day. Now instantly the capacity doubled and Treasury can print double the amount of IOUs.
So Ridiculous I Hardly Know Where to Start
I did not post the first name of “Libertarian Turned Keynesian” on purpose. His name was unusual enough that he could be found.
The above response is clearly absurd. I reply only because it is precisely the kind of “something for nothing” silliness that is frequently taught in higher education.
- Any person with a modicum of common sense, at any education level beyond 7th grade, should understand what happens to demand as soon as free money stopped.
- Any person with a modicum of common sense, at any education level beyond 7th grade, should understand costs of goods and services would soar if free money was handed out in any significant amount.
- Any college graduate should understand the difference between nominal GDP and “real” inflation adjusted GDP.
- Any college graduate should understand what happened in Zimbabwe and Weimar Germany.
- Any person with any amount of common sense should understand it’s what you get for your money, not how much you have, that matters.
Ignoring the typos, clearly the writer has absolutely zero sense of the difference between nominal GDP and wealth. In nominal terms (using the number of Zimbabwe dollars in circulation as “wealth”), Zimbabwe was economically the strongest country in the world.
Unfortunately, they cannot teach common sense in schools. Instead they teach Keynesian claptrap. Then economically illiterate graduates write me things similar to the above. This kind of thing happens all the time, frequently with emails ending in “.EDU”.
Addendum: Spare the Monetarists?
Reader Ayal asks “You target your attacks at Keynes and Keynesians, but why do you spare the Monetarists?”
The simple answer is I don’t. Bernanke is primarily a monetarist with some Keynesian tendencies as well. QE is 100% monetarism and I attack that all the time.
Countless times I have pointed out that Japan tried both monetary and fiscal stimulus and failed. One can also search my blog for Greg Mankiw, the high priest of monetarism to see what I have to say.
If I had to pick one article in that search reference to read, it would undoubtedly be Modern Day Fairy Tale of 3 Economic Wizards (Except It’s True)
Comment
It’s quite shocking what comes out of our education system. Of course, what comes out is hugely influenced by economically illiterate teachers at the highest levels in education.
Addendum 2: Not a Hoax
Several people suggested the email was a hoax.
It’s not. I have additional correspondence with this person thanking me for not using his name. And a Google check of his name with numerous references ties back to Columbia.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/#bhi3yBrBGz5EXBDe.99
The Watchdog says:
Mish attacks Keynesian stupidity with all the vengeance of Samuel L. Jackson in Pulp Fiction.
Go Mish!
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28th January 2013 at 9:43 am
Mark says:
Not actually stupid if you understand what the Krugmanist believe.
It really is the difference between people freely choosing what they want or having autocratic rule determine what’s best for them.
Those coupons expend the supply of goods out of thin air and are added to existing goods which will be priced much higher. Therebye, the BLS will report a CPI that has been mitigated by the (you cut my hair and I’ll mow your lawn) supply of services.
The problem is the government is making those items on the lower rung of Maslow’s High Archy of needs more expensive. And causing people without coupons to cut back elsewh
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28th January 2013 at 10:34 am
Thunderbird says:
Technology replacing middle income jobs. Where does that lead us? It leads us to a necessity to create new jobs. It is said that necessity is the mother of invention.
Necessity for cheap labor resulted in the invention of robots and technology to replace real people in the work force, due to an extra cost imposed by the government to employee real people. And what is this extra cost? Let’s see. Social Security tax paid by the employer, unemployment tax paid by the employer, workman’s compensation tax paid by the employer, medical insurance paid by the employer, accounting costs to keep records on employee wages for the IRS paid by the employer, costs to answer forms and requests by the government about the employee, workplace rules and regulations to be followed by the employer for the employee at cost to the employer, and on, and on, and on, until robots and technology becomes the solution to get out of the black hole of expenses imposed by the government just to have live employees. How absurd has it gotten!!!
So now that the mother of invention has solved the private employers problem, the government is stuck with the consequences of people looking to them to create jobs for live people because the private sector (the old creators of jobs) have been pushed out of the job creation business due to excessive costs caused by government regulation.
So what has the government been doing to solve this problem? They have been creating government jobs and starting wars around the world which requires the production of products for war, which in turn creates defense jobs.
The government has grown so much with this plan that it now is the driver of the economy. So as technology continues to replace middle class workers the government will increase it’s work force because of the necessity to keep people employed.
The government is good at job creation. Look at what jobs they have created in the last ten years? They have created the Department of Homeland Security that employs hundreds of thousands of people. Look at all the new jobs being created by the TSA? And look at the potential for more jobs to be created by them to police all the transportation terminals, highways, office buildings, public parts, etc. It is unlimited!
There is an accounting problem they have with the debt they are creating; due to the government job increases, that the mother of invention has to solve. They just have to change some accounting rules.
In the past with the use of payroll taxation on private sector wages since WW2 the government was able to grow comfortably. Then when the private sector employment began to shrink and government jobs increased the government began facing cash flow problems. So first they began inflating the money supply by just printing money to pay the bills. Then when inflating limits were reached they started borrowing from other countries. Today they are reaching the limits to their borrowing ability.
So what is their invention going to be to solve this problem?
They will just take over the entire economy including the postage; that is, the entire financial system. Communism is the answer to keep everyone employed by newly created government jobs in security and continuous wars, drug sales, and controlling the entire financial system. Think of Orwell’s 1984 world.
Of course many people who still want a private sector economy and to keep their assets won’t like this plan and will resist. So the government’s invention to solve this problem IS to disarm the people. And then the communist utopia will be realized.
End of story… or is it?
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28th January 2013 at 10:53 am
KaD says:
There is one economic plan that’s been proven to work: the Icelandkicksbankersasses plan.
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28th January 2013 at 11:55 am
AWD says:
Has B.S. In Obamanomics. Does not see redundancy.
US to have world’s best educated Blue Collar class
Studies are showing that America’s education system is having a true ‘trickle-down’ effect on the labor force, as more Blue Collar workers have college degrees than ever before. Rather than owning a house or even getting married, the new ‘American Dream’ appears to be a college education for more and more working-class Americans.
According to the most recent study, nearly half of all Americans with college degrees are considered ‘overqualified’ for their jobs based on their college education. This means the US has set a pace to catch up with India’s top position as the world’s most college-educated labor pool.
While only around 23 million jobs in the US require college degrees, there are over 41 million college-degree holders still in the US workforce, not counting those graduates who have retired or opted out of employment. This means that college graduates are taking on positions where degrees are not necessary.
“The popular myth is that a university education is about employment,” said Candy Panzer, an analyst with the Center for Progress in Education, which studies how colleges educate young people. “Colleges are not telling students that they will get great jobs if they graduate, but rather than a degree is part of one’s self-exploration. It is about personal fulfillment.”
Panzer said that students are not always looking for a career path when they enter college, as most parents are more interested in getting their children into a college rather than finding an employment track. When parents admonish their children over poor grades, it is rarely about jobs, but college that they are thinking.
“Graduation from college is usually the starting point for many young people in finding out what they want to do with their lives, and what they are really capable of handling,” Panzer said. “Many degree programs are not about going directly into the labor market. I mean, a bachelor degree in Latino Studies is not going to translate into a $100,000-a-year job.”
Panzer thinks that Generation Y, which are those students presently in college, are not interested in working in traditional ways, and will find more contentment with being able to ‘just get by’ rather than to have stress-fill but lucrative careers. They are not measuring themselves by material success, but rather living up to the ideals set for them in colleges.
“Students are being taught to value themselves rather than their stuff, and I think that is great,” Panzer quipped. “The lower their expectations are of employment, the happier they will be as our nation changes course towards a less materialistic and more globalistic direction.”
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28th January 2013 at 2:44 pm