The Successor to Keynes

Guest Post by Jeff Thomas from Doug Casey’s International Man

Europe is abuzz with Capital in the Twenty-First Century by French economist Thomas Piketty, released in Europe in March of this year and now a best-seller. It has since crossed the Atlantic and is already the number-one best-seller for booksmith Amazon. It has been called a “blockbuster” of a book, and many reviewers believe that it has the ability to revolutionise the study of economics.

Here are a few quotes from reviews:

In Piketty’s view, the solution is a measure beyond the political reach of any individual nation or international body, as they are now constituted: a global wealth tax. Only such a tax “would contain the unlimited growth of global inequality of wealth, which is currently increasing at a rate that cannot be sustained in the long run.”—Thomas B. Edsall

Many of the book’s 700 pages are spent marshalling the evidence that 21st-century capitalism is on a one-way journey towards inequality – unless we do something. … Piketty’s call for a “confiscatory” global tax on inherited wealth makes other supposedly radical economists look positively house-trained. He calls for an 80% tax on incomes above $500,000 a year in the US, assuring his readers there would be neither a flight of top execs to Canada nor a slowdown in growth, since the outcome would simply be to suppress such incomes. … Piketty’s Capital, unlike Marx’s Capital, contains solutions possible on the terrain of capitalism itself: the 15% tax on capital, the 80% tax on high incomes, enforced transparency for all bank transactions, overt use of inflation to redistribute wealth downwards.—Rosaline Christine McGreevy

His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality. … A work of extraordinary ambition, originality, and rigor, Capital in the Twenty-First Century reorients our understanding of economic history and confronts us with sobering lessons for today.—Amazon

The words, “Brilliant!” Ground-breaking!” and “Visionary!” will no doubt be seen in many reviews of Mr. Piketty’s book. He has written some 700 pages and gone back as far as the eighteenth century in his research, so few would doubt that he has been thorough.

And there can be no doubt that the world is presently facing greater economic turmoil than it ever has in history. One might say that his tome is “right on time.”

So let us examine his principal conclusions and learn why so many people are seeing his vision as the answer to the world’s troubles.

He recommends:

  • Uniform global taxation
  • Confiscatory tax on inherited wealth
  • 15% tax on capital
  • 80% tax on annual incomes over US$500,000
  • Enforced transparency on all bank transactions
  • Overt use of inflation to redistribute wealth downwards

Why didn’t anyone else think of this brilliant plan?

Well actually, they did. In fact, the above is essentially the shopping list of the IMF, the EU, the OECD and, in fact, many of the governments that make up what was formerly described as “the free world.” Piketty’s “vision” so closely follows the visions of these entities that, if he did not exist, they might have had to invent him.

After all, if governments come up with an economic plan that is dramatically socialistic, they might be regarded as being somewhat suspect. However, if an economist, who is of course “independent” in his thinking, offers a grand solution, it becomes easier for the masses to swallow.

Readers of International Man are likely to take a different view. They may argue that the observation that, “satisfactory answers have been hard to find for lack of adequate data and clear guiding theories,” is poppycock. Libertarians and contrarians have been offering very real solutions for decades. Unfortunately, Boobus humanus rarely bothers to pay attention to any view that is not the one currently being promoted by the governments of the day.

As Doug Casey says so accurately:

Even when people recognize and intellectually understand the philosophy of personal freedom and responsibility, most just can’t integrate it into themselves emotionally. And others simply refuse to grasp it intellectually. I’m afraid libertarianism is fated to appeal to only a small minority.

It’s interesting to draw a parallel between Mr. Piketty and John Maynard Keynes. Mister Keynes published his The General Theory of Employment, Interest, and Money in 1936. It was therefore well timed to provide the populace (who were then struggling with the Great Depression) with a brilliant solution from a Cambridge-educated economist.

Mister Keynes’ book was an instant hit with most all governments of the day, as it endorsed more state-controlled, socialistic economic principles. Since 1936, Keynesian economics has been the standard for most all governments and is regularly referred to, to explain why they employ such confiscatory policies.

Now, just in time for the Greater Depression, fate has delivered what we might term Mister Piketty’s “Revised Keynesianism”—an economic standard for the twenty-first century, and one which takes the power of governments up several notches.

Will the governments of the world respond to this new vision and announce that Mister Piketty has “shown the way” out of the current debacle, which has been blamed on capitalism?

Most definitely. Just as Mister Keynes was “just right” for the goals of governments in the twentieth century, Mister Piketty is just right for the goals of governments in the twenty-first century. And, as in the Great Depression, the great majority of people will not only accept the new approach, but applaud.

Of course, those of us with a libertarian bent could simply choose to regard Mister Piketty as a misinformed academic who fails to understand economics, but this would be a mistake.

Yes, there are many people today who are thinking in a more libertarian direction. Indeed, many are seeking to internationalise themselves in order to save their liberty and their wealth. Far more people, however, who also fear the downfall of the present economic system, are sitting tight, in the hope that the light will suddenly go on in the minds of economists and political leaders alike, that what is needed is a more free-market society. This group of people hopes that national leaders will “come to their senses” and reverse the trend toward socialism and fascism.

These latter people might do well to consider that the blueprint for the future has now been published. The blueprint implies that the reason Keynesianism has failed is not that it was socialistic. We are told that it failed because it was not radical enough; not far-reaching enough. A more totalitarian Keynesianism was needed and has now been provided.

If the reader lives in the EU, US, or other country whose economic direction is similar, he is left with the question of whether it is in his interest to remain in a jurisdiction that is likely to become even more totalitarian during and after the Greater Depression.

Editor’s Note: International diversification is the solution and your ultimate insurance policy.

It gives you options and frees you from absolute dependence on any one country.

Achieve that freedom, and it becomes very difficult for any single government to control your destiny.

It’s admittedly late in the game, but not too late to get started, which is why I recommend doing it sooner rather than later. Here is a great place to start.

Piketty Is Rickety On Government Complicity

Bad Government and Central Bank Policy Are the MAIN CAUSE of Runaway Inequality

French economist Thomas Piketty’s book on inequality – Capital in the Twenty-First Century – has gone completely viral.

Mainstream economists like Paul Krugman and Joseph Stiglitz endorse it. So does Economist magazine. The Financial Times and New York magazine both call him a ”rock star economist”.

Slate notes:

While recently passing through D.C., he took a little time to meet with Treasury Secretary Jack Lew, the Council of Economic Advisers, and the IMF. Even Morning Joe, never exactly on the leading edge of ideas journalism, ran a segment about Capital Tuesday morning.

Is Piketty right or wrong about inequality, its causes and the prescription for addressing inequality?

Piketty Is Right about Inequality

We noted in 2010 that extreme inequality helped cause the Great Depression … and the 2008 financial crisis. We noted in 2011 that inequality helped cause the fall of the Roman Empire.

In a few short years, mainstream economists have gone from assuming that inequality doesn’t matter, to realizing that runaway inequality cripples the economy.

Pikettey correctly notes that inequality is now the worst in world history … and will only get worse.

Asset Prices Rise Faster than Wages

Piketty argues that the main cause for inequality is that the rate of return on capital – land, natural resources, stocks, bonds and other assets – is far higher than the growth rate of the economy:

Because the growth rate is much slower than the rate of profit from holding capital assets, the asset-holders’ wealth increases much faster than the wealth of workers. In other words, working stiffs can’t keep up with those who make their money from investing in (and seeking rent from) land, stocks, bonds and other assets.

Piketty – a rigorous data researcher – is probably right that this is one of the main causes of inequality.

Government and Central Bank Policy Is What Is Making Assets Soar and the Economy Sink

But Piketty underplays the fact that bad government and central bank policy have greatly widened the gap between growth rate. After all, Fed chairman Bernanke, Treasury Secretary Geithner and chief economist Summer’s entire strategy was to artificially prop up asset prices – including the stock market – and see this, this, this and this.

At the same time, government policy has harmed the general economy, caused unemployment and hurt the average American.

Indeed, real wages have actually plummeted since 1969, and most of the new jobs that have been created are part times jobs with no benefit.

In other words, bad government and central bank policy have made the rate of return on capital much higher … but lowered wages. As such, bad policy is the core cause of the recent increase in inequality.

Nobel economist Joseph Stiglitz said in 2009 that the government’s toxic asset plan – a scheme to inflate the value of assets held by banks – “amounts to robbery of the American people”.

Bailouts Feather the Nests of the Fatcats, While Doing Nothing for the Average American

The American government’s top official in charge of the bank bailouts writes:

Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.

Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.

What’s he talking about?

Well, the Fed threw money at “several billionaires and tens of multi-millionaires”, including billionaire businessman H. Wayne Huizenga, billionaire Michael Dell of Dell computer, billionaire hedge fund manager John Paulson, billionaire private equity honcho J. Christopher Flowers, and the wife of Morgan Stanley CEO John Mack

And the bank bailouts weren’t a one-time thing in 2008. The government has been – continuously and massively – been bailout out the big banks for the last 6 years.

Indeed, virtually all of the banks profits comes from government bailouts. A top banking analyst estimates that subsidies to the giant banks exceeds $780 billion dollars each year.

A study of 124 banking crises by the International Monetary Fund found that bailing out banks which are only pretending to be solvent – like most of the big American banksharms the economy. So growth is slowed, while the richest fatcat bankers rake in the dough.

Indeed, the bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:

  • A lot of the bailout money is going to the failing companies’ shareholders
  • Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”

(Top economists, financial experts and bankers say that the big banks are too large … and their very size is threatening the economy. They say we need to break up the big banks to stabilize the economy.

If we stop bailing out the Wall Street welfare queens, the big banks would focus more on traditional lending and less on speculative casino gambling. Indeed, if we break up the big banks, it will increase the ability of smaller banks to make loans to Main Street, which will level the playing field.

We’re all for forcibly breaking them up. But we don’t even have to use government power to break up the banks … the big banks would fail on their own if the government just stopped bailing them out.)

QE: the Greatest Wealth Transfer in History

It’s been known for some time that quantitative easing (QE) increases inequality (and see this and this.) Many economists have said that QE quantitative easing benefits the rich, and hurts the little guy. 3 academic studies – and the architect of Japan’s quantitative easing program – all say that QE isn’t helping the American economy.

The Federal Reserve official responsible for implementing $1.25 trillion of quantitative easing has confirmed that QE is just a massive bailout for the rich:

I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

***

Trading for the first round of QE ended on March 31, 2010. The final results confirmed that, while there had been only trivial relief for Main Street, the U.S. central bank’s bond purchases had been an absolute coup for Wall Street. The banks hadn’t just benefited from the lower cost of making loans. They’d also enjoyed huge capital gains on the rising values of their securities holdings and fat commissions from brokering most of the Fed’s QE transactions. Wall Street had experienced its most profitable year ever in 2009, and 2010 was starting off in much the same way.

You’d think the Fed would have finally stopped to question the wisdom of QE. Think again. Only a few months later—after a 14% drop in the U.S. stock market and renewed weakening in the banking sector—the Fed announced a new round of bond buying: QE2. Germany’s finance minister, Wolfgang Schäuble, immediately called the decision “clueless.”

That was when I realized the Fed had lost any remaining ability to think independently from Wall Street.

Even the president of the Federal Reserve Bank of Dallas said that Fed’s Fisher said that “QE was a massive gift intended to boost wealth.”

Billionaires have admitted that they are the beneficiaries of QE. For example, billionaire hedge fund manager Stanley Druckenmiller said the following about QE:

This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.

“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”

Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”

“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”

And Donald Trump said:

“People like me will benefit from this.”

Economics professor Randall Wray writes:

Thieves … took over the whole economy and the political system lock, stock, and barrel. They didn’t just blow up finance, they oversaw the swiftest transfer of wealth to the very top the world has ever seen.

Economics professor Michael Hudson says that the big banks are trying to make us all serfs.

Economics professor Steve Keen says:

“This is the biggest transfer of wealth in history”, as the giant banks have handed their toxic debts from fraudulent activities to the countries and their people.

Money “Creation” Stuffs Bankers’ Pockets with Money

The advent of central banks hasn’t changed this formula. Specifically, the big banks (“primary dealers”) loan money to the Fed, and charge interest for the loan.

the banking system is founded upon the counter-intuitive but indisputable fact that banks create loans first, and then create deposits later.

In other words, virtually all money is actually created as debt. For example, in a hearing held on September 30, 1941 in the House Committee on Banking and Currency, the Chairman of the Federal Reserve (Mariner S. Eccles) said:

That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.

And Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, said:

If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.

Debt (from the borrower’s perspective) owed to banks is profit and income from the bank’s perspective. In other words, banks are in the business of creating more debt … i.e. finding more people who want to borrow larger sums.

Debt is central to our banking system. Indeed, Federal Reserve chairman Greenspan was so worried that the U.S. would pay off it’s debt, that he suggested tax cuts for the wealthy to increase the debt.

The big banks (“primary dealers”) loan money to the Fed, and charge interest for the loan. This is in contrast to what the Founding Fathers intended, and a massive redistribution of wealth … unnecessarily transferring extra money on every loan to the big primary dealers.

Lawlessness Is a Core Cause of Inequality

Joe Stiglitz said:

Inequality is not inevitable. It is not … like the weather, something that just happens to us. It is not the result of the laws of nature or the laws of economics. Rather, it is something that we create, by our policies, by what we do.

We created this inequality—chose it, really—with [bad] laws

Conservative Ron Paul points out that the system is rigged for the rich and against the poor and the middle class:

We asked the top regulator and prosecutor during the S&L crisis, who obtained over 1,000 felony convictions for major white collar fraud – professor of law and economics, Bill Black – what are the core causes of inequality. Professor Black told Washington’s Blog:

The industry that is the largest single driver of surging income inequality is finance. Finance dramatically increases inequality through three primary means. The obvious means is the massive flow of profits out of the productive sector and into finance, particularly compensation for finance elites. We know that a very large amount of that compensation is the product of the “sure thing” of accounting control fraud. They have been able to lead the fraud epidemics with absolute impunity. No Wall Street elite officer who led the frauds that caused the crisis has ever been prosecuted. [Background.] There are virtually no cases of “claw backs” from the C-suite perpetrators’ compensation even when it is now inescapable that the “income” they reported to “earn” their bonuses were lies and they were actually creating horrific losses.

The second means is that the three most destructive epidemics of financial fraud in history caused our financial crisis and hyper-inflated the bubble. This too was a “sure thing” because of the fraud “recipe.” The household sector’s wealth loss was over $11 trillion. Over 10 million Americans lost their jobs. The productivity loss is estimated at over $21 trillion. Each of these actions caused a vast loss of wealth suffered disproportionately by the 99%.

Third, finance, even absent fraud, is a major cause of increasing inequality. It is the means of tax evasion, which is (in $ terms) a crime that is all about the 1%, hedge funds, and large corporations. It is also the means, and the excuse, for outsourcing American jobs in the productive sector and extorting domestic tax giveaways by putting U.S. states and cities in competition to induce them to locate in a particular city.

In the savings and loan debacle we sought to remove all the proceeds of fraud from the guilty elites.

Indeed, the big banks continue to manipulate every market and commit crime after crime and … and profit handsomely from it, while law-abiding citizens slide further and further behind.

Yet Obama is prosecuting fewer financial crimes than Bush, or his father, or Ronald Reagan. Indeed, the government has actively covered up for – and encouragedcriminal fraud.

Indeed, there are two systems of justice in Americaone for the big banks and other fatcats, and one for everyone else.

Holding the little guy to the letter of the law – while letting the fatcats run around immune to the law – is making inequality much worse.

Black points out that we should claw back ill-gotten gains from criminals under well-established fraud principles. Specifically, the government could use existing laws to force ill-gotten gains to be disgorged (see this and this) and fraudulent transfers to be voided.

Economist Michael Hudson also criticizes Piketty for failing to address crime and fraud as core causes of inequality:

The other thing that is left out of the income tax statistics is of course how fortunes are really made, and that’s crime and fraud. The good thing about Piketty is he points out, why is it that French novelists and English novelists tell you much more about wealth than economics? And he points out that in the 19th century novels by Jane Austen and Balzac, the way to make a fortune is to marry into it. That’s true, but what Balzac also said is that behind every fortune is a great theft.

Government Subsidies to the Biggest Fatcats

The government shovels mass quantities of money to giant corporations through direct and indirect subsidies.

This includes subsidies to:

Why You’re Paying Too Much In Taxes Today: Because the Ultra-Rich Pay Nothing … Or Get Tax Refunds

The big boys use loopholes – including claiming their profits in foreign countries – to pay little or no taxes .. or to get tax refunds.

The middle class gets saddled with a heavier tax burden because the richest avoid taxes.

Government Creation of Monopolies

Wikipedia notes:

A better explainer of growing inequality, according to Stiglitz, is the use of political power generated by wealth by certain groups to shape government policies financially beneficial to them. This process, known to economists as rent-seeking, brings income not from creation of wealth but from “grabbing a larger share of the wealth that would otherwise have been produced without their effort”

Rent seeking is often thought to be the province of societies with weak institutions and weak rule of law, but Stiglitz believes there is no shortage of it in developed societies such as the United States. Examples of rent seeking leading to inequality include

  • the obtaining of public resources by “rent-collectors” at below market prices (such as granting public land to railroads, or selling mineral resources for a nominal price in the US),
  • selling services and products to the public at above market prices (medicare drug benefit in the US that prohibits government from negotiating prices of drugs with the drug companies, costing the US government an estimated $50 billion or more per year),
  • securing government tolerance of monopoly power (The richest person in the world in 2011, Carlos Slim, controlled Mexico’s newly privatized telecommunication industry).

(Background here, here and here.)

Stiglitz says:

One big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy …. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end.

Government creates monopolies even in the U.S. (and see below regarding government creation of the too big to fail banks.)

War Makes Us Poor … But Makes Fatcats Richer Quicker

War makes the bankers and executives in defense companies rich.

But – contrary to a long-standing myth – it makes the rest of us poor.

As such, war is a major cause of inequality.

Over-Financialization

When a country’s finance sector becomes too large finance, inequality rises. As Wikipedia notes:

[Economics professor] Jamie Galbraith argues that countries with larger financial sectors have greater inequality, and the link is not an accident.

Government policy has been encouraging the growth of the financial sector for decades:

http://2.bp.blogspot.com/-2DxXTVc4xnc/USfwvMBlO-I/AAAAAAAAB_Y/a1dyx_5U5Hs/s1600/financial+and+nonfinancial+sectors+-+compensation+Les+Leopold.jpg

And see this.

Economist Steve Keen has also shown that “a sustainable level of bank profits appears to be about 1% of GDP”, and that higher bank profits leads to a ponzi economy and a depression.

The government is largely responsible for this over-financialization. For example, MIT economics professor and former IMF chief economist Simon Johnson points out that the government created the giant banks, and they were not the product of free market competition.

Inequality Started Soaring When Nixon Took Us Off the Gold Standard

The New York Sun notes that inequality started soaring in 1971 … the same year that Nixon took the U.S. off of the gold standard. The Sun shows the following chart from Piketty’s book:

Zero Hedge emphasizes the inflection point:

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140422_piketty.png

Money Being Sucked Out of the U.S. Economy … But Big Bucks Are Being Made Abroad

Part of the widening gap is due to the fact that most American companies’ profits are driven by foreign sales and foreign workers. As AP noted in 2010:

Corporate profits are up. Stock prices are up. So why isn’t anyone hiring?

Actually, many American companies are — just maybe not in your town. They’re hiring overseas, where sales are surging and the pipeline of orders is fat.

***

The trend helps explain why unemployment remains high in the United States, edging up to 9.8% last month, even though companies are performing well: All but 4% of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.

But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9%, says Robert Scott, the institute’s senior international economist.

“There’s a huge difference between what is good for American companies versus what is good for the American economy,” says Scott.

***

Many of the products being made overseas aren’t coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.

Government policy has accelerated the growing inequality. It has encouraged American companies to move their facilities, resources and paychecks abroad. And some of the biggest companies in America have a negative tax rate … that is, not only do they pay no taxes, but they actually get tax refunds.

(And a large percentage of the bailouts actually went to foreign banks (and see this). And so did a huge portion of the money from quantitative easing. More here and here.)

Conclusion: Piketty Is Rickety On Government Complicity

The bottom line is that Piketty has done a great job of documenting the extent of inequality, and some of its causes. But he misses the degree to which bad government and central bank policy is responsible.

Memo To Professor Piketty: Its The Central Banks, Stupid!

Via David Stockman’s Contra Corner

By Hunter Lewis

Thomas Piketty, a 42-year-old economist from French academe has written a hot new book: Capital in the Twenty-First Century. The U.S. edition has been published by Harvard University Press and, remarkably, is leading the best seller list; the first time that a Harvard book has done so. A recent review describes Piketty as the man “who exposed capitalism’s fatal flaw.”

So what is this flaw? Supposedly under capitalism the rich get steadily richer in relation to everyone else; inequality gets worse and worse. It is all baked into the cake, unavoidable.

To support this, Piketty offers some dubious and unsupported financial logic, but also what he calls “a spectacular graph” of historical data. What does the graph actually show?

The amount of U.S. income controlled by the top 10 percent of earners starts at about 40 percent in 1910, rises to about 50 percent before the Crash of 1929, falls thereafter, returns to about 40 percent in 1995, and thereafter again rises to about 50 percent before falling somewhat after the Crash of 2008.

Let’s think about what this really means. Relative income of the top 10 percent did not rise inexorably over this period. Instead it peaked at two times: just before the great crashes of 1929 and 2008. In other words, inequality rose during the great economic bubble eras and fell thereafter.

And what caused and characterized these bubble eras? They were principally caused by the U.S. Federal Reserve and other central banks creating far too much new money and debt. They were characterized by an explosion of crony capitalism as some rich people exploited all the new money, both on Wall Street and through connections with the government in Washington.

We can learn a great deal about crony capitalism by studying the period between the end of WWI and the Great Depression and also the last 20 years, but we won’t learn much about capitalism. Crony capitalism is the opposite of capitalism. It is a perversion of markets, not the result of free prices and free markets.

One can see why the White House likes Piketty. He supports their narrative that government is the cure for inequality when in reality government has been the principal cause of growing inequality…..

In 1936, a dense, difficult-to-read academic book appeared that seemed to tell politicians they could do exactly what they wanted to do. This was Keynes’s General Theory. Piketty’s book serves the same purpose in 2014, and serves the same short-sighted, destructive policies.

If the Obama White House, the IMF, and people like Piketty would just let the economy alone, it could recover. As it is, they keep inventing new ways to destroy it.

 

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This is a syndicated repost courtesy of Mises Daily : Mises Institute on Austrian Economics and Libertarianism. To view original, click here.