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Keynesians wrong AGAIN …
and why US may surprise on growth.

What is great about seeing the economy through Keynesian lenses is the fact that you never have to say you are sorry for all the damage you caused. You just have to say, “It took a bit longer than we expected for our policies to work.” If it wasn’t so sad it would be to laugh.

The PhDs in clown suits are rit unning rampant within our government and institutions of “higher learning” spewing their econometrics still. Because after all, in the economic world A+B=C is the simple logic they seem to cling to so dearly.

But in a world of subjective valuation, so clearly defined by the Austrian School of economics, there is often no such thing as A+B=C. But the Austrians didn’t rely on higher math to prove this, just logic and hundreds of years of economic history.

But if econometrics doesn’t add up, how can I justify my PhD? Well, you can’t.

It is frustrating beyond belief to watch this play out over and over again. This is not rocket science. In fact, it is not a science at all. This is political economy. This is soft stuff. This is about psychology and behavior at points in time. This is about simple incentives that motivate. It is about the invisible hand of the market. In an economy whereby all wealth is driven by the private sector, as it is in the United States, if you screw up the private sector you will screw up that which we know as an economy. Period! End of story.

We know from real life experience again and again and again and again, though the leftist economic classes fail to get it (never seeming to let the facts get in the way of their equations), that allowing the private sector to keep more of its wealth not only allows the economy to grow, and all along with it despite the cat-calls from the inequality crowd, but it actually keeps the pro-government crowd flush with cash as tax revenues rise. But this crowd (left and right) and their lobbyist pals are never satisfied with the wealth transfer—they always want more.

OMG, how can it be that lowering the government burden from the backs of real working people can help the economy, laments the A+B+C crowd—deficits will abound surely! And yet this claptrap is again carried on by the major media as reality and a way to do what the pro-government crowd does best—generate more class warfare rhetoric. Yet this same crowd has the gall to say those that want smaller government, lower taxes, and individuals to be responsibility for their own actions are the ones creating vitriol. Mr. Orwell, phone your office.

This reminds me of something I once heard Ayn Rand say in an interview or speech I listened too many years ago. I am paraphrasing: The leftists were so delighted for so many years with communist Russia, as it meant an end to classes and inequality. Some leftists (very few) even admitted the reality, but justified it this way: yes, everyone seems poor and destitute, but at least they are “equally shabby.”

Here are some numbers for those who wonder why the economy didn’t get moving too fast out of this recent “recession” even though our beloved government was spending our money to help us. It comes via Leto Research:

It is a mistake to argue, as some market commentators have done, that the planned Republican spending cuts would derail the incipient economic recovery.

According to the National Income and Product Accounts (NIPA) of the Commerce Department, from the end of 2008 to the end of 2010 private-sector personal incomes declined by $413 billion, and government-sector incomes increased by $447 billion. The private sector losses include a $185 billion decline in private sector wages and salaries, a $55 billion decline in proprietors’ income, and a $204 billion decline in income from assets. The government sector gains include a $44 billion gain in government wages and salaries and a $403 billion increase in government transfer payments to individuals (only $89 billion of which was unemployment insurance benefits, i.e. proper “countercyclical” spending).

…Given that prior to the 2008 crisis consumer spending was growing by an average rate of 5.8%, we can say that the Obama administration’s massive government spending and income redistribution had negligible effect on aggregate consumption.

Bottom line: The government must stop taking our money for programs designed to “help us.” If they do stop “helping us,” the economy may actually recover surprisingly well. We can thank the wisdom displayed by the American electorate for sending a signal to this government to do just that—get out of the way, cut spending, and stop trying to “help us.”

Ooops, I guess that was spewing vitriol.