We are witnessing the real time death throes of modern macro-economic theory
The twin pillars of modern macro-economics are Fiscal (Keynesian) and Monetary policy. In the modern era, both of these "schools of thought" were given tremendous impetus during the 1930s Great Depression, as desperate policy-makers sought macro-driven strategies for alleviating poverty.
The concept behind both of these policies was "good", however, the implementation of both of these policies has been an ever-greater overwhelming disaster...
Very briefly, most people know that Fiscal policy is the use of government deficit spending to stabilize the economy during a recession. The intent is to support GDP/demand while the private economy restructures and otherwise retrenches for sustainable growth. Similarly, Monetary policy is the manipulation of the cost of money (interest rates) as a similar means of providing more (or less) liquidity to the private sector to alleviate periods of low liquidity and high real interest rates.
It wasn't too long ago ~a few decades, when these were both regarded as competing schools of thought. Coming out of WWII, Fiscal policy predominated since the world's money supply was still constrained by the quasi-gold Exchange standard that was in place during that era. The end of the gold-Exchange era in the early 1970s gave Monetary policy the "open-ended" capability of competing head-to-head with Fiscal policy. That experiment during the 1970s resulted in "Stagflation" stagnation/inflation as "structural rigidities" in the economy (aka. worker protections) directly translated lower interest rates (increased money supply) into inflation. Reaganomics of course changed all that by systematically dismantling the trade barriers and unions that had protected labour for decades, thereby allowing the great "disinflation" of the last 35 years via. Third World outsourcing.
"We are all Keynesians Now"
Fast forward to today. Again, on paper both of these policies were intended to provide stop-gap support to the economy during recession. They were not intended to replace the real economy. They were not intended to subsidize long-term tax cuts and military adventures. They were not intended to paper over an ever-widening trade deficit and mass outsourcing. They were not intended to allow Wall Street to invent ever-larger financial WMDs, blow up the economy and then start all over again. They were not intended to subsidize unsustainable consumption binges and McMansions. They were not intended to allow politicians to juice the economy into elections and grease special interest groups, thereby creating a never-ending four year boom and bust cycle, causing massive damage to the real economy.
The Two-Headed Monster: MonetaryKeynesianism
However...as we all know, these twin policies have done all of that. Worse yet, at this late juncture, these two mutated policies have now actually become conjoined into a two-headed monster. Monetary policy now requires ever more government debt in order to exert its control over the economy. If the government had no debt to buy, then Monetary policy would be inert. There would be no way to inflate the money supply because open market purchases of government debt is the method by which the Fed allocates newly printed money. Conversely, there is no way any of these governments could run these mega deficits year in and year out without having an ever-increasing supply of money and lower interest rates to finance their ever-growing debts.
The Two-headed monster IS the economy
Suffice to say, any concept of a sustainable economy existing without the ever-growing influence of the two-headed monster, is an outright fantasy. Over-use of mega-stimulus as a proxy for a real-economy has now completely crowded out the real economy and otherwise left it weak and totally incapable of growing organically. Now, the two-headed monster IS the economy.
The two-headed monster has allowed greed and stupidity to run amok
Regardless, as is the subject of this blog - there are a handful of us who see the writing on the wall and are able to look past this smoke and mirrors illusion. The Two-headed monster is running out of fuel - now with sovereign debt levels above 100% and interest rates at 0%. Therefore the end of this massive delusion is coming far sooner and far more catastrophically than the masses could ever predict.
Politicians, Wall Street, economists/academics i.e. those best acquainted with "the system", all depend entirely upon its existence for their livelihood, so they will be the last to figure out that it's imploding. It's that thing the Idiocracy systematically ignores called "conflict of interest".
Politicians, Wall Street, economists/academics i.e. those best acquainted with "the system", all depend entirely upon its existence for their livelihood, so they will be the last to figure out that it's imploding. It's that thing the Idiocracy systematically ignores called "conflict of interest".
And to think this all started out merely as a way of keeping kids out of garbage cans. But of course, that was prior to the advent of Ponzinomic Neocon Fauxtards, when there were adults running the show.
The New *Economy*
Wall Street and Corporate insiders use the stock market as their personal ATM machine to their offshore bank accounts - only brainwashed morons "buy and hold"
Of course the green boxes are the country club, purple are the servant's quarters
The New *Economy*
Wall Street and Corporate insiders use the stock market as their personal ATM machine to their offshore bank accounts - only brainwashed morons "buy and hold"
Of course the green boxes are the country club, purple are the servant's quarters
