You know things have gotten really bad when a Keynesian economist starts talking truth.
UC Berkeley economics professor J. Brad DeLong, a deputy assistant U.S. Treasury secretary under President Clinton, has published an opinion piece in which he calls on his fellow Keynesians to stop trying to cover up the truth and start labeling our ongoing economic problems as what they really are: a depression.
The dreaded “D-word.”
Keynesian economists are usually the last people to call things what they are, preferring euphemisms such as “quantitative easing” rather than admitting to the creation of fiat currency, for example.
Keynesian economics, named after John Maynard Keynes, has never worked as it has been claimed. It had some initial success in the 1950s and 1960s, but by the 1970s, its weaknesses were quite apparent.
However, many governments, including the Obama Administration, have clung stubbornly to Keynes’ ideas despite the abundant evidence that they don’t work.
The reason why is obvious. The main features of the Keynesian theory are a rejection of the idea of free markets as being capable of providing full employment and an embracing of the idea of government intervention through manipulation of fiscal policies. In short, Keynesian theories provide an excuse for more government control of your money.
DeLong doesn’t pin the blame for our current predicament on Keynesian practices, of course, because he remains an acolyte. But he does provide a refreshing burst of honesty.
Many Americans have known for years that despite all the happy talk in the media about a recovering economy, there has been no resl recovery, and in fact, for most people things have gotten steadily worse.
DeLong notes the collapse of the idea that Europe is entering a recovery, then says, “In the U.S., the Federal Reserve under Janet Yellen is no longer wondering whether it is appropriate to stop purchasing long-term assets and raise interest rates until there is a significant upturn in employment. Instead, despite the absence of a significant increase in employment or a substantial increase in inflation, the Fed already is cutting its asset purchases and considering when, not whether, to raise interest rates.”
Columnist Hunter Lewis, in commenting on DeLong’s admissions, reminds us of figures from President Bush’s first-term chief economist Larry Lindsey:
US Household Net Worth 2007- 2013
Top 1% Up 1.9%
Next 9 % Up 3.4%
Next 15% Down 0.5%
Next 25% Down 16.7%
Bottom 50% Down 44.2%
While things have been going well for people in the top 10 percent of income earners, for the vast majority of Americans, the past seven years have been one long economic bleed-out. The “Great Recession/Depression” may have started under Bush, but it’s Obama’s Keynesian dogma that has dragged it out.
And no matter what anyone claims, the recession/depression absolutely did NOT end in 2009.
DeLong wrote: “A year and a half ago, those who expected a return by 2017 to the path of potential output – whatever that would be – estimated that the Great Recession would ultimately cost the North Atlantic economy about 80% of one year’s GDP, or $13 trillion, in lost production. If such a five-year recovery began now – a highly optimistic scenario – it would mean losses of about $20 trillion. If, as seems more likely, the economy performs over the next five years as it has for the last two, then takes another five years to recover, a massive $35 trillion worth of wealth would be lost.”
If it weren’t obvious already, the government lies to us on a regular basis about our economic situation. Its motivations are no surprise: money and power, which both depend on winning votes — and you rarely win votes with the truth when your trademark is failure, as this Administration’s is. The resulting spin on economic data is parroted by the media.
Someday, it may make an intriguing sociological study on the effects of propaganda and its ability to make people disbelieve the reality in front of their faces. But for the time being it’s just sad and bewildering to see the number of people who still buy into talk of a recovery even while their own wallets get lighter.