What Krugman and others fail to take into account is that Keynes belonged
to a particular class and a particular period of history when a new
meritocratic elite -- the civil services of the new nation-states --
started to become far more powerful than nationally-sized businesses and
banks. In those times, the new centralised governments of Western Europe
and America could do anything, it seemed. They could manipulate millions of
young men into dying "for their country", they could dispense with the
time-honoured trade currencies of old and print their own banknotes, they
could go hugely into debt because the industrial revolution and prosperity
-- and thus taxation -- was in full spate. Above everything else the
politicians of nation-states thought that they could control their own
economies.
But, post-Keynes, things didn't continue as before. Large business became
even larger, more international and more self-determining. The chain of
consumer goods which had sustained the industrial revolution of Europe and
America dried up. A new financial sector arose which learned how to evade
government legislation at every step. Government taxation became harder to
maintain. New financial institutions arose which copied nation-states by
printing their own paper documents which purported to be money -- by 2008
becoming ten times the actual world production of goods.
We're living in a totally different world now than in Keynes's time. All
the "advanced" countries are now advancing into a level of debt that
taxpayers can never hope to repay. China, Brazil and other countries may or
may not catch up with the West but when they do they'll be in the same
dilemma. The big difference is that they, particularly the Chinese, already
know this. They can look on our failed experiment more objectively. They
want to avoid our fate. This is why China, Russia, Brazil, India, Middle
East countries and others are saying that a new gold-backed trading
currency is essential. Paper tokens won't do any longer.
This is why these countries are now buying gold, and why the price of gold
is going up. This is why the central banks of Western countries are no
longer scathing about gold-as-currency but are, in fact, starting to buy it
themselves for the first time in almost a century. Quietly the "inner
circles" are realizing that gold is re-establishing itself again as a real
currency and that a new era is opening. Meanwhile, Western nation-states,
having no idea whether we are presently at the beginning of lifetime
deflation or catastrophic inflation have no idea what to do in practice in
terms of last century's Keynesian or Friedmanist ideas.
They're in paralysis at the moment but, in desperation, they'll probably
choose the Krugman route. This is probably the better route because it will
bring about hyperinflation, and then sensible currencies, all the quicker.
Keith
At 19:11 09/07/2010 -0400, you wrote:
Mike G will be tempted to call this a Conservative rant. Ad hominem
doesn't refute his argument.
Steve
http://market-ticker.denninger.net/archives/2489-Krugmans-Insanity,-And-The-Hard-Mathematical-Truth.html
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Keith Hudson, Saltford, England
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