Keynesian insanity reaches a new peak

You want proof that Keynesian economics is insane. Well, here it is. From The Telegraph in London:

Savers should stop complaining about poor returns and start spending to help the economy, a senior Bank of England official warned today. . . .

Older households could afford to suffer because they had benefited from previous property price rises, Charles Bean, the deputy governor, suggested.

They should ‘not expect’ to live off interest, he added, admitting that low returns were part of a strategy.

It’s the strategy to discourage saving! What complete fools.

If there is any “strategy” more calculated to make economic conditions worse than they already are, a campaign to reduce private savings would be hard to beat. If you think like a Keynesian that an economy is driven by aggregate demand, then you must think that saving is in and of itself a problem when the economy is in recession. And this is not just some poor sod academic jerk somewhere off in Hayseed-on-Thames Polytechnic but a Deputy Governor of the Bank of England with the full support of the Governor, Mervyn King, himself!

Stupid beyond idiocy. Criminally negligent. Infuriating.

Want to know just how insane this is and also what to do instead? First read the article and then read Chapters 16 and 17 of my Free Market Economics which so far as I know may be the only introductory level text anywhere that will explain to you what you need to know.

And now from another BoE D-G: These people really are nuts. It’s their economic models, of course, but how can we protect ourselves against such views.

Negative interest rates could become a reality in an ‘extraordinary’ move by the Bank of England to kick-start the economy, one of its senior officials revealed yesterday.

Deputy governor Paul Tucker said a reduction of the base rate to below zero should be considered four years after it was cut to a record low of 0.5 per cent. . . .

If the base rate did become negative, it would mean major banks would have to pay the Bank of England to hold their money. The idea is that this would encourage them to lend more to stimulate both business and house buying.

I start with the assumption that this is so obviously wrong that merely putting it up on the page is enough. Everyone can immediately see why lowering interest rates to inhibit saving – going so far as to introduce negative interest rates – cannot be anything other than bad news. But after three-quarters of a century of Y=C+I+G we may well have reached the stage where virtualy no one with a degree in mainstream economic theory understands how an economy works. Really, how are we going to get out of the mess we are in if these are the best ideas those managing our economies have to offer.

This entry was posted in Uncategorized. Bookmark the permalink.

60 Responses to Keynesian insanity reaches a new peak

  1. Kingsley

    It would appear that quite literally Mr Bean is running the Bank of England

  2. Rodney

    There is a certain logic here. As “keynesian” policy must lead inevitably to inflation this will destroy their savings anyway. They might as well spend up before they go broke.

  3. Alfonso

    Everything the Keynesians do guarantees the eventual triumph of their hated “barbarous relic”.

  4. Token

    They should ‘not expect’ to live off interest, he added, admitting that low returns were part of a strategy.

    It is endless government meddling in the economy, and the moronic counter intuitive statements used to rationalise the meddling, which makes people believe the Marxist crap about capitalism.

  5. thrfrollickingmole

    That article is illogical.

    The government is borrowing (in part) to fund pensions.

    Its encouraging short term spending by self funded retirees which will see a long term increase in pension outlays?
    if i were self funded id move heaven and earth to avoid having to go on a government supplied pension, they hav to cut back/go bust sooner or later.

  6. stackja

    Unless the Keynesians can confiscate my savings. I say to them go to hell.

  7. Token

    Its encouraging short term spending by self funded retirees which will see a long term increase in pension outlays?

    if i were self funded id move heaven and earth to avoid having to go on a government supplied pension, they hav to cut back/go bust sooner or later.

    My parents are SFR. They are of a age cohort that paid taxes all their lives, paid for their kids education out of their pocket, and saved like crazy.

    They believe taking a pension would make them failures and a burden on society. Their pride and self esteem would be shattered if they were forced to go there and they are fighting hard to make sure they do not have to.

    The statement by the moronic technolocrat does not and will never make sense to them.

  8. Louis Hissink

    Just study this book to understand what the long term goals are.

    1. Debasement of the nation’s money
    2. Creation of civil unrest
    3. figure it out – the Marxists have never been coy about their goals.

    Keynes’ work was focussed on Fabian goals, nothing less, nothing more, and if you prefer not to accept this, then sure, enjoy the socialist utopia that is at a station near you.

  9. My sister was telling me last night about an Irish co-worker of hers. She and her partner have been out in WA for 18 months, working both their backsides off and saving like fury to get a mortgage and buy themselves a home back in Ireland.

    But the thing is – because they’ve been away for 18 months (not counting visits back home), they no longer have residency status. They can therefore only borrow about half of the amount that a ‘resident’ can.

    They will have to go back to a country with almost no jobs, and those poorly-paid, and effectively live on their savings for six months before they’re allowed to buy a house. This should eat up much of their carefully-saved deposit.

    This to me sums up why the Irish economy is absolutely in Rooty Hill. People who are willing and able to work and earn actual cash, and who are prepared to bring it home and inject it into an ailing economy – like the Keynsians would have us do – are being prevented from doing so. But they’re also being prevented from saving it. This is the worst of all possible worlds.

  10. Unless the Keynesians can confiscate my savings. I say to them go to hell.

    If those savings are held as currency, then that they can and that they will.

  11. Nuke Gray

    I thought the government would want to encourage savings! Thank God it’s only the Bank of England, and not a commercial bank!
    The Bank of England used to be a respectable institution. What went wrong?
    Did the rot set in when Britain went off the gold standard?

  12. Rabz

    This is indeed utterly infuriating idiocy. However, having said that, saving, self reliance, making sacrifices, etc, are such quaint, outmoded concepts nowadays.

    That’s why we have the gubberment to give us everything we need, eh bro?

  13. stackja

    If those savings are held as currency, then that they can and that they will.

    Chifley tried to nationalise and ALP spent years recovering. Gough, Bob and Paul came and went too. Expect Julia and Kev to go soon.

  14. brc

    Want to know just how insane this is and also what to do instead? First read the article and then read Chapters 16 and 17 of my Free Market Economics which

    Is your book available on Kindle yet?

    If not, why not, and when is it going to be?

    I have a strict no-dead-tree book policy unless the book is > 50% photographs.

  15. Is your book available on Kindle yet?

    Yes, see previous posts on the topic.

    Unfortunately, not yet on iBooks.

  16. tbh

    I’ve never understood the Keynesian argument against savings. Why wouldn’t you want people saving money, investing a bit of it and not being a burden on the taxpayer? Well Fabians might not want it, but they are in the minority I’d like to think. I thought our liberal values were built on hard work and self-reliance? It would seem not. I’m with those who want to be completely self-funded retirees. I want to be able to quit work on my own terms and I also don’t expect to ever get a pension. It’s too far in the future to bank on it still being there when I’m in my 60′s and beyond.

    The spending is just a short term sugar hit anyway.

  17. brc

    tbh the argument by proto-keynesians is that people who save excessively (it’s called hoarding to make it sound worse) will lead to deflation because of more people saving and less people spending.

    This of course relies on the particular notion that every dollar saved is actually going into a mattress and not into a bank where it is lent out to someone who does want to invest.

    Note that everyone is trained like a singing parrot to say ‘deflation bad! must be avoided at all costs!’.

    When you ask people if they would like prices to go down, you might get a different view of deflation. Of course, the flip side to that is that their price (wage rates) have to go down as well.

    Inflation favors debtors and deflation favors creditors, in the same way that high exchange rates favor importans and low exchange rates favor exporters, and high interest rates favor savers and low interest rates favor lenders. You can’t really call one right and one wrong in any of these cases, because it depends on your point of view.

    But deflation = catastrophic, inflation = desired. That’s the world we live in currently.

    Ever since the first bright spark got the idea of using paper money, the powers-that-be (bankers and government) have been trying to make sure that they can sufficiently inflate the currency supply to silently tax people, because governments and bankers get first grab at the newly minted money.

    It’s not likely to change in this lifetime, it’s been that way for 200 years, might as well get used to it, as wrong as it is.

  18. Mother Hubbard's Dog

    Older households could afford to suffer because they had benefited from previous property price rises

    Nice. One way they could suffer is to turn off the heating.
    From The Daily Express

    Ann Robinson, consumer champion at uSwitch, said: “We are facing disaster on energy prices. The dynamic has changed, but the thinking hasn’t.

    “What worries me most is that the average household energy bill will be £1,400 by end of the year; £1,500 is a cliff edge at which most people say they’ll switch off the heating entirely.”

  19. tbh

    Yep, understand the mechanics of the argument but shake my head at the desired outcomes. This assumption that money just gets hoarded somehow and never cycled back through the economy is a little absurd.

  20. ilibcc

    May as well cut off water and food supplies and then tell people to commit suicide as a strategy to avoid dying of starvation and thirst.

  21. Token

    This of course relies on the particular notion that every dollar saved is actually going into a mattress and not into a bank where it is lent out to someone who does want to invest.

    One needs to be particularly thick to make such an assumption in a time before governments guaranteed bank deposits.

    Every investment at that time had a tangible risk and I remember Rothbard note that pre-WWI deflation was occuring.

    Anyone who understands the world knows a rational person who has been successful at saving did so by intelligent investing, and they would do so again to pay their way through retirement.

  22. ilibcc

    You had plenty of roast beef and pudding in the 1970s, what are you complaining about? Starve, you fool! It’s for your own good!

  23. “Unless the Keynesians can confiscate my savings. I say to them go to hell.”

    Unless?

  24. Louis Hissink

    Whaat ? It’s on Kindle? Eeeh – I recently purchased the dead tree version – second last one on Amazon. Bugga.

  25. rtp

    brc, there is nothing wrong with putting money in mattresses either. It simply lowers the cost of capital (in terms of money) so it is easier for others to invest. The key is that you have produced something but not consumed it. This increase in real savings must lead to an increase in real investment regardless of where you park the cash. Cash at a bank only represents real savings it doesn’t constitute it.

  26. Driftforge

    In an unslushy system – I.e. without the RBA adjusting supply – putting money under the bed just increases the offer required to encourage you to put it towards something productive. Being able to choose to not invest – to literally ‘save’ money – is a critical freedom that is denied under the current system.

    Giving the RBA the ability and responsibility to keep the system flush with cash basically denies the system the feedback it requires to function.

  27. Helen Armstrong

    Is your book available on Kindle yet?

    Yes, see previous posts on the topic.

    Unfortunately, not yet on iBooks.

    I just searched UK and USA Amazon and no kindle. Where is it?

  28. Driftforge

    It can be found following the links here.

  29. Keith

    These statements are right up there with the Japanese treasury dude who told elderly Japanese to hurry up and die last month. Totally outrageous – in fact Bean is basically saying the same thing in terms of consequences :

    They should ‘not expect’ to live off interest, he added

  30. Myrrdin Seren

    And add the insane energy policy that MHD flagged upthread plus innovative NHS health care initiatives like the Liverpool Pathway and the Mid Staffs report and you can well conclude that the long term policy framework of the British political class equates to:

    No money, no political clout ( juice ); no favoured identity politics ? – please die and make it soon.

  31. Louis Hissink

    DF, that is an ebook – not Kindle.

  32. brc

    DF, that is an ebook – not Kindle.

    And I’ll give my simple lesson on free market economics.

    Until someone shows me a link that says ‘click here to buy ebook’ and that click actually nets me an ebook, nobody is getting my money.

    The ‘add to basket’ button on that page is for soft & hardcovers, the other links are to generic shopping sites.

    It doesn’t matter if you have to pay the amazon margins – you’ll get far more sales that way and there are no inventory costs.

  33. Untill we start shooting these rapacious and stupid bastards, the world will continue going to hell in a handbasket.*
    *Not a bloody death threat. Not yet.

  34. Capitalist Piggy

    No Kindle, no buy. Sorry.

  35. Capitalist Piggy

    BTW, bought Peter Smith’s Bad Economics the other day (kindle ofc), enjoying it.

  36. Ah. A Kindle isn’t an ebook reader? My apologies.

    As I noted, nothing available for the iPad either.

  37. stackja

    May as well cut off water and food supplies and then tell people to commit suicide as a strategy to avoid dying of starvation and thirst.

    This sounds like Left policy less of the unwashed to take the resources the anointed are entitled to.

  38. Louis Hissink

    Kindle is an ebook reader, but it’s Amazon’s proprietary platform and when someone says that there is a Kindle verion, one automatically assumes it’s a simple locate the text in Amazon, click on the Kindle version and t’dah, their 1-click purchasing system. I love it – fast and easy and the book arrives a couple of minutes later.

    However others have different ebook formats, hardware etc, so it gets messy, but the biggest market is Kindle, so for max coverage, that’s the distribution outlet you must supply.

  39. Helen Armstrong

    Google Books App explanation to enable using on Ipad, Here.

    It is much too convoluted to get at though, needs to be one click to ensure maximum takeup.

  40. Driftforge

    Yes, the ebooks place also had a convoluted app process for getting at their stuff. But then the book ends up in another app distinct from all your other books which is a bit sucky.

  41. dan

    Kindle is rendered as text and scrolls instantly. Google Play experiences of mine have been very poor with books rendered (very slowly) as images

  42. dan

    There seems to be trouble trying to read Google Play offline, that’s an even bigger drawback

  43. Entropy

    Just load it onto amazon and iBooks already.

  44. Entropy

    And while you are at it, use iBooks Author to add other media. Get first over advantage over other economics texts.

  45. Jack

    I do have sympathy for the idea of moving up the risk with your investments, ie create the next apple rather than get an extra 25 bps on your cash !

  46. 2dogs

    “Savers should stop complaining about poor returns and start spending to help the economy investing in more riskier, more productive ventures”

    Fixed that for him. This should be the understood economic benefit of loose monetary policy. Discouraging savings is a negative side effect.

  47. Alfonso

    Fear not Keynesian politics, instead consider Keynes an opportunity to make money. Pick the big trend whose premise is false and bet against it.

  48. Driftforge

    I do have sympathy for the idea of moving up the risk with your investments, ie create the next apple rather than get an extra 25 bps on your cash !

    Like all things, argue for it, don’t legislate it.

  49. Tel

    Louis Hissink, fascinating documenation about Keynes and the Fabians. Brings a lot of concepts together.

    I’m not as worried about the Fabians as perhaps some other people are. Skulduggery has been the norm throughout human history, there’s nothing new about that. I personally think we are headed back toward Feudalism, but it seems unlikely the Fabians will change anything — bad ideas are still bad, regardless of how they are presented. Read George Orwell, “You and the Atomic Bomb”.

  50. Tel

    Savers should stop complaining about poor returns and start investing in more riskier, more productive ventures.

    They probably would if they were confident they could keep their winnings. Soverign risk and erosion of property rights has reached the point where it dominates the physical risk of undertaking such a venture.

  51. Louis Hissink

    Tel,

    My guess is that Keynes realised that micromanagement of the economy, treating everything as an office of the state, could not work, so I guess he thought that macro-managing it might be the solution – where macro-management is sort of equivalent to manipulating statistics instead of the data itself. That and the ignorance of Say’s Law, of course.

    And a tad off thread but most people seem to forget that China is a centrally planned economy despite its capitalistic inclinations. All those empty cities they have built are not follies but planned for a goal. One thing is certain socialists of the Fabian type work most exceedingly slow, so slow that most have been lulled into intellectual lethargy or manipulated down an intellectual path leading to a subconscious acceptance of socialist doctrine.

    The interesting thing is that if socialists are so certain they can engineer us into their brave new world by changing our thinking patterns by education and behaviour by manipulating energy costs etc, then how come they are intellectually so rigid that looming catastrophe can’t get them to change their policies and beliefs? It means their brains are so ossified, that they can’t be brainwashed, unlike us who they regard as intellectually malleable.

    Idiots.

  52. mareeS

    Louis makes very good points, especially in final para.

    One thing I have observed re this government’s increasingly loud mutterings about superannuation and the savings of older Australians is that banks are reporting a shortage of $100 notes.

    Quelle surprise! Just about everyone I know who’s drawing down on SMSFs is kicking away a green note or several every payday, because we see this governmment’s intentions.

  53. Abu Chowdah

    I have a strict no-dead-tree book policy unless the book is > 50% photographs.

    Good Lord. What an appalling policy!

  54. Abu Chowdah

    Whaat ? It’s on Kindle? Eeeh – I recently purchased the dead tree version – second last one on Amazon. Bugga.

    What is WRONG with you people?

  55. Abu Chowdah

    No Kindle, no buy. Sorry.

    Philistine! Leftie! Baboon! Quebecois!

  56. brc

    I have a strict no-dead-tree book policy unless the book is > 50% photographs.

    Good Lord. What an appalling policy!

    Not really. I have too many books and not enough space. I am declittering and step one for that is to stop bringing dead trees into the house.

  57. Infidel tiger

    I am declittering

    Don’t do it.

  58. brc

    Yeah, whoops. Declittering – auto correct, is that even a word? Decluttering. That’s what I’m doing.

  59. MT Isa Miner

    For those of us with different e-book issues, just use this software, which is free and easy and works and does not have ads or bugs.

    http://calibre-ebook.com/ to covert anything to anything.

Comments are closed.