Avatar of admin

by

Leading Keynesian Economist Uses The “D” Word

August 31, 2014 in Economics

By Hunter Lewis

Most Keynesian economists do not want to admit that we are in another depression.  They find the word painful.

They find it painful because it contradicts the idea that Keynesian economic ideas have ended depressions forever. It also contradicts the idea that the massive and continuing Keynesian stimulus applied by world governments since 2008 has worked. For this and other reasons, euphemisms such as the Great Recession have been embraced not only by Keynesian economists, but by their allies in government and in the mainstream press.

I argued that we were in a depression in a January article and again in April. Now Brad DeLong, one of the most prestigious Keynesians, a professor at Berkeley and former deputy assistant secretary of the Treasury under Clinton, says that he agrees. It really is a depression (http://www.project-syndicate.org/commentary/j–bradford-delong-argues-that-it-is-time-to-call-what-is-happening-in-europe-and-the-us-by-its-true-name).

DeLong doesn’t blame Keynesianism; that would be too much to expect. But he does call the thing by its right name, which is a major departure from the usual Keynesian style.

These are after all the people who call the government creating money out of thin air “ quantitative easing,” “ bond buying,” and the like, all of which are parroted by the press. When Keynes did this, he was often being impish, as when he called newly created money ““green cheese,” echoing the old nursery nonsense that  “the moon is made of green cheese.” His acolytes have adopted the style of dissimulation, but without the slightest trace of a sense of humor.

Although we are in a depression, it is not a depression for everyone, as is by now well known. Even so, the full hit on the middle class and the poor relative to the affluent is not adequately understood. Consider these figures from Larry Lindsey, who served Bush 2 as chief economist at the beginning of the first term, only to be booted from the White House for too much truth telling:

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%

None of the economic statistics we get from the government are reliable. Inflation is understated. Economic growth is overstated. Unemployment is understated.  But this chart of net worth is about as reliable as we can expect to get.

It tells the story of a middle class in the process of  being destroyed and of poor people who will never be able to get into …read more

Source: MISES INSTITUTE

Leave a reply

You must be logged in to post a comment.