The G20 Summit

From Gary north,his member side Specific Answers Speaking of the G20 meeting that just ended..... As Paul told the Greeks..."I see that you are religous in every way..."

....FAITH!
In response to this laundry list of political promises, stock markets around the world increased by 2 to 4%. This indicates that stock market investors are committed to the political salvation that Keynesianism promises. They are committed to the idea that taxation, monetary inflation, regulation, and foreign aid to banana republics will heal the world of its $50 trillion losses, and lead to a Green Nirvana.

This means, in the immortal words that were never uttered by P. T. Barnum, "there' a sucker born every minute." Of course, the Keynesian suckers are not born every minute. But every June several million of them graduate from American universities, where they were trained by Keynesian economists and social scientists to believe that government spending and government regulation are the source of long-term economic growth. The suckers are not born every minute. The suckers are sent to college by their parents, who go into debt anywhere from $40,000-$200,000, in order that their children might be trained in the logic of Keynesian economics.

The fundamental practical question of all economics is this one: "Who wins and who pays?" This is also the fundamental question of all politics. Keynesian economists create sophisticated mathematical models to keep students from finding a clear answer to these two crucial questions.

The Keynesians' goal is to train students to believe that money spent by the government is productive, while money spent by investors and capitalist enterprises is wasteful. They teach the students to believe that the expansion of money by the central bank is productive, while increased savings by the public leads to the Keynesians call the paradox of thrift. Somehow, thrift creates economic recessions. Somehow, increased saving to make available capital goods is a threat to the financial stability of free markets.

The trouble is, the theory is wrongheaded. The source of productivity is creativity that is financed by voluntary saving. It is possible to have creative ideas that never flourish, because these ideas never receive funding from investors. It is also possible to have investments that go sour because the investments rested on false premises. But in the long run, voluntary thrift, meaning a reduction of current consumption, is the most important technical factor in any economy that experiences is long-term economic growth....

The problem is this: the policies that governments adopt to establish economic growth will reduce economic growth. They transfer assets from the private capital markets to the markets for government debt. Then the money is spent by one set of government bureaucrats to fund the projects of another group of bureaucrats. There is no profit and loss system to assure the planners that they are in fact meeting the needs of consumers. The money meets the needs of incumbent politicians. Why this should lead to economic growth is a mystery, but Keynesian economics teaches that it will.