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Best 5 out of 7 for who has to clean up???

May 10, 2012

It was a fun party while it lasted…

The Social Welfare State is dying. Like the Berlin Wall and the Iron Curtain, the cradle-to-grave social welfare experiment must eventually collapse. A system of taxing work and profits, while subsidizing leisure, sloth, and retirement, must eventually fail.

The end of the Social Welfare State is painful for many, and it will not end quickly or quietly as the elections of this past weekend prove. …

…even easy money would ultimately be a dead end, leading to higher interest rates and less capital investment. Anyway, the Germans would never go along with a euro as weak and inflationary as many in Greece and France want. And Germany has huge leverage: if the ECB gets too loose, only Germany could leave the euro, go back to its old currency, and not get hammered by financial markets.

In the end, this is a battle the socialists are simply not going to win. Greece is too small to be convincing; France is about to show the world what doesn’t work….

The end of the social welfare state in Europe is a precursor for the US. It’s a Dead Cat Bounce for Socialism.

Amusingly I had a discussion with someone who left their country of origin – presumably for economic opportunity – indicating they believe essentially in truth, beauty and love instead of money, so who cares about the economy and jobs. Riiiigggghtt...but why am I shocked? The person who points out the charlatan’s tricks usually ends up being rejected by the crowd who’d rather be fooled by a beautiful simplistic model vs. “life is pain. Anyone who tells you otherwise is selling something”

Enter Keynes

Despite the lack of evidence, it is remarkable how much allegiance the Keynesian approach receives from policy makers and economists. I think it’s because the Keynesian model addresses important macroeconomic policy issues and is pedagogically beautiful, no doubt reflecting the genius of Keynes. The basic model—government steps in to spend when others won’t—can be presented readily to one’s mother, who is then likely to buy the conclusions  

Keynes worshipers’ faith in this model has actually been strengthened by the Great Recession and the associated financial crisis. Yet the empirical support for all this is astonishingly thin. The Keynesian model asks one to turn economic common sense on its head in many ways. For instance, more saving is bad because of the resultant drop in consumer demand, and higher productivity is bad because the increased supply of goods tends to lower the price level, thereby raising the real value of debt. Meanwhile, transfer payments that subsidize unemployment are supposed to lower unemployment, and more government spending is good even if it goes to wasteful projects.

 Eventually, someone has to do clean up from the 30 year bender the world has been on. Right now everyone is playing ‘rock paper scissors’ to see who’s left holding the bag on clean up – this generation, or the next generation …the hangover is going to be a doosey

One Comment leave one →
  1. May 10, 2012 9:44 pm

    Thank you for not including anything about the breastfeeding mom on the Time cover.

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