The Great Black Hole

Readers should study this article to grasp How bad economic ideas get embedded into the economy. Keynesian Thought is widely decried, but actively used by Government; the basic reason being that it allows Politicians to garner political support by widespread Spending. A prime Example of this reaction were the Bush Tax Cuts, which did more to distort Market Pricing than it did to prime any economic Pump. The elimination of the Government surplus, which had been disclaimed as a Drag on economic performance, had disappeared naturally before a single Taxpayer had filed a Tax Return. The View that the economic Downturn of the Time was circumvented by the Tax Cuts proved fallacious, as economic performance did not immediately increase, while the flow of Cash centered on Resource Prices, which did soar. The End-Result accumulated that Consumer Prices went up while Wages stagnated, leading both Government and Consumer into vastly increased Debt levels simply to maintain their previous lifestyle. Economists would disagree with me, but I would suggest that the Bush Tax Cuts were directly responsible for the financial crisis We now face, forcing the banking community into unsafe Banking practices simply to provide the increased Sums necessary under the maximized Debt load.

Keynes originally wrote that Government Deficit Spending was a special Case, only used when there was a definitive failure to clear the Markets because of lack of Demand. It was never intended to be a continuous fuel to the Economy, allocated to ensure a unrealistic Production schedule higher than the Markets could ever clear; a position which quickly appeared without preamble, assuming that higher Employment was assured with every deficit measure of Spending. It became apparent that Wage levels governed the level of Employment, with Wage levels as the great limit of Employment; they had to be held down, or no stimulus was provided from the deficit spending at all. Stimulus, though, created both higher Resource prices and charges to the Consumer. An overall Study of the Stimulus programs since Keynes’ 1936 Work–basically a justification of the Roosevelt New Deal program–shows that Stimulus is a guarantee of a statistically solid rate of Inflation, more than it is any propellent of economic performance.

Roger Garrison does not enter into a discussion of the chronic insufficiency of aggregate Demand, suggesting it is the natural state of any economy. Not a Word is expressed to attribute the actual role of this insufficiency, which to actively adjust distorted Production schedules, so that excess Production is not made; necessitating some form of Product elimination. Early Stimulus advocates realized that you could not simply give the Surplus away, though many Poor could utilize it, because it would destroy the Market pricing structure. They quickly came to realize that Government Spending could be the fulcrum to create artificial Demand; building Four-Lane Highways where a Goat path would do, and building $10 Trillion of Weaponry never used for anything. It was the perfect solution, but it had its hazards; it channeled Investment into economic areas where little political support was achieved, and created machinery where Children could easily burn their fingers. The Upshot of it All stands We not only have an Oversupply of Basic Consumption Goods under such a Stimulus format, but We possess an economic Production Schedule oriented to a wrong set of Production assumptions. lgl