Archive for the ‘Keynesian’ Category

Obama’s Economic Strategy Akin To LBJ’s Vietnam Fiasco: “Pour In More”

March 6, 2009

With America embroiled in its biggest disaster of the 20th Century, the Vietnam War, the President of the United States, Lyndon Baines Johnson, decided that he himslef should micro-manage the entire war effort, after his heavy reliance upon Defense Secretary Robert McNamera.

McNamera and his top advisors were called “Whiz Kids;” and they embraced a new thinking called systems analysis.

McNamera’s charts and graphs were never wrong: until Communists overwhelmed Vietnam in 1975.

The Team LBJ startegy for a time in Vietnam could easily have been called “Pour in More.”

LBJ also decided, despite the costs of the war in Vietnam, he could still execute his vast social reforms in the “Great Society.”

He was wrong.

Robert McNamara
McNamera pours in more troops…..

President Obama, a man not short of brainpower and hubris, might be falling into the LBJ trap.

Obama is currently relying upon economic advisors and economic advice that could possibly be totally wrong for the nation.  Keynesian economics, as many say, is an unproven theory: and far from a certain fix.

And “Pour in More” doen’t seem to be working just yet.

Worse still: those that predict economic recovery, like businesses in a position to hire and those able to express confidence in economic growth by investing, are not pouring in anything.  They are bailing out.

As Warren E. Buffett has said: “Beware of geeks bearing formulas.”  He said this about the young lions of  economic thinking around just now, like Treasury Secretary Timothy Geithner.

He could have said the same thing about Robert McNamera.

And Obama’s move to execute a broad social agenda including health care reform, energy use overhaul and other spending efforts, might just remind some of the LBJ dilemma.  Obama is waging a war to revive the economy; yet he insists upon also setting America upon a totally new direction that will cost unknown trillions — even as he allows business as usual pork spending and waste to be executed in Congress.

Related:
Households, Businesses Have Stopped Spending; Now It’s Congressional Responsibility Time

Stock Markets: When Will the Bull Return?

http://throwingstones.wordpress.com/20
09/03/05/moderates-uneasy-with-obam
a-plan-manu-raju-politicocom/

 Unemployment Highest Since 1983; Business Leaders Have No Confidence in Obama Economic Plan, Team

http://michellemalkin.com/2009/03/06/cube-s
teak-americans-vs-the-wagyu-beef-white-house/

Venezuela’s Chavez Urges Obama, U.S. Down Socialist Path

Treasury island: Geithner’s lost crew 

Obama’s Radicalism Is Killing the Stock Market

 NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Stimulus Dilusion: More Debt Spending Will Never Resolve Debt Crisis

February 7, 2009
Governments cling to the delusion that a crisis of excess debt can be solved by creating more debt.
Niall Ferguson
The Los Angeles Times
February 6, 2009

It began as a subprime surprise, became a credit crunch and then a global financial crisis. At last week’s World Economic Forum in Davos, Switzerland, Russia and China blamed America, everyone blamed the bankers, and the bankers blamed you and me. From where I sat, the majority of the attendees were stuck in the Great Repression: deeply anxious but fundamentally in denial about the nature and magnitude of the problem.

Some foretold the bottom of the recession by the middle of this year. Others claimed that India and China would be the engines of recovery. But mostly the wise and powerful had decided to trust that John Maynard Keynes would save us all.

I heard almost no criticism of the $819-billion stimulus package making its way through Congress. The general assumption seemed to be that practically any kind of government expenditure would be beneficial — and the bigger the resulting deficit the better.

There is something desperate about the way economists are clinging to their dogeared copies of Keynes’ “General Theory.” Uneasily aware that their discipline almost entirely failed to anticipate the current crisis, they seem to be regressing to macroeconomic childhood, clutching the Keynesian “multiplier effect” — which holds that a dollar spent by the government begets more than a dollar’s worth of additional economic output — like an old teddy bear.

They need to grow up and face the harsh reality: The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital.

The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.

Read the rest:
http://www.latimes.com/news/opinion/comme
ntary/la-oe-ferg6-2009feb06,0,6972232.column

Audacity, Hope and Obama’s Spending Stimulus: Once Discredited Theory Gets A Real Try

January 11, 2009
President-elect Obama proposes an unparalleled test of Keynes’ decades-old idea: that deficit spending on a grand-enough scale can inspire the confidence to right a sinking economy.
By Peter G. Gosselin
The Los Angeles Times
January 11, 2009
Reporting from Washington — In a measure of how quickly its options are shrinking, the United States is about to embrace an economic theory that was widely thought for most of the last generation to have been discredited: the idea that great bursts of deficit-funded government expenditure can jolt an economy back to growth.

And the nation is poised to put this theory to the test on a scale untried in peacetime by any developed country on Earth.

President-elect Barack Obama will soon unveil a package of tax cuts and spending increases that, combined with already planned spending, would push Washington’s 2009 deficit to between $1.5 trillion and $2 trillion — more than 10% of the economy’s output. And he will argue that this tidal wave of federal expenditure should continue into next year, and perhaps beyond.

Only during World War II did U.S. government expenditures account for a greater share of economic activity, according to federal statistics. That’s also true for virtually every other developed country.

“There’s been nothing of the magnitude of what the incoming administration is contemplating — certainly not as intentional policy — in the modern era,” said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington.

Related:
Obama Pressed From Left on Stimulus
.
Obama Stimulus: Trapped Between Too Little Rock and Paul Krugman Nightmare

Read the rest:
http://www.latimes.com/business/la-fi-
econ11-2009jan11,0,2730452.story

According to Keynesian economics the state should stimulate economic growth and improve stability in the private sector – through, for example, interest rates, taxation and public projects.

Read:
http://en.wikipedia.org/wiki/Keynesian