Saturday, May 5, 2012

Keynesian's are leading us to world war.

Even among the non-deranged is a habit of ignoring constraints. Good ideas that can't be put into effect aren't good ideas. Bluntly put, the Keynesian remedies (borrow, spend, adjust later) require things of Germany that German politicians cannot deliver.

Governments engage in austerity not because they want to, but because they have nowhere to get the money they'd like to spend and spend. The German people don't want to tax themselves—or indirectly tax themselves with inflation—so Spaniards, Greeks and Italians can spend the money.   Or Obama's rich vs poor.

And inevitable is the half-spoken argument about the size of government. Whether or not Europe's governments are too big, they are certainly too big for the euro. Fixed exchange rates between sovereign, democratic countries may be practical in a world of atomized businesses and individuals who don't conceive of an alternative to organizing their lives by price signals. The gold standard certainly worked well for the better part of a century.

But that's not our world and never will be again. In France, 56% of national income is controlled by the state. Across Europe, the first recourse of every interest group and voting bloc is to expect the state to protect them from inconvenient adjustments dictated by mere price signals.

To say Europe walked blindly into monetary union is an exaggeration. Bureaucratic Europhiles hoped it would necessitate a march toward a United States of Europe. Pro-business Europhiles hoped it would force a return to the market.

Broad growth of government in Europe (56% of total spending in France), it's Socialism, is imploding, as it always does.  Opportunistic leaders, such as our President, will inflame and blame.  Ever greater cradle to grave government care creates a lazy citizenry, it has to.   The industrious Germans are not going to pay for the lazy Greek's and Spaniards.  The lazy will protest the providers (like Obama is doing right now) and the providers will be angry in return.  There are already accusations of Nazism.

Inflation or austerity which is necessitated by overly generous spending will spark protests, violence, nationalism....war.

It will be the Keynesian's fault.  It will be the socialists faults.  It will not be the fault of those who said to live within our means.  Unfortunately they again will be blamed.

1 comment:

Baxter said...

Those who said, "Live within our means" as they cut taxes in an effort to starve the beast?

It's not those bright minds that took us to 15%/GDP from 20%/GDP that will "lead us to war"?

Today's GOP is responsible for the debt and deficit. Thank you, Ronnie, and thank you Dubya.