The Treasury Put: Bipartisan Road to Fiscal Oblivion
The long run is a misleading guide to current affairs. In the long run we are all dead.
Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again
- Keynes
TL; DR
- We now add to deficits even as unemployment drops
- Even Keynes himself did not intend this to happen
- The Great Reset has started
- Bureaucracy is evil
Quick Economics comment:
Authored by GoldFix ZH Edit
The more the chart below is looked at in context the more sense it all makes now.
Here is Soc Gen's Albert Edwards commenting on it:
This chart from the excellent Simon White of Bloomberg sums up how nuts the fiscal situation is. To be fair this pro-cyclical fiscal dysentery started under Trump but Biden has taken it to a new level. It's a cross-party road to fiscal oblivion. Source
That statement got us thinking. This might just be the fabled reset unfolding right under our noses. But what got us here in the broadest most grass roots sense? What caused this path to manifest? As always, it starts with John Maynard Keynes. But he's not the bad guy here, at least not the main one.
Deficit Spending in Good Times
The marked divergences between the deficit and unemployment in the chart say it all. Sadly it also confirms the neokeynesian mindset. Not just as a cheap attack on them, (although that is fun too). But by analyzing specifics the stats show us.
Specifically, the focus is on the circles above where the deficit persists and grows despite falling unemployment. That tells the whole irresponsible tale. First, a quick digression into what Keynes said regarding deficit spending
The Neo-Keynesian Mindset
Keynes had advised govts to spend to get out of recession. To not wait for things to fix themselves because “in the long run were dead”. It was a call to action when necessary, not to be abused when unnecessary. Activist monetary government for sure, but not 24/7/365. Nevertheless, a license to spend was born. Thusly neo-Keynesians took it as… “deficit spending is ok all the time”.
Today since 2016 we’re not even reducing spending *after* economic recoveries. The sick thing is.. we are likely not even *able* to reduce now that the whole world is moving to a different economic model without our initiative. We must now spend on retooling *while*expanding the social safety net, or seriously fall behind by a generation.
Oh well.
Here’s more on the origin of the idiocy that intentionally misconstrued what Keynes said
Keyness and "The Long Run" in Truth
Keynes said: “in the long run, we are all dead” as an admonition of Gov’t economists who did nothing to fix problems and only announced when problems ended like useless news reporters. He was, in truth, calling for more interventionist government for sure… and as abhorrent as that may be it was not a call to mortgage the future for the present. But neo-Keynesians took it that way as we shall see.
- Neo-Keynesians: it’s our job to fix things that aren’t broken. Fee markets suck!
- Politicians encouraged that mindset by saying: “fuck it, we can postpone problems by borrowing from the future and keep getting re-elected!!”
With this …. A bureaucratic monster was created.
Meddling in Free Markets as a Profession
They realized as interventionist economists they can ensure their own job security— creating the next crisis by rushing to solve the non-existent current one. Their job, therefore was to intervene, not fix!!! And from there, the actual bureaucratic mission was created. Bureaucracy is evil and its partipicants sycophantic minions.
The Bureaucratic Monster
A bureaucracy is a living thing whose sole purpose is to perpetuate its own existence, even at the expense of its individual members. Thus: the bureaucratic members now had their mission. Break stuff to fix it like the TV repairman who loosens an antenna screw while fixing a knob for future work.
Included below paper on the “Fed Put”
Continues here
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