Comments on: Lies We’re Being Told: Interest is Consumption, Saving is “a Negative Act”

By: larry morris

larry morris — Sat, 20 Feb 2010 02:08:56 +0000

the only reason they want you too spend all your money is so that you are always broke, they can not steal your money if you are saving some on it I’m old enough too see that everyone in office has but one notion and that is to lie too you and that is why they are not to be trusted ever.

By: Bill Jones

Bill Jones — Sun, 14 Feb 2010 02:11:11 +0000

John Havey: What’s wrong with GDD- Gross Domestic Destruction?

By: Ken

Ken — Tue, 09 Feb 2010 04:56:42 +0000

Paul is right.

“Businesses “invest” by paying money to their workers and suppliers. Those payments are the business’s “costs” but they are the worker’s and the supplier’s “incomes”. So Costs = Incomes. Governments will tax some of those incomes and redistribute them to other people, so tax-and-spend government changes the distribution structure of incomes but not the gross amount of income. It remains true that business’s costs = national income.”

- this doesn’t work if the workers and suppliers are in China. Those costs = incomes are not in the US so all the rest of your argument becomes moot.

By: Paul

Paul — Sun, 07 Feb 2010 22:59:21 +0000

Derryl,

Where your argument fails spectacularly is in the assumption that Labor/Production/Inventories & Cash are all part of a closed loop (Insular) Financial economic system. What you (And more likely Keynes) have glaringly failed to factor in is income derived from export sales.

Workers are free to save all they want (Or indeed spend without the risk of incuring credit charges) without any ‘Negative’ detriment to their own economy if what they produce is of value to purchasers abroad.

One doesn’t need to do much research to discover that the Chinese population are being actively encouraged by their own government to purchase Gold/Silver (Savings), all while their economy continues to grow, and their standard of living increases. Because they produce.

Western economies that rely solely on local service industries to employ workers and credit cards/housing equity for spending to ensure GDP growth, but in turn don’t produce anything of worth, are by definition, doomed to a debt burdened burn-out. It’s simple 1st grade stuff.

Keynsianism is, by any other name, a pyramid economy, a Ponzi scheme.

And all Ponzi schemes fail in the end.

By: Chris S

Chris S — Fri, 05 Feb 2010 05:22:20 +0000

FDR effectively removed the individual citizens from the gold standard in 1933. After his executive order and subsequent legislation to make it legal, the federal reserve notes were no longer notes in the actual sense. A person could not exchange them for gold at a local bank. Nixon (not that I am defending the man) was forced into a corner by the actions of France under Charles De Gaulle, Spain, and a few other nations who starting in 1960′s, began to exchange their dollars for gold bullion from the national treasury. The United States had been printing more “notes” than they had bullion and the French called us on it. (Time Magazine February 12, 1965) The Fed had followed the same pattern of self destruction that had plagued banks from their inception in the 1600′s. Keynesian economic theory is flawed in a singular and most glaring sense. The death spiral starts as soon as you do what he advised. The instant a government relies on continual debt loads to cover bad behavior, is the instant that those debt loads will continue to grow indefinitely. During a boom those of the bad behavior sort spend the “surplus” in all facets of life, during bust, those in charge spend to end the downturn.
The problem is that we no longer produce. Under the Keynesian theory, the dynamic money stream would have to reflect a dynamic economy. As the economy grows, so does the reserve of cash. As the economy shrinks, so does the reserve. That is what the fed is supposed to be doing with interest rates. However under the Keynesian model so skillfully followed under FDR, and every other administration, Instead of the money supply following the dynamic economy it assumes a dynamic money supply with a static economy.

By: Brad Thrasher

Brad Thrasher — Thu, 04 Feb 2010 20:33:12 +0000

I don’t need to know anything about economics to know that Gregory Bresiger is wrong.

My Aunt Fran taught me it is both rude and cowardly to speak ill of the dead. The fact that Mr. Bresiger does so, while claiming some superior moral authority as to the virtue of savings merely suggests, as my Aunt Fran would say, “He butters his toast with our cheap money. And there’s no cheaper money to a banker than the money we put in our savings accounts.”

Aunt Fran was right, up until the Fed started giving the stuff away.

By: Jason C.

Jason C. — Thu, 04 Feb 2010 02:08:51 +0000

The paradox of thrift. I remember an economics teacher (Keynesian) who actually believed in the paradox of thrift. It seems logical in the short term to believe that if everyone saves at the same time, economic activity will diminish and a recession will ensue. Being that Keynesianism is the false religion of economics (a short-sited one at that), it fails to look beyond its own nose into the future to see that increased savings is one of the ways in which economic growth is sustained. So unless everyone saves by stuffing their mattress with $100 bills, that savings will exist in a bank to be lent to those with production in mind. Won’t that create jobs? It’s production that creates wealth, not consumption. And yes, Keynesian enjoys government sponsorship because it gives governments the excuse to deficit spend without feeling guilty about the long-term damage it does to living standards.

By: derryl

derryl — Wed, 03 Feb 2010 22:05:18 +0000

Actually when you look at a national economy from a cash flow perspective Keynes is entirely correct. Classical economics describes a barter economy where it is assumed that the production of goods creates its own exchange medium by which to trade or sell the goods (Keynes actually noted this in his General Theory; I am not a Keynesian, but I will give credit where it is due). But in a monetary economy there is no direct relationship between the quantity or value of goods produced and the amount of money in the system. In a money economy goods values and the exchange medium (the money) are 2 entirely separate systems.

Businesses “invest” by paying money to their workers and suppliers. Those payments are the business’s “costs” but they are the worker’s and the supplier’s “incomes”. So Costs = Incomes. Governments will tax some of those incomes and redistribute them to other people, so tax-and-spend government changes the distribution structure of incomes but not the gross amount of income. It remains true that business’s costs = national income.

When those workers and suppliers buy the goods that the business produced, those sales become the business’s income. So from the business’s perspective, Spending = Income.

If a nation’s business’s spend a trillion dollars producing goods, then they have collectively spent a trillion dollars of spendable incomes into the economy as their “costs”. But if they expect to earn a 10% profit then businesses will put $1 trillion + 10% of “prices” into the economy. Where does the money come from to collect as profits?

Besides business spending, consumer debt spending puts incomes into the economy. A homebuyer borrows $300k and spends it on a house, where the money becomes incomes to all the builders and suppliers of the house construction and sale. So there are 2 sources of incomes in an economy (3 if you want to double-count and add government redistribution): business investment spending and consumer debt spending. QE adds a 3rd source of spending-incomes, when central banks create money to buy bonds and governments spend the money.

Either way, Spending = Incomes. When people remove money from the spending-income stream as “savings”, and if people are saving at a time when money supply is not growing by people taking out and spending more debt-money, then you get Keynes’ “paradox of thrift”. Reduced spending causes reduced incomes which leads to more reduced spending, etc., down the deflationary spiral. To see the mechanics of a money economy (i.e. not a barter economy), you have to look at it from a cash flow perspective. Once you do that the arithmetic is simple.

By: Edward Ulysses Cate

Edward Ulysses Cate — Wed, 03 Feb 2010 16:21:37 +0000

Lies we’re being told, as your title states, is simply so that those in position to plunder can continue doing so. One’s common sense says that if they didn’t lie and steal so much from each of us, there would be more trading of labor, which would create and sustain more jobs. The drones have simply stolen too much too quickly. The rest of us are on to them now. Labor + Raw Materials = Wealth.
Trading paper instruments only re-distributes that wealth from workers to drones. Workers don’t see it simply because they were lied-to-by-omission in government, education and religion. Example:
When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.” … Frederic Bastiat (1801 – 1850)
I’m 62. I only discovered this quote, Bastiat and his text “The Law” a few days ago. It should have been taught to all citizens before one graduates from high school. I’m aware many others know of this. I’m just disappointed that only now I’ve come across it. Sort of sums up our economy, no?!

By: Daniel de Paris

Daniel de Paris — Wed, 03 Feb 2010 13:56:32 +0000

Of course, the current economies of US and continental Europe are completely different animal than their counter part of say 1880 to 1940.

What Keynesian economists have willingly ignored that the western citizen is now more of a consumer than a citizen. Bombarded by marketing since inception, one can not refrain from consuming. It is now embedded into the very nature of our societies.

Only those a bit older and with a critical view on this massive change in base behaviour can tackle what is happening now.

The countries that provides capitalism to our world, UK and the US, have just hollowed out their “capital” base via consumption.

The Keynes argument could certainly be applied to China. Not to our countries. Of course Krugmanites will not like it. But the truth is that ECONOMICALLY SPEAKING to-days US bears more resemblance with the 1867 Austro-Hungarian Empire than with the very same US during the thirties.

Your parochial gallic “Jacques Rueff” reader