Wednesday, February 18, 2009

Keynesians Are Morons

You must understand that the vast majority of the talking heads are keynesian. That is.. they subscribe the few remaining theories postulated by John Maynard Keynes that have not quite been 100% proven incorrect just yet.

Now the keynesians describe a recession like this... "demand no longer equals productive capacity because people have started storing up large cash reserves."

So... recessions are bad... and they are what happens when companies are making stuff that people aren't buying.. because those bad people have decided to save some of their money.

Out of curiousity... Do you remember any massive rash of unified saving among your friends and family recently? Did the whole world recently decide to start saving money all at the same time? Of course not. The very idea is assinine. Never the less...

Since that is what they believe the problem is... they believe someone has to step in and buy the stuff that the public isn't buying... lest the capacity go to waste and companies start laying people off.

Ok... lets put it in common terms.

Lets say GM decides that what people really want are not cars at all... but motorized unicycles. They invest millions in retooling.. and produce thousands of motorized unicycles... which no one buys... because nobody wants motorized unicycles.

All of that capital investment was wasted by GM.. and now there is a deficit between what GM has produced.. and what people actually buy.

To the Keynesian... or as they are more commonly referred.. morons... this is a horror. The Government MUST step in and buy all the excess unicycles. That is the only thing that will prevent a recession. So tax money is taken out of the private sector where it was going to good competetive companies making good competetive products... and given to GM... so GM can keep making crap that no one wants.

Compare this to the Austrian view... which is... GM did something stupid. GM dies... and the productive capacity is replaced by a company that's not nearly as stupid. Meanwhile the money that would've otherwise been spent on GM cars... go saved.. and therefore can be spent on the products of the new competitive company.

Now you tell me... which view makes sense... and which view is the one championed by Harvard Business School?

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