For Heaven’s sake, calm down and pour yourself a stiff drink.
I know…I know…that John Maynard Keynes is the father of Quantitative Easing, or government effectively printing money to supposedly stimulate economic growth. I know that as he debates the immortal FA Hayek in the two brilliant, modern rap-videos, Lord Keynes enters the room to diabolical thunderclaps. I even know that his ever-gentlemanly opponent, Ludwig von Mises, lovingly pasted a newspaper clipping on Keynes’ homosexuality into the back of the Austrian’s own copy of Keynes’ “General Theory” (now in the Mises Library at Hillsdale College).
“Etceteraah, etceteraah, etceteraah,” as the King of Siam tells Anna in the musical.
But according to my old friend and mentor, the British free-market economist John Burton, Keynes thought that what we today call QE should be only done modestly and reluctantly in times of great crisis and – get this – that it was jolly unthinkable, my good man, that government should ever consume more than 25 percent of a nation’s annual productivity. In rich countries, most governments now gobble up close to one-half and often more.
As Bertie Wooster might say, “Fancy that, old fruit!”
Keynes advocated what now would be called limited government and modest tinkering, the effectiveness of which we non-economists may not judge easily except that limited tinkering might only cause limited damage. But his descendants go berserk.
Today’s self-described Keynesians do stuff that would have their namesake fumbling for the barf-bag. Their trillions of bucks of alleged stimulus, time and again, generate no growth apart from those temporary jobs paid by government funny-money, which only last until the rubber check loses its snap and politicians need to sign another. If the old fellow made it up to Heaven, I’m sure that one can hear the upchucking from several clouds away.
In terms of ignoring one’s teacher, it is as if Karl Marx proposed food-stamps and his followers gave us Stalin. In terms of degree, it is as if Lord Keynes advocated a restorative gin after work, but his acolytes slosh the stuff over their morning cornflakes. In terms of Neo-Keynesian sense and sensibility, if it is fine to get intimate with your spouse, it is even better to make whoopee with your spouse, with the neighbours, their parked cars, their household pets, the mailman, the pizza-delivery guy and every mailbox, tree and trashcan on your street.
Poor Keynes gets misrepresented by his proponents perhaps because at the bottom of government’s enormous, costly and posh golf-bag there are only two items, the bomb and the check-book. Governments can blow you to smithereens or they can spend you to death. This is a metaphor. They can use force to bomb you, assassinate you, torture you, jail you, fine you or fondle your daughter at the airport: they can use (your) money to buy your vote, bribe you, strengthen your competitors until you are destroyed, hire officials to regulate and hector you into madness and insolvency or bankrupt you by buying off others. But there are no woods and no irons in the government golf-bag: the bomb and the check-book are it.
Bombing deferred for now, the US Government is still deploying the check-book on the Palestinians, with Congress cutting off food supplies to the hungry for their audacity to request UN recognition (getting anything meaningful from the UN is a bit like hiring a eunuch as your marriage-counsellor, but leave that go).
In Libya, a country that will still sell its oil no matter who is in charge because they cannot drink the stuff, Western governments told their caddies to reach into the golf-bags and hand them bombs. Next they will ask for the check-books because that’s all they have left.
In America, citizens may object to getting the Afghanistan and Iraq and Libya treatment. The voters of Omaha and Phoenix and Boston may not like being carpet-bombed, especially in an election year. So ‘Tiger Woods’ Obama and his caddie, Ben Bernanke, have only one club left to get around the course, namely the public check-book, and approaching the 17th green they are already shooting way over par in this four-year presidential tournament.
In Britain how different it isn’t. President Barak gave what Britons call a barracking to Prime Minister David Cameron over his sniffy refusal to join America’s fiscal cocktail party. Cameron and his money-man, Chancellor George Osborne, insisted on supposedly massive cuts that, um, only stem the growth of already-outrageous government spending: they won’t drink any more than the current (burp) three bottles of scotch a day.
Britain’s bureaucrats, welfare scroungers, media vultures and limousine-liberals made such a ruckus that now Cameron has caved in and the UK is going for a two-fer, a fiscal version of happy-hour. In addition to their central bank printing new trillions in funny money, the British government will buy additional billions’ worth of stock in small and medium-sized businesses that have trouble getting loans from banks. No fooling.
This won’t increase government debt, Chancellor “Stillborn” hiccoughs, because – hey, guys – government will own stock in all those small businesses so it won’t look like debt on the balance sheets. Boris Yeltsin was never drunk enough, nor Leonid Brezhnev so communist, to think up a corker like this. It is as if John Belushi left Animal House for a job at the Fed.
The logic is fascinating: bankers cannot or will not lend money to many small businesses, in part because bankers are afraid of the risk while politicians are so busy sloshing money everywhere, government inflation gnaws at purchasing power, and worldwide consumers cease spending and trouser their pay-checks fearing the worst.
So bureaucrats – the guys busy not collecting the garbage, not alleviating poverty, making trains miss their timetables, burning mail that they are too lazy to deliver and launching military debacles around the world – will make the loans instead of bankers who have studied this stuff for years and who have a big financial incentive to get it right. As P. J. O’Rourke once said, this is like giving your dog a credit card.
Whatever panel oversees this government lending process, however nominally private-sector, it will be controlled by government pencil-pushers who only know how to kill or spend. So spend they will, in spades. Signs will proclaim, “Gotta pulse? Getta loan!” Had you unmarried daughters with the self-restraint of these new government lenders, they would all come home pregnant – every nine months. Meanwhile, your pension and your life-savings will be worth less every day.
Some long-gone buckskinner comic told a story of a lost man and his dog starving in the American wilderness. He cuts off his dog’s tail, cooks it, eats the meat and hurls the bones to man’s best friend. The storyteller explained that the master, and at the cost of some pain the grateful dog, got hot meals but the dog wondered where the knife would strike next. This is another metaphor: government is the lost man and you are Rover.
The moral may be to buy gold if you wish but fit a padlock on your underpants. And stop blaming Keynes for the Keynesians: he only wanted a little snorterino of the bad stuff while his followers are utterly stinko and gagging for more.
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