LANCING THE AMERICAN BUBBLE
Read Jay B Gaskill’s
Lost Souls Coffee Shop, an allegory for the human condition. More on the Bridge to Being Blog at http://jaygaskill.com/blog2/ .
And read Jay Gaskill’s
new thriller, The Stranded Ones. More on
the Policy Think Site at http://www.jaygaskill.com/TourTheStrandedOnes.pdf
.
Welcome to the Policy Think Site: http://www.jaygaskill.com
As Posted On
The Out-Lawyer’s Blog: http://www.jaygaskill.com/blog1
The Human Conspiracy Blog: http://www.jaygaskill.com/blog3
All contents, unless otherwise indicated are --
Copyright © 2003, 2004, 2005, 2006, 2007, 2008,
2009 & 2010 by Jay B. Gaskill
Permission to publish, distribute or print all
or part of this article - except for personal use - is needed.
Forwarded links are welcomed.
Contact Jay B. Gaskill, attorney at law, via e
mail at law@jaygaskill.com
The American Bubble?
Catastrophic failure wonderfully
concentrates the mind – unless it causes its architects to adopt a 'much more
of the same' suicide pact. The late John
Maynard Keynes is the poster child for the mischief that results when economic
theory becomes economic doctrine. The
current economic mess is just a warning of the catastrophe to come. The leaders of congress, blithely ignorant of
the failure of thirty years of Keynes-inspired deficit spending, are on a
suicidal course. It would be a good idea
for the country to get off that train before the collision.
It is time for
new thinking.
If I am correct,
later generations will lump Keynes' ideas in the same category of 'good
intentions with bad consequences' category now occupied by the permissive child
rearing theories of Dr. Spock.
In 2008, I
posted an article titled “The Great Keynesian Collapse”. It still holds up very well and is linked
below.
Keynesian
economic theory is a spectacular 21st century failure. This can be traced for three major economic
factors, all of which now operate to discredit the entire edifice of
Keynesian-derived policy: (1) the utter
lack of discipline of popular democracies, whose politicians are ever seduced
by the promise of a free fiscal lunch; (2) the profound impact of the world
economy, the monetary effects of which are fully capable of swamping local
currency and money supply policies; (3) the complete incompetence of government
bureaucracies when it comes to the creation of wealth-generating enterprises.
Avoiding the Great American Collapse
Following the
huge deficits generated by the WW II economy, fiscal sanity and economic
progress gradually reestablished themselves during the Eisenhower years and,
briefly, during the first three years of the brutally truncated Kennedy
administration.
The great fiscal
watershed was the administration of Lyndon Johnson. Following JFK's fiscally
cautious approach to Keynesian economics, LBJ
wholeheartedly bought into the notion that the
The Vietnam War and
the Great society set the stage for the later collapse of Keynesian economic
theory in much the same way that an intoxicated teenage driver in an ultra-safe
Mercedes sedan sets the stage for a highway disaster. The padding, the crush zones, the airbags,
the seat belts, the safe brakes and all the rest are mere illusions in the
hands of a reckless teen – or a master politician.
This was the
beginning of the modern American economic fantasy, the notion that the
Note for future
reference: No racehorse has even been able to finish the Kentucky Derby while
carrying a dead elephant on its back.
The Nixon
administration muddled through without repudiating the LBJ-Keynes
bargain, but did not greatly aggravate its effects. After a brief transition under President
Ford, the grand LBJ Keynesian bargain suffered its
first major collapse, resulting in the Carter recession, a period of rampant
inflation and dismal economic performance.
Every succeeding
administration - Reagan, Bush I, Clinton, Bush II and Obama - have been seduced
by the perverse Keynesian notion that we can continue to borrow against a
bright future, while all the time relentlessly ruining that future beyond
recovery by digging a debt crater so deep that no sunlight can reach the
bottom. The current administration seems
committed to a course that will put us in deep in that dark, unscalable pit
before the end of its first – and
possibly only – four year lease on executive power.
All of the
post-Eisenhower GOP administrations played the Keynes game, too, succumbing to
a dangerous trade-off: “Please fund our defense and security priorities and
we'll look the other way when your domestic 'social justice' priorities are met
with borrowed money”. This is what is
meant by two cooperating elites. Bargains
like these explain more than any other single factor why the Tea Party movement
is so threatening to all current federal office holders.
Think about it
from a common sense perspective for a moment.
Virtually 80% of elected federal officials actually think it is
reasonable to discount worries about annual deficits as long as they represent
an arbitrary 'acceptable' percentage of overall civilian spending for goods and
services (the GDP). As if these new
deficits aren't adding to a mountain of unpaid indebtedness. As if they aren’t placing us in the path of
fiscal collapse when, inevitably, fewer and fewer willing lenders are
available.
This is exactly
like a family ignoring its practice of always borrowing and never
repaying because “it's only a little bit at a time”, while continuing to
redefine “a little bit”.
Yes, we
Americans will soon face some heavy lifting.
But our nation's full recovery is possible, but only when the borrowing addiction is broken.
New thinking
starts with study and reflection. The
private enterprise engine that created American prosperity can save us, but
only if we are willing to save it.
Food for thought
and discussion: Follow the links to four
articles on this developing topic below.
The Great Meltdown [2008]
http://jaygaskill.com/TheGreatMeltdownOf08.htm
The Great Keynesian Collapse [2008]
http://jaygaskill.com/KeynsianCollapse.pdf
Recovery 09
http://jaygaskill.com/Recovery09.htm
Guide to Recovery
http://jaygaskill.com/GUIDEtoRECOVERY.htm
Stay tuned….
JBG