laffer and the bonus army.
looking over the past week’s topics everything is so serious and well, ..I wanted to do something lighter today. but then I was looking at a book on supply-side economics and I couldn’t help myself.. lol
supply side economics is a favorite of the Chicago school.
people sometimes talk about the ‘ricardian vice’ referring to the development of unreal and oversimplified theoretical models of economy that are totally divorced from reality. its either a con-job or basically delusional/ pathological..
in 1954 milton friedman wrote. “the economy of America is depression proof.” he had a model to prove it. some of it was true(like the best lies.)
friedman and schwarz’ analysis of the causes of the 30s depression.. blames the contraction in money supply between feb 29 and march 33. they proved that it wasn’t the gold standard that caused the depression.
this is what mr. obama is attempting to avoid I suppose.
the paradigm of the roaring 20s was broken and the fed contracted money supply! they made a mistake.
this was the time when the invisible jackboot of the market was worn by the likes of general george patton and the bayonetts were turned on the bonus army. (see wiki article.)
stagnation followed in the 30s. some people argue it was exacerbated by new dealism which destroyed investor confidence. the idea that capital wanted to punish the proles for having the temerity to demand some social justice.
conventional wisdom says that it was the mobilization of ww2 that pulled the usa out of recession .. others say the it was the post war dropping of regulation and refocussing on civilian production. that investor confidence returned.
i reckon it was because the rest of the world had to finally admit it was wrong and gave leadership to the new world and its optimism which became the engine for unprecedented global growth. the problem was the corruption surfacing on wall st. masked by pseudo-liberalism and its fake modelling.
global free-market capitalism.. is the rhetoric .. a beautiful model of self regulating markets… except that like in the 1920s it was greedy bastards masquerading as free marketeers who gained control of the institutions... major banks and fed. so it seems from here.
there were fairly polite arguments. the guys who trotted them out totally didn’t mention the fact that the entire us banking system was being built on toxic assets inflated with totally unsustainable debt and a derivative market ‘worth’ hundreds of trillions. the so called free-market supply-siders have consistently ignored realities preferring the ricardian vice of the false economy. it was Arthur laffer and his disciples in reaganomics that really jacked up the practice though it had been building up since the theoretical formulations of the Chicago school.(1950s on). tax cuts.. less regulation.. free trade.. this is what has lead to the crash beginning 2008. it was no real free market nor was it Keynes. it was supply-side liars and delusionists.
since the 30s depression, the libetarian economic philosophy of the 'austrian school'… like l. von mises, hayek, Schumpeter has been ignored except by the odd entrepeneur. I’d say .. that if we avoid a prolonged stone age this time around …if..... then such names should become more widespread before the next kondratiev wave as joseph schumpeter calls the period between depressions. (see wiki)
the old story.. a form is created . (the post war system).. its imperfections show up and it is destroyed. a new one is created with the addition of the knowledge gained from the last one.
have a nice weekend..