Tuesday, April 23, 2013

Why Krugman and the Keynesians Are Lackeys for the Neofeudal Debtocracy

If you set out to design a system that would implode with devastating consequences, it would be the Keynesian Cargo Cult's neofeudal financialization debtocracy.


The heart and soul of the Keynesian Cargo Cult is the dogma that the cure for all economic ailments is more aggregate demand, i.e. consumption. The Keynesians' fanatic faith in boosting consumption would be merely childishly naive if it didn't directly support a parasitic neofeudal debt-serfdom. Sadly, Krugman and his fellow cultists' single-minded parroting of "aggregate demand" makes them well-paid lackeys and toadies for an extractive neofeudal-neocolonial debtocracy.


If you are unfamiliar with the neofeudal, neocolonial model of financialization, please review:

Debt = Serfdom (April 2, 2013)
Crisis and Opportunity (February 1, 2013)

Like all cargo cults, Keynesians maintain a magical-thinking belief in the power of wanting more stuff. But in so doing, they embrace and support the mystification that protects the power structure that is dooming the nation and its economy to stagnation and eventual collapse (call it "reset" if you prefer).

By focusing on increasing demand and consumption by any means, the Keynesian Cultists miss the key dynamics of sustainable growth and fail utterly and completely to acknowledge the corrupt and exploitive nature of our cartel-state crony-capitalism economy.

Has their naivete blinded them to the power structure of the neofeudal-neocolonial debtocracy? It seems unlikely, and so that leaves a less savory motivation: co-option.They're raking in big bucks as apologists for cartel-state crony-capitalism, and as a result they don't dare question the power structure, much less hazard a critique of the hands that feed them.

The Krugman-Keynesian Cargo Cult is incapable of distinguishing between productive investment and profligate spending. Keynesian cultists focus on an incredibly blunt and misleading indicator of gross domestic product: GDP. Burn down a house and rebuild it, pay people to dig a hole and fill it, build bridges to nowhere, buy costly weapons systems the military doesn't even want, purchase boatloads of particle board furniture from China that's headed for the landfill: it's all equally wonderful to the Keynesian apologists because it boosts GDP.

Incredible as it seems to GDP-worshippers, there is a difference between productive investment and squandering money. A productive investment generates a multiplier effect: most importantly, it increases productivity which then creates value, surplus and wealth.

There is no multiplier in building McMansions in the middle of nowhere, bridges to nowhere, particle board shelving from China or a university degree in film studies, etc. Housing is consumption, a bridge to nowhere is consumption, particle board shelving is consumption, and a $180,000 bachelor's degree in a field of study with near-zero economic premium in the real economy is also consumption.

The Keynesian Cultists and their fellow apologists/neofeudal apparatchiks attempt to mystify this consumption by labeling it "investment." The misdirection may fool craven politicos seeking to buy votes, but the real world is not fooled.

Value, surplus and wealth can only be created by increasing productivity. If an investment doesn't increase productivity, it is either malinvestment, misallocation of scarce capital or consumption.

How does buying particle board shelving from China improve productivity in America? It does not. Does dumping trillions of borrowed dollars into cartels like sickcare, Big Pharma, higher education or the military-industrial complex increase productivity? No, it actively lowers it by diverting national income to the most corrupt, inefficient and least productive sectors of the economy.

The Keynesians are also blind to the dynamic of improving household income. It their magical-thinking universe, buying particle board shelving from China (yippee, aggregate demand!) is supposed to magically turn lead (wasteful consumption) into gold (higher wages). Wages can only increase as productivity increases. Any other apparent increase is simply a subsidy that shifts money from a more productive sector to a less productive sector.

This is how you end up with a healthcare system that is 50% fraud, paper-shuffling, and inefficiency. We know America's sickcare is 50% waste, fraud and paper-shuffling because our competitors provide their citizens healthcare for half of what we spend per person.

The Keynesians' inability to distinguish between consumption and investment that increases productivity is fatal.

The Cargo Cult is also blind to the metric that matters: debt and the ability to service debt. As financialization creates an unproductive nation of debt-serfs who depend on debt to fund their consumption, household income declines. This leaves households less able to service higher debt.

But since aggregate demand (i.e. financialization) is dependent on ever-expanding debt, the system falls apart once households cannot increase their debt loads. ( The Global Status Quo Strategy: Do More of What Has Failed Spectacularly)

In response, the Status Quo increases government borrowing and spending (either directly, or for subsidies to favored cartels like the mortgage industry) to fill the gap left by debt-serfs unable (or unwilling) to borrow more for shelving from China, etc.

The problem with borrowing money for unproductive consumption is the cheap shelving breaks and is hauled to the dump but the interest payment remains--in the case of government borrowing, essentially forever. Unproductive spending of cash is wasteful, as that scarce capital could have been invested in productive assets.

But spending borrowed money on unproductive consumption--McMansions, degrees in critical studies, duplicative medical tests, marginal-utility meds and weapons systems--is truly insane, for the cost of that consumption continues to rise over time as interest is paid, until the debt is retired (paid off) or renounced (defaulted). All that interest is diverting income that could have been invested in higher productivity.

The Keynesian Cultists are also blind to the enormous opportunity cost of funding consumption with debt. Over time, servicing debt bleeds the economy dry as productivity, wages and investment stagnate.

If you set out to design a system that would implode with devastating consequences, it would be the Keynesian Cargo Cult's neofeudal financialization debtocracy. All the incentives favor increasing debt, misallocation of capital and mindless consumption, and all the disincentives weaken investments in productivity and the creative destruction of malinvestments and subsidies to favored cartels.

Why do the Keynesian Cargo Cultists continue dancing around the campfire waving dead chickens and worshipping aggregate demand? Toadies, lackeys and apologists are always well-paid to support the party line. Aggregate demand, aggregate demand, brawk! 



Special "the end of the world as we know it" sale on seeds from our longtime supplier Everlasting Seeds:TEOTWAWKI SALE! 20% OFF!
In light of the calamitous predictions regarding the Global Coastal Event [Clif High], Korean Nuclear tensions, and Solar/EMPs “Kill Shot” {Ed Dames}, we thought we'd offer folks the largest discount we've ever given. We're not 'fortune tellers' here, or Seers, or 'Intuitives': but if even ONE of these predictions come to pass, it'll definitely make for a 'bad hair day' {week/month/year...} for all of us... 


Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

go to print edition1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)



Thank you, Robert B. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.Thank you, Chris H. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.


Our Privacy Policy:


Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative). If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.


PRIVACY NOTICE FOR EEA INDIVIDUALS


This section covers disclosures on the General Data Protection Regulation (GDPR) for users residing within EEA only. GDPR replaces the existing Directive 95/46/ec, and aims at harmonizing data protection laws in the EU that are fit for purpose in the digital age. The primary objective of the GDPR is to give citizens back control of their personal data. Please follow the link below to access InvestingChannel’s General Data Protection Notice. https://stg.media.investingchannel.com/gdpr-notice/


Notice of Compliance with The California Consumer Protection Act
This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising. If you do not want any personal information that may be collected by third-party advertising to be sold, please follow the instructions on this page: Limit the Use of My Sensitive Personal Information.


Regarding Cookies:


This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly.


Our Commission Policy:

As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted on my site.

  © Blogger templates Newspaper III by Ourblogtemplates.com 2008

Back to TOP