There was, indeed, a time when clear thinking and lucid communication via the written word were held in high regard. As far as we can tell, this wonderful epoch concluded in 1936. Everything since has been tortured with varying degrees of gobbledygook.
The fall from grace was triggered by the 1936 publication of John Maynard Keynes’ The General Theory of Employment, Interest and Money. The book is rigorously indecipherable. What’s more, it has the ill-effect of making those who read it dumber.
Nonetheless, politicians and establishment economists remain enamored with Keynes’ gibberish. For it offers academic rationale for governments to do what they love to do most – borrow money and spend it on inane programs. In particular, Keynes advocated filling bottles with money and burying them in coalmines for people to dig up as a way to end unemployment. Somehow, this public works egg hunt would make everyone rich.
Over the years this reasoning has inspired countless government stunts to save the economy from itself. Not long ago, Keynes devotee, Paul Krugman, took this logic and ran with it to the outer limits of deep space. In the process, he seems to have lost his mind.
According to Krugman, the proper way to propel an economic growth chart up and to the right is to borrow massive amounts of money and spend it preparing for an alien invasion. Naturally, it takes a Nobel Prize winning economist to come up with such nonsense.
Unfortunately, Keynes’ drivel became the archetypical for illogical economic thought, and still infects economic discourse to this day. You can hardly browse the headlines of Yahoo finance without your eyeballs being lacerated by it.
Just this week, for instance, we came across a headline titled, The Coming Trump Financial Crash. The author, Dennis M. Kelleher, happens to be President and CEO of the oddly named company Better Markets. The company website clarifies that Better Markets is “a nonprofit that promotes the public interest in the financial markets.”
What exactly this Washington, D.C. based nonprofit does – or how they keep the lights on – is unclear. But what is clear is that Kelleher is very comfortable applying words and terms to construct sentences with haphazard syntax. Kelleher also seems panicked that financial deregulation by Trump is going to cause a great big crash:
“If the Trump administration does just half of what it says it’s going to do in economic policy and financial regulation, another financial crash is almost certain and sooner rather than later. Worse yet, if they do that, the next crash will be much worse than the last one.
“Why another crash? Because it appears he is going to cause an asset and stock market bubble at the very same time he is reducing or eliminating the most sensible financial regulation designed to prevent the highest risk gambling on Wall Street. Tax changes that favor the wealthiest and repatriation of overseas profits that will most likely fund stock buybacks and M&A will be a short-term boost for the stock market. However, there has been almost no discussion of concrete policies that would actually produce sustainable and durable economic growth in the real economy.
“We have already seen the beginnings of the stock market bubble, with financial stocks leading the way as investors think that Wall Street’s highly profitable, but highest risk activities will create outsized returns […]. If financial regulation designed to protect Main Street’s jobs, homes and savings from Wall Street’s excesses are weakened or eliminated, then those activities will lead to financial excesses and almost certainly end in a financial crash.”
Do you follow the logic?
Don’t Blame Trump When the World Ends
Here at the Economic Prism we think Kelleher is giving President Trump too much credit for what he can and can’t do. While we agree a stock market crash is in the cards. Unlike Kelleher, when the crash does inevitably come, we don’t think President Trump is who the fingers of blame should be pointed at.
Regulations, which Kelleher advocates, don’t get at the core of the problem. Rather, the core of the problem is that today’s fiat money system is completely out of control. Until something is done about it, we’ll continue to experience epic asset bubbles and busts.
President Trump’s efforts to ease corporate tax policy or financial regulations are small potatoes compared to the destructive market whipsaws that come with rampant credit creation. Offshore corporate coffers would’ve never been stuffed so full if we had sound money with honest limits.
You may love the man. You may hate him. But the fact is, President Trump has been dealt the worst hand of any incoming U.S. President since James Buchanan – or maybe ever.
He’s taking over at a time when the national debt has experienced exponential growth for over 45 years. The national debt was under $400 billion when Tricky Dick Nixon closed the gold window in 1971. Today it’s nearly $20 trillion.
In short, the debt curve is entering a hyperbolic state. No amount of monetary gas will be able to propel it straight up forever. Of course, when you tack on unfunded liabilities, like social security, prescription drugs, and medicare, the debt runs up to a breathtaking $104.6 trillion. Each taxpayer’s on the hook for over $874,800.
At the same time, the stock valuations are at nose bleed heights. The Shiller’s Cyclically Adjusted Price Earnings (CAPE) ratio, for instance, is currently 28.5. That’s 70 percent higher than the CAPE’s long-term historical average.
In addition, there have only been two occasions over the last 100 years that saw the CAPE at a higher valuation than today. One was during the late 1920s, right before the stock market crash. The other was the late 1990s, just prior to the popping of the internet bubble.
Similarly, the Buffett indicator, which is a ratio of the total market capitalization over gross domestic product, also shows that stocks are significantly overvalued. The ratio currently stands at about 126 percent. A fairly valued market is a ratio somewhere between 75 and 90 percent. Anything above 115 percent is considered significantly over valued.
The point is a century of scientific mismanagement of the currency has pushed the economic, financial, and social order well past any rational limit. Total government debt and stock valuations are at all-time extremes. Something big is coming. You can guarantee it.
But don’t blame Trump when the world ends. There ain’t a doggone thing he or anyone else can do to stop it.
for Economic Prism
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Love the article. Thanks. I’m unsure whether all the negative forecasts are viable since I do think that the Trump rally has reset how we need to look at stock market prices. Having said that, I barely know what I mean.
I loved this gem: Nonetheless, politicians and establishment economists remain enamored with Keynes’ gibberish. For it offers academic rationale for governments to do what they love to do most – borrow money and spend it on inane programs. In particular, Keynes advocated filling bottles with money and burying them in coalmines for people to dig up as a way to end unemployment. Somehow, this public works egg hunt would make everyone rich.
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Mass delusion is hard to break. People believe government money is safe. When the Crack Up Boom happens, millions of Rothbardians need to be ready to explain why.
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We only have John Maynard Keynes, insane prophet to rival Mohammed the pedophile, with just as many adherents to his insane economic theories as the false prophet of enslavement (submission, sorry, it looks the same in hindsight), to blame.
Well, them and their followers and the slow but inexorable, inevitable collapse of all empires with which history is rife. QED.
So if digging a hole to fill a hole is sound economic policy, why ain’t we all rich? [that’s rhetoric. It’s a smarmy intentional reductio ad absurdam argument against Keynes’ money-making scheme in eighteen words].
Economies will crash. People will die by the billions. Oceans will rise and fall, glaciers will ebb and flow, our magnetic poles will continue to shift every 23 millenia or so, time and tide awaits no man or woman (or LGBTQXYZ or transmutated) and still, the “economic” policies put forth and enacted upon by Keynes and his globalist allies will still be inherently wrong, or evil.
And just as long as there is a mainstream media running cover for those guys, evil will continue to rule, attempt to rule, and be brought down by the madding hordes of scraggly starved scabrous torch and pitchfork-bearing social justice whores which come before every empire collapses under its own weight.
Evil. Evil runs amok.
It’s all relative, you, good 20th century post-judgment hipster-type, say?
Good, bad, I’m the guy with the keyboard.
It’s not Keynes! It’s any government that latches onto any economic policy that leaves the government in control!!!! Keynes was just the most convenient one!
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Strange they had no problem blaming Obama for the 2008 financial crash and the subsequent massive debt growth. Indeed they blamed Obama for a lot of things most of which he wasn’t responsible for. The reality was the 2008 financial crash happened under George W. Bush’s watch and because of it the wheels were already in motion for the massive bailouts by the time Obama came to power which in turn set in motion the massive debt growth. None of this is to say Obama was innocent and indeed under Obama the US economy recovered, employment grew and the annual deficit fell despite Obama having to deal with a hostile house and senate for most of his term. But if the market crashes and burns and the world ends under Trump, Trump will own it. No question about it as he seems determined to unravel all the regulation that was passed under Obama and his policies should once again accelerate the debt growth.
Do you even read what you type? “… should once again accelerate the debt growth”?
“the US economy recovered, employment grew and the annual deficit fell”
Employment “grew” because the dept. of labor statistics began throwing out numbers which disagreed with their goal of “less than five percent unemployment.”
Fact is (facts ARE tricky things, unlike leftist lies), the true UE numbers overall are closer to 15% on average, higher than 50% in many urban areas.
The very same dept. of Labor tells us over 95 million (that’s 95 followed by six zeroes) Americans have LEFT the labor market. Not working. Not showing employment. That’s HALF of all eligible “workers.” So how is UE shown as under 5%? DOL throws out people “no longer looking for work.” Not that they’re employed, they’re not showing up at unemployment lines or showing income to the IRS.
Food stamps recipients more than doubled under President Obeyme.
Jobs? Federal employees increased, low-income earners increased, very narrow tech market jobs increased (Mark Zuckerberg’s making bank on this).
If everyone has jobs, where are the millions of “protestors” coming from all of a sudden?
The deficit fell? Oh, that’s right, Pres. Obeyme’s in-house communist political officer Van Jones did tell us “left is right, right is left, up is down, good is bad.”
Under EX President Obeyme’s policies, a national debt which (thanks to that deficit-spending central-bank ponzi schemer before ponzi scheming was cool Alexander Hamilton) took 217 years to accumulate DOUBLED in his eight years as golfer in chief. At the peak of his “growth” model, the Federal Reserve was pumping notes with nothing to back them up at the rate of a Trillion dollars (that’s a 1 followed by more zeroes than you have fingies) into the US market which had the effect of artificially propping up the GDP while setting the stage for future hyperinflationary collapse of our Potemkin economy.
You may not be old enough to remember the crushing effect of Jimmy Carter’s policies in the 1970s where double-digit mortgage rates were the norm. 13% for a home loan? 9% was considered GREAT.
The ONLY thing keeping those rates down NOW is the Fed’s policies. When they start bumping up the bank rates, the prime rates will go through the roof.
Very likely in the next year or so of Mr. Trump’s first four years in office, and, the media and leftist trolls such as yourself will indeed make him own that which was set up by his predecessors.
You don’t need to reply. Your first post proved the irrationality of leftists once again.