The Most Insane People in American Government…

crazy

There is a group of people in mainstream American government who are more insane than any other. These are people who are truly deluded, at best. At worst, they are malevolent power-seekers who understand the truth, but prefer others to believe the lie.

The most insane people working in the US Government are Keynesian Economists.

Where are these people in government? Everywhere, unfortunately.

The people running the Federal Reserve are Keynesians. Probably something near 99% of all D.C. politicians are basically Keynesian in economic outlook. Probably something near 90% (if not more) of all college economics professors are Keynesians to some degree; if you took economics in college, you were probably taught Keynesian Economics by a Keynesian. A large number of mainstream financial journalists and pundits are Keynesian in outlook.

Barack Obama is a Keynesian; so was George W. Bush. So was Bill Clinton. So was Bush Sr. So was basically every President of the 20th century, all the way back to Woodrow Wilson (which is anachronistic, I realize; he reigned even before Keynesian theory existed. I have discussed how that works here.) Officially, Reagan was an economic Supply-Sider (pejoratively called “trickle-down theory”); but in action, he was a Keynesian fellow traveler. They say “If it talks like a duck and walks like a duck, then it’s a duck.” I apply that logic to politicians and economists, but in a modified format: “It can say whatever the hell it wants, but if it walks like a Keynesian, then it’s a Keynesian.”

Why are these people insane? The late great economist Ludwig Von Mises explained this almost seventy years ago in 1948: They believe they can “turn stones into bread.” Read Mises’ short and pointed article here.

Von Mises hit the nail on the head: Keynesians believe that an economy can pull itself up by its own bootstraps. They believe that spending, both private and government, generates prosperity. They believe that the government can print money into existence, spend it into the economy, and that this is what produces prosperity. They believe that they can cause a productive economy to spring forth out of an unproductive economy simply by introducing new money to the system, also known as inflation. As Keynes himself declared in a 1943 edition of the Paper of the British Experts, inflation performs the “miracle… of turning a stone into bread.”

We live in a monetary system rigged by Keynesian witchdoctors who think they can turn stones into bread. That is why we keep hearing the word “stimulus” in the news: because the Keynesians running the Federal Reserve think that they can heal our broken economy by papering over the wounds with new dollars. So they provide major amounts of credit to the economy in an attempt to do so. But as I have explained in a recent article, the healing of our economy is not a function of the money supply; it is a function of entrepreneurship, risk-taking, and production. But the very essence of the Federal Reserve goes against these things. They do all they can to blow enormous bubbles in the stock market and prop up failing sectors of the economy, akin to the actions pursued before, during, and after the 2008 recession in the banking and housing markets. This stifles efficient re-capitalization of wasted resources, because resources being wasted can stay where they are, protected by the Federal Reserve. In a recession, resources being employed wastefully are liquidated and re-allocated by entrepreneurs and risk-takers into different, more efficient uses. But the Keynesians at the Federal Reserve, like Fed Chairwoman Janet Yellen, are not interested in allowing the economy to undergo a fundamental re-allocation and subsequent re-capitalization of wasted resources; they’d prefer to turn stones into bread.

It ain’t working. But they’ll keep trying.

So why are these people in power? Better question: Why are they STILL in power, after dropping the ball time after time for the past 100 years? Good question. The short answer can be broken up into two segments:

1)      The Good Ol’ Boy network is a powerful thing. Many of these economic and political elites went to the same ivy league schools: Harvard, Yale, and Princeton, to name a few. Many of the highest-up of the highest have been members or close associates of the same organizations, like Skull & Bones or the Council on Foreign Relations. Many of these elites attend the same conferences: Bilderberg and Davos are the most well-known. The elites have been taught, and influenced, by the Keynesian old guard. They have been supported and cherry-picked for power by the Keynesian old guard. This applies to both Democrats and Republicans; the Keynesian paradigm is, unfortunately, wholly bipartisan.

2)      Because Keynesianism is good for the government.  This reason applies even more so than the last. Governments and their constituent politicians love to spend money. They love to make bold promises to voters that will get them elected; promises that they can’t actually pay for. So how can politicians pay for their promises? Taxes are one way. But ever-higher outright taxes make people upset pretty quickly. So politicians turn to a sneakier method of taxation: inflation. Making new money and spending it, which of course devalues the money we already have in our pockets. Governments love Keynesian theory, because they need it in order to buy votes with wild and unsustainable promises, and to pursue bone-headed welfare and warfare schemes.

The Federal Reserve does not print money and give it directly to the Treasury Department for spending. That would be illegal. But in modern times, the Federal Reserve does do this in a roundabout way: by purchasing bonds from the Treasury Department, which creates a cash flow into the Treasury. This is called “monetizing the debt.” The Federal Reserve has always claimed that it will not hold Treasury bonds forever; the entire thrust of their stimulus program assumes that they will sell their bonds back to the Treasury eventually and get their money back, effectively de-monetizing the debt. The problem? I’m not so sure they’ll ever do it.

There is no major opposition to the Federal Reserve or Keynesianism in American politics. Both Democrats and Republicans are united on this, for the most part. Rand Paul is the only major politician who questions the validity of the Federal Reserve; he carries on his father’s torch. Unfortunately, he is little more than a candle in the catacombs where Capitol Hill is concerned.

And yet, I sense more opposition to the Federal Reserve than has existed before. I sense more and more people beginning to question the Keynesian paradigm, and question if our “brilliant helmsman” at the Federal Reserve have any clue as to what they’re doing. I thank the Internet for this great awakening. The Keynesian establishment, firmly in control of the mainstream media, has silenced and deflected opposition from the Federal Reserve for years. They are losing this important monopoly over information in the War of Ideas.

In the next economic crisis, which I think will befall us within the next few years, the Federal Reserve will cry out for more power. Janet Yellen will declare that bigger and bolder inflation programs than ever before will be needed to combat the recession. In reality, that is the exact opposite of what we need, as average citizens. But the American Welfare-Warfare State needs it. So expect Congress to give it to them.

Don’t be fooled. The Federal Reserve is not the doctor; it is the virus.

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