Jeff  Carter

Caught this article in BI today. The lack of analysis and depth of thought is frightening. In March of 2009, we embarked on our latest Keynesian experiment. Previous to this one, we had tried Keynesian schemes before. They almost never work. The author also fails to look past the comparison of the Austrian School and Keynesian school of economics. There is another more rigid school, the Chicago School.

Without delving into the petty differences of each, the Austrian and Chicago school are similar, but the Chicago school has a lot more math to it. It’s more data and scientific method driven. The Keynesian school relies on the fundamental principles of the IS-LM curve. It’s more of an art form with than the Chicago school, which relies on a classical mathematical model for prediction.

The first time we tinkered with Keynes was the Great Depression. Instead of rescuing the American people, Keynesian economics made us poorer and prolonged the downturn. Keynesian advocates like to say that it was World War Two that brought us out of the Depression. Even today, Krugman was advocating for space invaders to get us to ramp up spending and bring us out of this prolonged recession.

Nobel Laureate Robert Lucas and Leonard Rapping calculated on the basis of just expansionary Federal Reserve policy that the economy should have been back to normal by 1935. So what stopped a blockbuster recovery from ever starting? The New Deal.


Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.