Back in the Cold War days, Joseph Stalin and his Kremlin clique used to refer to European liberals (and their American counterparts) as useful idiots. You can't blame them. After all, here was a country, the USSR, that had starved and slain its own citizens by the millions, set a precedent for global warmingists with crackpot science under TD Lysenko and occupied Eastern Europe from the Baltic to the Balkans in the name of "buffer states." But he called for street action against American imperialism, and zombie millions marched in Rome, Paris, Bonn, London and even a few burgs in "Amerika" as well.
A knife finally went through the heart of communism with the collapse of the Soviet Bloc in the 1980s. With breathtaking rapidity, the dominoes — you know, the ones liberals said didn't even exist, let alone could fall — fell in the wrong direction. They fell in the direction of freedom, wealth and free markets.
As an economist, I have been hoping for over four decades now that Keynesianism would suffer the same fate. It is easy to sum up Keynesianism. Forget all the prattle in your college Economics 101 course about aggregate demand curves, marginal propensities to consume and magnificent multipliers. It's far easier than that to sum up! Keynesian can be summarized in 12words: The Government Knows How to Spend Your Money Better Than You Do.
All the liberal faults of our post-World War II federal government tidal wave can be traced to this dirty dozen meme. Never mind as soon as 1937, when the stock market and the economy collapsed faster than any time it did in 1929 to 1932, it was clear fiscal policy and initiatives had failed to really pull the economy out of the Great Depression. It was World War II spending that ended the Depression, became the new claim.
When World War II ended, therefore, Keynesians expected a second market crash and depression. There was a cottage industry of doomsayers, foreshadowing the great environmental whack jobs of the 1960s and 1970s. But the depression never came; government cutbacks did not doom the United States to a resumption of the 1930s. The 1950s did just fine, thank you.
But why reach into that distant past, when proof of the failure of Keynesian economics has unfolded in front of our very eyes the last few years? The largest surge of government purchases in history, teamed up with lowest interest rates in the history of the republic — I must admit, it is hard to get below zero, but kudos to President Obama for trying — have produced the weakest recovery financial journalists can remember.
In fact, it is the pinnacle of gall for the White House to claim credit for job growth whatsoever, when the vast majority of it can be credited to investment by the oil companies (horrors!) in fracking and pipelines and manufacturing spinoffs from lower fossil fuel prices.
Remember all the howling over the fiscal cliff at the end of last year? Six months into higher taxes and reduced government spending, we see not a dent in jobs growth. It continues to plod along at 200,000 per month, plus or minus here and there and revisions here and there.
At the same time, Keynesians can't understand why making Obamacare cut fully in at 50 employees might be a reason for slow job growth among small firms.
But how, thou may ask, are these idiots so useful? Well, bull markets climb a wall of worry, the old Wall Street maxim goes. Since the private sector-induced economic recovery commenced in the spring of 2009, the Standard & Poor's 500 Index has gained more than 146 percent. But Keynesians, and their accolades in the mainstream financial media, can't seem to make up their minds whether a new bear market has started or whether the previous one has even ended yet. (I kid you not.)
The more scandals that cripple the Obama agenda, the greater business optimism soars. It recently touched its highest levels since last year's Romney implosion.
Network news talks about "dysfunction in Washington." Republican in name only Sen. John McCain, R-Ariz., pines for the good old days of the Keating Five. Meanwhile, the Republicans who "obstruct" the normal functions of Washington have managed to reduce growth in federal spending to its lowest rate since the late 1990s. Not surprisingly, that was the last time real Republicans ran the lower house in congress.
So keep that wall of worry coming, Keynesians! Maybe you will miss the next four years of the bull market, as you have missed the first four. Maybe a few more million jobs will be created (by Wal-Mart and all the other companies you hate). Maybe a few thousand vets will find employment (Wal-Mart just guaranteed vets a job. Will Joe Biden do the same?) Maybe a few more of those very stimulating (no pun intended) countries around the Mediterranean will continue to flounder in bankruptcy and euro-stagnation.
The day Keynesians throw out their textbooks and start buying shares, that will be the signal to sell.
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