Occasional X: The foul spirit of political economics (CDXXXVII)

“The core Keynesian error is treating consumption as the engine of wealth. Keynes fixated on aggregate demand, the total spending flowing through an economy, as the variable governments must manage. Boost it artificially, and you rescue the economy. Production precedes consumption. …Government stimulus spending doesn't create resources. It redirects them. When Washington borrows a billion dollars and injects it into infrastructure or green energy, it pulls that capital away from whatever private actors would have funded.” (Handre) Economic debate suffers from the fact that economics is a failed/fake science. Economists do not know what profit is, and consequently, how the economic system works. It's been that way ever since Adam Smith. Both Keynesianism and Austrianism is proto-scientific garbage. The free-market economy runs on profit. Macroeconomic profit Qm is given by the axiomatically correct Profit Law Qm:=(I−Sm)+(G−T)+(X−M)+Yd. The Law implies Qm≔(I−Sm)>0 for Early Capitalism, and it implies Qm≔(G−T)>0 for Late Capitalism. Keynes observed that investment expenditures I were insufficient; therefore, the balance (I−Sm) was too low. He proposed to compensate the shortfall with a bigger balance (G−T) of public deficit spending. Handre's claim that this “pulls capital away from whatever private actors would have funded” is a hallucination because the actual problem was that there never were private actors in the wings to fund private investment I in the first place. In the monetary economy, investment is not restricted by the household sector's saving Sm. If Sm is zero, investment is fully financed by credit and retained profit. In free-market economies, public debt has increased with minor interruptions for 200+ years. So, Qm≔(G−T)>0 is a crucial ingredient of Capitalism's life elixir. Everybody understands that the overriding principle of economics is that macroeconomic profit is greater than zero; otherwise, firms start going bankrupt, and the breakdown begins. All other principles are secondary at best. Neither utility maximization nor profit maximization nor efficient resource allocation keeps the economy above the zero-profit cutoff. Currently, the free-market economy is temporarily saved from breakdown by the deficit-spending/money-creating duo of Treasury/Central Bank, i.e., the State. This means that the premise of legacy economics, i.e., that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system, is axiomatically false. This means that economics is a failed/fake science. Ultimately, this means that the representative economist is too stupid to understand the elementary algebra that underlies macroeconomic accounting. Austrians can't get beyond their microeconomic/ behavioral horizon. Math was never their strong suit. From the fact that the free-market economy thrives on positive/increasing macroeconomic profit, which, in turn, stems mainly from the State's deficit-spending/money-creation, it follows immediately that budget-balancing/debt-reduction turns macroeconomic profit into loss, and this means that the free-market economy cannot dismount from the debt tiger. Because of deficit-spending/money-creation, i.e., of the free lunches for the Oligarchy, the distribution of income/wealth becomes progressively more extreme. As the debt grows, the number of millionaires/billionaires/zillionaires grows exponentially. Since the household sector is taxed for interest, there is an absolute upper limit for the growth of public debt, which is given by public_debt times avg_interest_rate ≦wage_income. Economic problems, though, start much earlier because of other irreducible items in the budget (military, health, etc.) and a not exactly known upper tax-to-income limit. The breakdown of the free-market economy is a systemic inevitability. The important thing is not whether it will happen, but when. The current system can only exist as a nominally growing economy. If debt growth stops, macroeconomic profit approaches zero, and the economy implodes. Austrians correctly observe the lethal weaknesses of the free-market system. Their communicative modus operandi is to simply attribute all economic misdevelopments to the State and to advertize the unchained entrepreneur as the economic savior who is eagerly waiting in the wings. The fact is, behind the wings there has never been anything.

— AXEC (@EgmontHandtke) November 7, 2026

Occasional X: Clueless economists / Money (CXLXIX)

“If you double everyones money (cash/debt), prices will increase roughly 2x.” (Tony Watson) That's the sloppy Quantity Theory. It is plausible, but failed/fake science. Tony Watson has never had any idea of the difference between transaction money and money as a store of value. He has no idea of economics in general, and the Theory of Money, in particular. The first thing in Monetary Theory is that transaction money is zero at the beginning and the end of a given period; see line 16 in AXEC237c ⇓. It is periodically created out of nothing and goes back to nothing. There's no problem here; money is endogenous. If the wage rate W doubles in line 5, the price doubles, and the quantity of transaction money doubles in line 16. It is still zero at the period's beginning and end. If tested, it yields a proportionality between price P and the quantity of transaction money M. However, this is NOT causality. The common causality is the doubling of the wage rate. For 200+ years, economics has claimed to be a science. But it still is not. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. As a result, economic policy guidance has never had valid scientific foundations. The Quantity Theory is a good example of this. That money is created out of nothing and backed by nothing is NOT the critical point of a fiat money system. The point is whether money is injected (i) on the left side of the business sector's national account in the form of wages, or (ii) on the right side in the form of additional nominal demand, i.e., in the form of deficit spending. The case of deficit-spending/money-creation, i.e., increasing consumptive public debt, is equivalent to bringing counterfeit money into circulation, which in real terms amounts to stealing stuff from WeThePeople. National debt is roughly equal to the financial wealth of WeTheOligarchy. Ultimately, most of WeTheOligarchy's financial wealth is printed by the Central Bank. This is not a 'problem', but the defining characteristic of Capitalism. The problem with the Central Bank is NOT that it creates money out of nothing, but that it creates profit out of nothing. If the Central Bank is only allowed to create transaction money to meet the needs of businesses and households, then fiat money is the ideal solution. The problems arise with sectoral balances. For the axiomatically correct Monetary Theory, see the working paper ⇒ The Dark-Matter Theory of Fiat Money https://t.co/0QSqFFrVUX

— AXEC (@EgmontHandtke) November 7, 2026

Occasional X: The foul spirit of political economics (CDXXXVI)

“James K. Galbraith sees jasonfurman's recent comments about 'heterodox' economics as a veiled swipe at IsabellaMWeber and as evidence that mainstream economics is showing signs of insecurity.” (Project Syndicate) Insecurity is a euphemism for the realization that mainstream economics is failed/fake science. For 200+ years, economics has claimed to be a science. But it still is not. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory & axiomatically false & materially/ formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the whole analytical superstructure is scientifically worthless. While it is true that Orthodoxy is scientifically defunct, the inevitable Paradigm Shift won't come from Heterodoxy either. Heterodox economics is also scientifically worthless. For details, see ⇛ Heterodoxy ― an axiomatic failure just like Orthodoxy https://t.co/P04clprP31 It is high time that both Orthodoxy and Heterodoxy were consigned to the Hall of Eternal Scientific Shame. To finally become a science, economics needs a Paradigm Shift from false behavioral microfoundations and false Keynesian macrofoundations to true macrofoundations (⇓ AXEC121l).

— AXEC (@EgmontHandtke) November 7, 2026

Occasional X: How it works (DXXXVI)

“Prices should be understood first and foremost as a mechanism through which monetary incomes, including profits, are generated and realized. After all, firms set prices not simply to cover their costs, but also to make profits.” (Khazbi Budunov) Time to get Price and Profit Theory right. Economics has defined itself as a social science and accordingly has been based on subjective/behavioral assumptions/axioms. This is the methodological ur-mistake. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. Economics needs a Paradigm Shift. The representative economist will not survive it intellectually. That's a bad outlook for Khazbi Budunov. The methodologically correct approach is summarized in table AXEC244a ⇓. Microfoundations are methodologically false; therefore, the elementary production-consumption economy is given with three macroeconomic axioms in lines 1, 2, 3. Under the initial analytical conditions of market-clearing, i.e., X=O, and budget-balancing, i.e., Ec=Yw or ρEC=1, this yields the price P in line 5 and 8 as equal to unit wage costs W/R. Without budget-balancing, it is ρEC*W/R, in the general case with ρEC≠1. For a start, the price is the dependent variable here. This is a starting condition. In the most elementary case, the price is equal to unit wage costs W/R. The workers get the whole product O. The profit Qm for the business sector as a whole is zero. In the general case, the macroeconomic price depends on demand, expressed by ρEC≠1, and unit wage costs W/R. If the condition of budget balancing is lifted, then nominal demand is not equal to wage income. The market-clearing price P is now co-determined by the expenditure ratio ρE, i.e., ρE1<1 means saving of the household sector as a whole. Dissaving, i.e., ρE1>1, means that the household sector takes a credit from the Central Bank. The Central Bank stands here for the banking system. Dissaving also means that the business sector makes a profit in line 12 and accordingly has demand deposits at the Central Bank. If the household sector saves, the business sector makes a loss. As a result, the expenditure ratio ρE determines both price P (line 8) and profit/loss Qm (line 12) simultaneously. Without ρE>1, the price cannot rise above unit wage costs W/R, and there is no profit Qm. Profit is not a monetary income; distributed profit is. Profit is a balance, i.e., the difference of flows. Economists have not understood this since the time of the Founding Fathers. If the firm simply increases the price, the market-clearing condition no longer holds and the inventory increases, i.e., O−X>0. Whether the firm wants to make a profit is irrelevant. Profit appears only if ρE>1. Profit does not appear either if the firm simply increases the price. Profit is not psychic or behavioral but depends on the objective/systemic precondition ρE>1. To expect profit from the entrepreneur's wishes or expectations or price increases is as good as expecting rain from the chief's rain dance.

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: The foul spirit of political economics (CDXXXV)

“Extended Macroeconomics lecture today, 4 hours long, from Keynes to Lucas, how employment and inflation theories evolved and the different versions of the Phillips Curve.” (Benito Salomão) The scientifically valid 1-minute lecture says that economists mutilated and misinterpreted the original Phillip Curve. Paul Samuelson never understood profit and, by logical consequence, how the economic system works. Together with Solow, they messed up the original Phillips Curve back in 1960. ⇒ NAIRU, wage-led growth, and Samuelson's Dyscalculia https://t.co/eo4JJFC4fz and The father of modern economics and his imbecile kids https://t.co/HGon0cPZly For more details, see Cross-references: Employment/Phillips Curve https://t.co/RfA1hj72qQ

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: The foul spirit of political economics (CDXXXIV)

“Can economics fight fascism?” (Martin Sandbu) No. That's not how it should be. Martin Sandbu does not understand what science is all about. He has totally overlooked that, as a scientist, the economist has no mandate for political agenda-pushing. This is known since the Founding Fathers. “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill) For 200+ years, economics has claimed to be Science but still is NOT. The major approaches (Walrasianism, Keynesianism, Marxianism, Austrianism, and their derivatives) are mutually contradictory, axiomatically false, and materially/formally inconsistent. They all got profit wrong. When the subject's foundational concepts are inconsistent, the entire analytical superstructure is scientifically worthless. As a consequence, economic policy guidance has never had valid scientific foundations (AXEC141g ⇓); left/center/right does not matter. Economics has no truth-value, but only political use-value. The state of economics is this: there is political economics and theoretical economics. The Founding Fathers called themselves political economists; that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda-pushing). J. S. Mill was the only scientist among his low-IQ peers. He understood the difference between science and politics. After J. S. Mill, economics has been taken over by look-alike scientists. The representative economist is not, and never has been, a competent scientist, but an 1. agenda pusher 2. useful idiot 3. impostor 4. phrase monger 5. storyteller 6. troll 7. self-glorifier 8. pseudo-psychologist 9. speculative mind-reader 10. hallucinating prophet 11. media talker 12. vacuous philosopher 13. tireless reshuffler of the proto-scientific dungheap 14. clown in the political Circus Maximus.

— AXEC (@EgmontHandtke) November 6, 2026

Occasional X: The foul spirit of political economics (CDXXXIII)

“Just remember: … 4. Government deficits create non-government financial surpluses.” (Khazbi Budonov) That's the usual MMT deception. A large deficit for the U.S. government means a healthy free lunch for WeTheOligarchy and a growing number of millionaires/billionaires/zillionares. Reminder: Macroeconomic Profit Qm is given by the axiomatically correct Profit Law Qm:=(I−Sm)+(G−T)+(X−M)+Yd. The Law implies Qm:=(G−T)>0, i.e., macroeconomic profit is (co-)produced by deficit-spending/money-creation, i.e., the growth of public debt. See the graphical proof in Fig AXEC216a ⇓ . After the differentiation between the household sector and business sector, it is methodologically inadmissible to define a 'non-government sector' or a 'private sector' that fuses the two sectors again. This hides the crucial relationship Qm:=−Sm, i.e., the macroeconomic profit of the business sector is the complementary balance to the household sector's dissaving. By the same token, it holds Qm:=(G−T)>0, i.e., the profit of the business sector is equal to the deficit of the public sector. The free-market economy is temporarily saved from breakdown by the deficit-spending/money-creating duo Treasury / Central Bank, i.e., the State. This means that the premise of mainstream economics, i.e., that the unfettered free-market economy is a self-adjusting, self-stabilizing, and self-optimizing system, is axiomatically false. And this means that economics has been proto-scientific garbage for 200+ years. And this means that the representative economist is either stupid or corrupt or both. The non-government sector is a verbal/formal fraud to hide the fact that PublicDeficit=BusinessProfit.

— AXEC (@EgmontHandtke) November 6, 2026