Comment on Steve Penfield on ‘Financial Fraud: Lord Keynes, the New Deal and 'Stimulus' Mania'’
Keynes realized that the mainstream economics of his time was defective and tried to move the whole thing from microfoundations to macrofoundations. This is called a Paradigm Shift, but unfortunately, Keynes messed it up because he was too stupid for the elementary algebra that underlies macroeconomics.
The blunder occurred on p. 63 of the General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.”
This syllogism is conceptually and logically defective because Keynes did not come to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.) Because profit is ill-defined, the whole theoretical superstructure of Keynesianism is scientifically worthless.
So, here you have the real scandal. The economist Keynes NEVER understood what profit is. Worse, for 80+ years neither pro- nor anti-Keynesians spotted the foundational blunder that invalidates ALL of the economics.#1
Economics is a scientific fraud because Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, and materially/formally inconsistent.
Because of this, economic policy guidance has NEVER had sound scientific foundations.
At the moment, it is Stephanie Kelton, her post-Keynesian fellow academics, and a horde of social media trolls who are pushing deficit-spending/money-creation and are complicit in the greatest distributional fraud of all time.#2
The fact of the matter is that the correct macroeconomic Profit Law implies Public Deficit = Private Profit. This is why MMT is currently hyped.
Economists are NOT scientists but have always been the useful idiots of the Oligarchy. Keynes has only been one of the more colorful examples.
Egmont Kakarot-Handtke
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There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. Economics is a failed science, or, in Feynman's terms, a
cargo cult science. The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel is a fraud because there is NO such thing as economic sciences.
Theoretical economics has to be judged according to the criteria true/false and NOTHING else. Truth, in turn, is well-defined by material/formal consistency. Criteria like good/bad or good/evil or like/dislike or useful/useless or right/left do NOT apply.
So, for the question of whether Keynes' General Theory is scientifically true or false, his sex life is IRRELEVANT. It is relevant, though, for politics because argumentation in the political realm consists of not much more than shit-throwing and blackmailing. Steve Penfield's piece is a telling example of this genre.
Obviously, Steve Penfield deals with the ‘paradox of thrift’ entirely on the emotional/ moralistic level: “Regarding his relentless assault against individual ‘thrift’ — made futile now by ongoing inflationary debasement — the hedonist Keynes loved public adoration and hated anything that required patience and self-control. Accordingly, he championed an ideology that merely reflected his own personal preferences at the expense of everyone else.”
Now, the fact of the matter is that Keynes happened to be right on this specific point. The (simplified) macroeconomic Profit Law says Q≡(G−T)+(I−S), and in the most elementary case, Q≡−S, i.e., the business sector's loss is equal to the household sector's saving. We all can agree that such an economy has a short lifespan. On the microeconomic level, the individual saver may be a good and responsible person, but on the macroeconomic level, the savers spell doom for the economy.
There is a way out, though. The saving S of the household sector can be compensated for by deficit-spending of the government sector, i.e., (G−T)>0. If (G−T)>S, the business sector makes a profit. And this is exactly what happened historically.
The Profit Law implies Public Deficit (G−T) = Private Profit Q, so the policy of deficit-spending/money-creation provides a free lunch for the Oligarchy. Accordingly, the financial assets of the Oligarchy grow in lockstep with the public debt of WeThePeople. The interest on public debt is taxed from WeThePeople and paid to the Oligarchy. This, in a nutshell, is the modus operandi of late capitalism. Picking up momentum in the 1970s, the public debt now stands at ≈ $23 trillion.
The fact of the matter is that the so-called free-market economy is NOT self-regulating and self-optimizing but has already a long time been on the life support of the state. Profit is in the main produced by public deficits. The Oligarchy, in turn, uses the opulent free lunches to corrupt the state’s legislative, executive, and judiciary institutions in its favor. This constitutes a self-accelerating positive feedback loop, the very opposite of an equilibrium system.
Keynes did not really understand how the monetary economy works.#2 However, with his macroeconomic approach, he came closer to the truth than the Austrians, of which Steve Penfield is an intellectual heir. Austrianism never rose above the level of gossip and shit-throwing. It's economics at its worst.
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Steve Penfield maintains “1) all bank credit is inflationary, 2) all credit inflation involves counterfeiting, and 3) all counterfeiting amounts to organized theft.” And “In banking, the first step in ensnaring society in the trap of fiat credit began with the simple act of lying: pretending to store more wealth in a banker’s vault than honest accounting could demonstrate.”
Keynes is known to have been pro-fiat money and anti-gold standard. The fact that fiat money is created ‘out of nothing’ upsets many people because it reminds them of the alchemists' fraudulent claim of being able to turn shit into gold. To this day, the Austrians cannot get over the replacement of gold with fiat money as a transaction medium and blame Keynes for inflation and other economic ills as a result of the original monetary sin.
The fact of the matter is that there is nothing wrong with the central bank's creation of money out of nothing as long as the money is injected on the supply side, i.e., for financing a growing wage bill that results from increasing employment. Problems arise if the money is spent on the demand side. In this case, it has the same effects as counterfeit money. #1
The fiat money system indeed has a weak point that can easily be exploited for political purposes. In our days, it is the MMTers that push Wall Street's agenda in their lectures and on social media, and push with the propagation of deficit-spending/money-creation the central bank into the role of a counterfeiter.
- The counterfeiter never runs out of money.
- The counterfeiter never stops stealing stuff from the rest of society.
- The counterfeiter increases the profit of the business sector with his additional monetary demand. The Profit Law implies Public Deficit = Private Profit.
- The counterfeiter causes merely an almost imperceptible one-off price-hike (NO inflation).
- The counterfeiter poses as a good guy and boasts that he promotes growth and employment.
- The counterfeiter 'solves' any problem from unemployment to pandemics to global warming with deficit-spending/money-creation.
- The counterfeiter continuously increases the public debt but says that it does not matter.
While Steve Penfield repeats the old rants about banks and bankers, MMTers/Wall Street/Trump pull off the greatest profit explosion of all time before his very eyes. #2
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REPLY to TheTrumanShow on Oct 6
You say, “Theories are just unproven hunches.”
Obviously, you do not know the difference between a hypothesis and a theory. Sit up and take notice.
- “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
- Science manifests itself in the form of the true theory.
- Truth is well-defined by material and formal consistency.
- Logical consistency is secured by applying the axiomatic-deductive method, and material consistency is secured by applying state-of-the-art testing.
- The true theory/model is the humanly best mental representation of reality.
- The main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational economic concept of profit wrong.
- Because the foundations are false, the analytical superstructure is false.
- Economics is scientifically worthless.
- Economic policy guidance (left/center/right does not matter) has NEVER had sound scientific foundations. It's just opinion and blather.
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REPLY to Joe Levantine on Oct 8
Economics claims to be a science, but it is NOT. This has to be kept in mind when, in the next few days, the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is awarded. #1 Economists are NOT scientists but clowns and useful idiots in the political Circus Maximus. Since Adam Smith/Karl Marx, economics has never been anything else than political propaganda in the garb of science.
Needless to emphasize that the general public has no real chance to figure out that economics is fake science: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman)
What is missing for 200+ years is the true theory. However, as political agenda pushers, economists do not suffer from their scientific incompetence but, in fact, enjoy their life in the swamp between true and false where “nothing is clear and everything is possible” (Keynes). Like everybody else in the disinformation business, economists apply the idea of scientific truth not as a guiding principle for their work but as a Potemkin façade.
Economics is, in the main, storytelling without scientific content. People who have been educated by the entertainment industry like this junk. #2, #3
A pretty obvious case of brain-dead agenda-pushing is when the discussion turns to history or even to stories from the bible. Time to realize that the bible is a literary forgery from the first to the last page.#4
Economics cannot be based on history because it is well known that history is, for the most part, a literary construct. #5 So, always when the argument becomes historical or psychological or biblical, it is pretty obvious that some troll is trying to lead a clueless public deeper into the swamp.
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REPLY to Mark Tapley on Oct 9
My post #149 ended with “Economics cannot be based on history because it is well known that history is, for the most part, a literary construct. So, always when the argument becomes historical or psychological or biblical, it is pretty obvious that some troll is trying to lead a clueless public deeper into the swamp.”
Mark Tapley's post #150 begins with the bible story of the Talents and then goes further back to Moses.
From this alone, one can safely conclude that Mark Tapley is an agenda pusher, and it is not too hard to see that he pushes the agenda of Uncle Scrooge.
Uncle Scrooge is known for sitting on a huge pile of gold/money, lending large sums to the state as the most attractive borrower, charging a risk-free long-term fixed interest, and also being heavily invested in real estate, which has the known property of steadily increasing in value in a growing economy.
As it happens, Uncle Scrooge and Adam Smith started their careers about the same time: “Adam Smith, when he wrote his Wealth of Nations, and Burke, when he produced his famous speech on economic reform, understood by ‘political economy’ a ‘branch of the science of the statesman or legislator’, a theory of practice, the science of the prudent management of the public finances. The growth of the huge debts which weighed on the great military nations would end in proving their ruin. This was especially true of England, which had become immensely in debt through the conquest of her colonial Empire.” (Halévy)
When gold was the transaction medium, Uncle Scrooge was one of the gatekeepers and at the height of his economic and political influence. This changed with the introduction of fiat money and the technical possibility of commercial banks to create the additional money that was needed for the steady growth of the stock of real capital.
So, the argumentation of Mark Tapley is easy to understand.
Uncle Scrooge
- is pro-bible because the story of the Talents justifies interest, and anti-catholic because the early church condemned usury,
- hates the fiat-money bankers because they ended his gold supply monopoly and with it the rich and steady source of risk-free interest income as well as political power,
- is less than enthusiastic about the revival of the ancient idea of debt jubilees,
- fears inflation because it devalues his huge stock of government bonds,
- cautions against new debt because this increases the risk for old debt,
- hates the state when it levies taxes for welfare spending on top of the absolutely necessary interest payments,
- warns against confiscatory taxation on the landowners because “property ownership is … necessary for capital formation” well knowing that capital formation no longer depends on the landowners.
Mark Tapley covers his agenda-pushing for the Oligarchy with cheap Tea Party populism: “There is nothing worse than giving money to the government since they will waste it or apply it to some kind of racket like the present fake virus to benefit all their cronies.”
This is a bit ungrateful because the Oligarchy thrives since the Napoleonic wars on the government's deficit spending and the steadily growing public debt. It holds, Financial assets of the Oligarchy ≈ Public debt of WeThePeople.
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REPLY to Mark Tapley on Oct 10
You say, “My only agenda is for more liberty and less government.”
You certainly agree that this is a political agenda. Everyone is, of course, entitled to climb on a soapbox and spread their opinion. As a result, the world is drowning in shitty opinions. The fact is that nobody needs opinions; what is needed is knowledge: scientific knowledge.
The ancient Greeks realized this long ago: “There are always many different opinions and conventions concerning any one problem or subject-matter … This shows that they are not all true. For if they conflict, then at best only one of them can be true. Thus it appears that Parmenides ... was the first to distinguish clearly between truth or reality on the one hand, and convention or conventional opinion (hearsay, plausible myth) on the other ...” (Popper)
This insight, obviously, has not yet arrived under the rock where you live.
Economics is about how the economic system works. It is NOT about the sex life of Keynes, nor about liberty, fake moonwalks, or global warming. True, economists are relentlessly blathering about all these things, but this only proves that they are stupid/ corrupt agenda pushers that have NO idea of what science is all about.
Science is about knowledge, and politics is about opinion and belief. The plain fact about economics is: Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, and Pluralism are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL get the foundational concept of profit wrong.
Let this sink in: economists do not know to this day what profit is because they are too stupid for the elementary algebra that underlies macroeconomics. #1 And this means that economics from Adam Smith to Marx to the Austrians to Keynes and beyond is proto-scientific garbage.
Economists have NO idea of how the actual monetary economy works. Economics is NOT a science but the natural habitat of morons, agenda pushers, confused confusers, blatherers, fraudsters, trolls, disinformants, entertainers, clowns, and fake scientists.
This thread deals with financial fraud and Keynesianism. Now, the absurdity of the situation is that while you are waffling about property rights in ancient Rome #2, the greatest financial fraud is pulled off right before your eyes.
The correct macroeconomic Profit Law implies Public Deficit = Private Profit, and this means that the current explosion of deficit-spending/money-creation will result in the largest profit explosion the world has ever seen. And it is academic economists, MMTers more specifically, who provide the ‘scientific’ cover for this plain distributional fraud and sell it as a benefit for WeThePeople. #3
Economists are once again the agenda pushers for the Oligarchy. Adam Smith was in this business, Karl Marx also, Keynes too, Hayek and Friedman too, and, of course, the brain-dead opinion spreader Mark Tapley.
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REPLY to Joe Levantine on Oct 11
You and Mark Tapley are propagating obsolete Austrianism. The Austrian core assertion is that Laissez-faire would result in a stable economy with overall optimal outcomes. This assertion has NEVER been proven. The provable fact of the matter is that the market economy is inherently unstable.
So, the very premise of Austrian economics is false, and because of this, the whole verbal superstructure is false. Austrian economics is scientifically worthless, and Austrian pro-liberty and anti-state rhetoric is just political agenda pushing.
Reality is at odds with the popular ideas of a free-market economy and Laissez-faire.
The axiomatically correct macroeconomic Profit Law states Q≡(G−T)−S, and this means that the greater part of the profit in the United States is actually produced by the State. The U.S. economy has been hanging for a long time already on the state ventilator for its survival.
The policy of deficit-spending/money-creation is ultimately a means of postponing the breakdown of the U.S. economy. It is a free lunch for the Oligarchy. The financial wealth of the Oligarchy grows in lockstep with the public debt of WeThePeople. Take the state away, and Capitalism as we know it breaks down. Laissez-faire is a pipe dream.
There is nothing more mendacious than the populist anti-statism of the Austrian school.
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REPLY to Mark Tapley on Oct 12
Today, the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is awarded. Each year, economics ceremoniously claims to be 'sciences'.
Science is well-defined for 2300 years: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)
The fact is that the main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism, MMT ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all get the foundational economic concept of profit wrong. Because economists lack the true theory, their economic policy guidance has had NO sound scientific foundation since Adam Smith/Karl Marx.
Economists are a hazard to their fellow citizens: “Late in life, …, he [Napoleon] claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner) Economists bear the intellectual responsibility for the enormous social devastation of mass unemployment since the Great Depression. Right policy depends on true theory.
Economics is vacuous political drivel. In order to prove this, you need merely read your own stuff.
The EconNobel is the widely visible landmark of economists’ scientific fraud. #1 On the street level, this fraud is perpetuated with populist slogans by social media trolls like you.
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REPLY to James Charles on Oct 13
You say: “However, during time periods such as the 1950s, when in many countries credit was mainly channeled into the real economy, asset prices remained stable and the traditional quantity theory could be expected to hold.”
The traditional quantity theory has been summarized as: “Inflation is always and everywhere a monetary phenomenon.” (Milton Friedman, quoted in @James Charles' link above)
Now, the traditional quantity theory is proto-scientific garbage, like everything else from Milton Friedman.
The macroeconomic Law of Supply and Demand states for the case of an elementary production-consumption economy P=ρ W/R with ρ>1 meaning deficit-spending, W wage rate, and R productivity.#1 The point is that the quantity of money is NOT among the price determinants, meaning that the traditional quantity theory is false.
So, a fiat money system as such is NOT the cause of inflation. To put the blame for creeping inflation on Keynes as pro-fiat/anti-gold advocate is just Austrian shit-throwing.
Creeping inflation happens, of course, and it is mainly a problem for the holders of government bonds, i.e., the coupon-clipping rentiers. It can be said that Austrianism is not a scientific thought collective but rather the public relations arm of the rentier class.
Note that Austrians never formally refuted Keynes' General Theory and replaced it with something better; instead, Murray Rothbard wrote a biography with extensive details about Keynes' sex life.
Economists are scientifically incompetent, but Austrians never rose above the level of lobbying and shit-throwing.
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REPLY to Joe Levantine on Oct 14
You say: “I think that the impetus of any new economic or social ideology should center first and foremost on human dignity as a value in itself.”
Obviously, you do not understand. Social ideology is not the point of the issue. Humanity has more than enough ideology. You can flush ideology/religion/history down the toilet. The longevity of this sociopathic storytelling proves only one thing: people can be made to believe any bullshit for any length of time.
Every time you board an airplane with the expectation of landing safely 10 hours later in some foreign country, the idea should pop up in your head that this has not been made possible by politicians, priests, ideologues, journalists, or any other member of the blathering class but by scientists/engineers/mathematicians.
To this day, economics is ideology and not science. Economics is provably false, and the blunder lies at the level of elementary algebra. #1 This scientific disgrace is bad enough, but the whole thing turns into fraud when economists award themselves a prize for sciences, i.e., the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.
Your talk about social ideology and human dignity tells one that you do not understand the difference between politics and science. Politics is an issue for the 99% of stupid/corrupt agenda pushers, science is an issue for the 1% that has preserved some human dignity, i.e. is committed to science/knowledge/truth. It is of utmost importance to secure the separation of these two spheres because science cannot improve politics but politics can corrupt science. In the political sphere, there is NO human dignity.
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REPLY to Mark Tapley on Oct 15
You say: “You think Friedman didn’t know what he was talking about?”
This is a proven fact. #1, #2 Friedman was the archetypical political economist, i.e., an agenda pusher for the Oligarchy. First of all, he did not realize that the mainstream supply-demand-equilibrium approach was proto-scientific garbage, and he never understood what profit is. So, he was a scientific zero.
Friedman's mission was not science but propaganda. As a member of Mont Pelerin, his task was to defend and promote U.S. capitalism and to roll back Keynesianism/Socialism. This he did eloquently with his AEA Presidential Address in December 1967. The American Economic Association is the politburo of the profession and defines what mainstream economics is.
As a representative of the Chicago School, Friedman was practically on the payroll of the Oligarchy. And he did a good job.‡ Rockefeller called the university ‘the best investment’ he ever made.
For abusing academia as a platform for political agenda pushing, this fake scientist was awarded the fake Nobel.
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REPLY to James Charles on Oct 16
THX for the link. Richard Werner's piece is far superior to anything the quantity theory folks, in general, and Steve Penfield, Mark Tapley, and Joe Levantine, in particular, have ever brought to the table.
