Re: [Marxism] Beyond Keynes to Inflation

["Barry Brooks" <durable@xxxxxxxxxxxxx>]

This article is a great example of how lost our "leaders" are.

>Beyond Keynes to Inflation by Richard Benson Benson's
>Economic & Market Trends January 9, 2006

>The biggest post-depression fear was that saving too much
>could cause spending to fall short and recession ...

Translation: If the income of investors exceeds the need for
new investment their extra money is used for speculation and
the economy will slow down while prices rise.

>The Keynesian trick used for
>our central bank was to cut interest rates to a level
>low enough to encourage businesses to spend excess
>savings.

Low rates alone will not encourage business
spending. In the depression of the 30's interest rates were
very low, but no one would invest without expectation of
profitable operation... that requires demand, not just low
interest rates.

Lower rates will reduce the income of investors.
If their investment income is reduced to match the need
for new investment then speculation and demand deficiency
are avoided. But, low interest rates by themselves do not
insure increased business spending.

Spending (new investment) is justified by the expectation
of sales, and thus profits; not by the level of surplus
investment income or the availability of cheap loans.

>In a few short years, those savings have
>simply vanished ...

Where does he get this crap. Are we to believe that investor
income has vanished or even fallen to the level of new
investment? See below...

>*Hyperinflations are caused by extremely rapid growth
>in the supply of ?paper? money.

In the German inflation of the 20's the real value of the
money supply fell to 5% of its previous value. The extra
money they printed always fell short of covering its
reduced value.  Too much money chasing too few goods?
Milton got the Nobel prize for spouting the same crap.

>They occur when the
>monetary and fiscal authorities of a nation regularly
>issue large quantities of money to pay for a large
>stream of government expenditures.

If that is true why is govt debt high and rising? If the
government were printing money to pay as it goes there
would be no govt debt.  The govt is borrowing it; not
printing it.  Where does this guy get this crap?

 Most money is created (not printed) by private banks
when they loan out a large multiple of what has been
deposited.

>In effect,
>inflation is a form of taxation where the government
>gains at the expense of those who hold money whose
>value is declining. Hyperinflations are, therefore,
>very large taxation schemes.

Who does this tax? It's the rich who hold money. Should
we cry about taxing the rich with inflation when they
avoid most other forms of taxation?

Govt debt results from our failure to tax the surplus income
of investors, and instead just borrow that money.  The
investors can pretend they are avoiding taxes, while
their own speculation and poor planning cause the
inflation they hate, because inflation is a very progressive
tax.

>The preservation of real wealth at a time when the
>Federal Reserve will be dedicated to building debt,
>money and inflation, is not going to be an easy task;

Debt, money and inflation are not so harmful to the
preservation of real wealth as letting "investors" decide
what we should invest in, in the pursuit of immediate
profit.

*****************
As for the claim that we have a shortage of savings parroted
by Benson, Paul Blustein said the opposite in his recent
Washington Post article ... without ever using the word save ...

>Funds Blowing Foreign Bubbles?
>By Paul Blustein
>Washington Post Staff Writer
>Thursday, December 8, 2005; D01
> "There's just a huge amount of money
>sloshing around looking for a place to go," said Desmond Lachman, an
>economist at the American Enterprise Institute ...

This is why cutting taxes for the rich will not make jobs. They already have
plenty of money to invest, but who would open a new factory when existing
capacity is standing idle? Instead of new investment, tax-cuts for the rich
will just produce more speculation.

This is why Keynes is still right about demand and why supply-side
economics is just crazy propaganda.

Barry





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