As I was reading through a couple of econ blogs this morning (particularly the comments sections), I started to get frustrated by some of the usual suspects who are always there to defend Keynesian economics. It seems that whatever evidence is presented, it is spun in a way to defend the theory and to rebuke any counter-point. All of which I have anticipated as the trend that will become more obvious with time.
But, as my temperature started to rise with the audacity, I suddenly remembered that it doesn’t really matter. I don’t really care if a majority becomes convinced of the virtues of the contrarian view. Truthfully, as long as more people than not continue to operate in a stupor, the outcomes remain more predictable. Even with the investments that I make to protect myself, I’m not banking on gold, for example, going mainstream like stocks or bonds. Demand only has to change on the margins, which means just a small increase, and then the price will go supersonic. And when “austerity” is misused now in order to justify more fiscal and monetary stimulus, you know the other side is in trouble.
(And if you’re wondering, we now use that term to refer to a decrease in the rate of increase. For the record, that ain’t austerity.)
The Keynesian argument (and I’m calling it Keynesian, but really it captures monetarists and other mainstream folks also) always comes back to this notion of below-trend growth. We were on some sort of trajectory in the middle of the last decade, and now we are far below. But, again, way back when, I noted how growth during the bubble years represented an abnormality from the previous trend. Which, on its face, would suggest that something funky had happened – it’s not like we had some sort of manufacturing renaissance. No, we simply allowed a housing bubble to form and the financial industry to grow recklessly large, a result of terrible monetary policy and complementary political missteps to encourage it.
This battle between what solutions are best, I think, is being hashed out with good intentions. But the prevailing fatal conceit is never far away. So, my priority is protecting my family. Convincing people that I’m seeing the problems for what they are matters much less.
