Pipe Down Now Keynesians

It is the belief of Keynesians that government interference in the economy can lead to economic growth.  At first glance one can understand why this fallacy has been warped into practical economic thought.  This belief is a perversion of Basiat’s broken window analogy. Basiat claims that if a window is broken the funds used to fix the window help to provide a job for the glass manufacturer.  However, what is not witnessed is the reduction of the purchasing power of the person whose window was broken.  If said window was not broke then he could have used those funds to purchase other goods or services, which could have had the power to keep more people employed then merely the glass manufacturer. 

Keynesians pervert Basiat’s theory, by taking the theory one step further.  Keynesians believe that by having the government inject money into the economy this will lead to greater economic growth.  However, what is not seen is the potential damage being dealt to the other citizens.  Since the government has no funds of its own it either has to levy higher taxes the citizenry, borrow money from other nations, run up a higher deficit or inflate our currency, which reduces the purchasing power of our money. 

Our “leaders” in Washington have come to realize that raising taxes on the citizenry is not the best way for them to gain favor with the public, especially during the middle of an economic recession. So they will not readily go for the taxation route because this intern jeopardizes their chances at getting reelected.

Since our elected leaders won’t tax to raise the funds necessary to pay for the stimulus Keynesians call for they will turn to other countries to purchase our debt.  By doing this taxes won’t have to be raised immediately, and the deficit will seemingly be reduced.  However, what is not readily taken into consideration is the inherent threat to national sovereignty this possesses.  By having other nation purchase our debt they are inherently purchasing us.  It is sad to think that a nation that has fought so hard for freedom, that our leaders will beg other nations to enslave us.  For if our country was to act in a way that runs contrary to how the nations that we are indebted to, that nation could call in our debt and demand payment, which of course our government would not have.  This could then lead to either the government shutting down, a dramatic increase in taxes, the rapid inflation of our currency, and or the deficit will increase. 

It is no wonder that our deficit is rapidly approaching fourteen trillion dollars.  Our leaders believe that the creation of a higher deficit is the sexiest approach to take to pay for their “stimulus” because what a deficit really amounts to is an I.O.U. that will be paid for that will have to be paid for by our children and grandchildren.  By doing this our “leaders” can save their skin come time for reelection, and they get all the perks that come with brining home the pork to their state or district. 

However, despite how bad these previous approaches may seem nothing is as terrible as the final approach, which is the inflation of our currency.  The Federal Reserve is the instrument used to create inflation.  The Federal Reserve, either by cranking us the speed on the printing press or by electronically manipulating digits in the bank accounts of different banks and businesses, will inflate our currency, which reduces the purchasing power of every individual in our nation.  The inflation of the money supply leads to an increase of the prices of every good and service offered on the market, which means that one will not get the preverbal bang that he or she once got for his or her buck.  By inflating the money the citizenry will inherently be taxed a second time.  At least by being taxed outright the citizenry has the ability to throw out those elected officials that raise the taxes.  But do to the “apolitical” nature of the Federal Reserve, those official on the Federal Reserve board can do pretty much whatever they want and suffer no repercussions for it. 

So as one can see that no matter, which way one splits it Keynesian economic theory is simply disastrous.  Whether is be through higher taxes, borrowing money from other nations, the generation of higher deficit or the inflation of our currency.  The end result will be economic disaster and a loss of freedom.  So one is forced to ask the question is short-term economic growth worth the long-term repercussions of Keynesian economics.