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  1. Fiscal recklessness says you. Liberal utopia says Obama.

    I will keep repeating it until the GOP and the rest of the country acknowledge what Obama and his liberal followers believe: The Federal Reserve can buy all the Treasuries it wants with zero negative effects because the amount of money they magically wire to the Treasury is equal or less to the amount of money destroyed in a consumption based economy. Remember what Keynes said, he can pay for some to dig holes and then pay someone else to fill them to create GDP with printed money.

    That being the case, he Obama can spend any amount of money supporting those who don’t work and making rich his crony friends because the money magically appears from the Fed. The Fed is so clever about this management of the economy, they can do it WITHOUT printing money. They just wire the ones and zeros to the Treasury. We will never have hyper inflation because the Fed will balance the magic money creation machine with the amount of dollars destroyed via consumption, i.e. food, rent, medical care, etc. You dolts forget that 70% of the economy is consumption based. Therefore I can create the 70% of the dollars of the $16 trillion in GDP.

    You Republicans are so stupid for not recognizing the abilities of the Federal Reserve and thus it is me, Barack Obama is the genius here, not you, the so called fiscal conservatives. Transformative change is here and I Barack Obama have made it occur by demonstrating to you that I can spend more than the taxes take in revenue and do so indefinitely. The tax the rich propaganda was just a trick on my part to keep you occupied while I complete the transformation of the economy to a Centrally Planned one that will avoid all the mistakes of the previous Socialist countries who failed at it.

    I Barack Obama don’t need Congress to authorize any spending because I can have the Treasury Secretary sell bonds to the Federal Reserve. We don’t need to tax anyone anymore since I can get all the money I need to service the needs of the poor and needy, my constituents.

    Comment by dscott — December 4, 2012 @ 1:28 pm

  2. Did Keynes actually say that?

    Comment by Tom — December 4, 2012 @ 2:45 pm

  3. #2, Oh, he said it, and it’s far worse in context…

    “If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of repercussions, the real income of the community, and its capital wealth, would probably become a good deal greater than it actually is.”

    http://quotes.liberty-tree.ca/quote_blog/John.Maynard.Keynes.Quote.657C

    In summary, Capitalists are so foolish that they would dig for dollar bills in bottle and would create more wealth in the process and pay the government to do it. In other words people are so stupid that they believe the Dollar bill has intrinsic worth like gold and we can trick them into expending all kinds of labor and intellectual capital to earn it. Kind of like the feed bag in front of the horse, it’s kept just far enough away that the horse walks endlessly forward after the food and so work (productive labor) is coaxed out of them.

    Modern Keynians are so much more advanced than in the 1930s, they don’t need to print money anymore, just wire ones and zeros. What Keynes and now Obama believe is they can trick people into being productive for what is essentially worthless value. Now do you begin to see what Obama’s transformative economy looks like? This guy doesn’t lose sleep at night over the deficit, it’s all a huge joke to him. In fact, you remember the pictures of him with the middle finger? That’s him to the GOP haggling over the Fiscal Cliff. As far as Obama is concerned the joke is on us, we are just too stupid to figure it out yet. In the meantime him and his followers are laughing it up over the inside joke and us scrambling to save the country.

    The reality is just as it happened in Argentina, Zimbabwe and Germany, as more and more people/countries figure out the Dollar isn’t worth anything, they will rush for the exits trying to unload Dollars sending a huge tidal wave of currency back into this country. Watch for the decoupling of oil from the Dollar in favor of gold or some other monetary unit like the SDR. http://www.zerohedge.com/article/will-basket-currencies-replace-dollar (old article but now right on target) Once oil is sold in SDRs, it won’t be long before every foreign bank will demand all monetary transactions be settled on a NON Dollar basis. At that point, the Dollar takes a total crap and the genius Obama runs the US completely off the rails in a hyper inflationary episode. Then finally, all the morons who followed Obama will realize utopia can never be achieved. Oh joy, we get to pick up the pieces but at least get to kick the liberals to the curb once and for all.

    btw – The whole idea of the EURO taking the Dollar’s place blew up due to the fiscal stupidity of the Greeks, Spanish and Italians. That was Saddam Hussein’s plan which was then taken up by the Iranians after his demise.

    Comment by dscott — December 4, 2012 @ 4:12 pm

  4. How do dollars get destroyed by consumption? Is that a Keynesian assumption? It looks incorrect to me, but I’d like to know the thinking behind it.

    Comment by GW — December 5, 2012 @ 9:43 am

  5. #4, If everything is spent on consumption, there is no investment. To the extent that government policies are oriented toward consumption to the point where it starts taking away from what would have been used for investment (clearly the case now) as the cure that will supposedly pull us out of difficulty, it creates modest short-term growth at the expense of potentially robust long-term growth.

    Comment by Tom — December 5, 2012 @ 10:14 am

  6. #4, let’s consider how wealth is created and destroyed by using a very simple example.

    I walk into a grocery store with $10 and buy $10 worth of say vegetables and fruits. The NET asset value is $20. I exchanged my $10 in bills which btw represents a value of my hourly labor to my employer. (an important tangent since there are many ways to destroy or build wealth).

    When I consume the fruits and vegetables that week, the NET asset value is down to $10 held by the grocery store and nothing held by me. So the NET asset value fell from $20 at the beginning to $10. Government spending works pretty much the same way, especially in transfer payments to entitlements. Just about every dollar that goes out to “welfare and social security and medicaid recipients, etc.” is consumed. 70% of the economic activity is fueled in this consumption fashion.

    Now obviously if this slice of the economic system were the sum totality, then it wouldn’t take very long to spiral to zero OR more correctly the dollar bills would simply end up in one spot in one person’s hand kind of like the winner of the game of Monopoly (which we call Mercantilism). If you have done any reading at all on Keynesian you would note their universal hatred of wealth creators, including Keynes himself (who was a diehard Socialist). Why did he hate capitalists? Because in his system of thought SAVING MONEY was BAD as it allowed banks to aggregate funds for loans that created wealth in two ways: 1. interest and 2. profits from the manufacture and sales of goods which in the Socialist/Communist POV is called EXCESS COST. In Capitalism, this is where the 30% of the economic transactions actually creates 100% of the economy. The Federal Reserve by it’s actions via the banks controls the amount of “dollars” in circulation, thus they can create and destroy physical dollars. In a growing economy, less dollars need to be destroyed.

    The whole point of Keynesian economics is that the government by it’s creation of dollars would efficiently take care of all the needs of mankind by eliminating the motive for profit. Hence in the liberal/progressive/socialist world view the government drives the economy. In Keynes’ world if you are saving money, you are admitting you GOT TOO MUCH for your needs. It is your fault that the economy is floundering because you didn’t spend the money in your hands. IF you are making a profit, you are OVERCHARGING for producing a product or providing a service. The whole point of a living wage is to give you just enough for your subsistence and nothing more. Anything in excess is greed. Thus Keynes quote in #3 reveals his true belief system that Socialism should run the world. In Capitalism, profit and savings are the seed money of investment to produce wealth.

    Keynesism is Obama’s understanding of the world and this is why he has no problem with running trillion dollar deficits from now to eternity. The government in borrowing money is simply sopping up excess dollars which they then payout to “finance” government operations. All those “dollars” have to go somewhere. So when Obama says there comes a point when you have made enough, he is revealing his Keynesian discipleship. Thus taxing the rich means literally to Obama that you people have made too much and I’m going to redistribute your greedy takings back to the government which incidentally I take the credit for it, and give it to the bottom up economic model I promote, i.e. welfare. It’s like one big Chicago to him. Ultimately, Obama will dispense with traditional funding of government operations like he dispensed with the annual budget via Harry Reid, Taxes are merely to punish the greedy and the rest of you will be beholding to the government for your subsistence payments. He is 90% there as the Federal Reserve announced it will be buying 90% of all government bonds.

    At some point I foresee the Fed begin an orderly unwind of ALL government issued bonds held by foreigners such as China, Japan, etc by buying back all those bonds with wired ones and zeros which all of them will then be obliged to purchase US made hard products and goods to repatriate their wealth or lose it. Once most governments and financiers realize the end game they will rush for the exits dumping dollars and buy anything. At first it will look like Obama is a genius as the American economy roars to life, but that will be very short lived once the dollars are repatriated because NO ONE is going to accept Dollars for any foreign origin product starting with oil.

    Comment by dscott — December 5, 2012 @ 1:00 pm

  7. BTW – When the Federal Reserve embarks on buying back all those government bonds held by foreigners, the national debt will magically disappear. Because those dollars were made up by the Federal Reserve in the first place. In doing so the Transformative Change will be complete as everyone will understand that when you worked for X dollars per hour you actually worked for nothing because those dollars aren’t worth anything. We will live in a workers paradise where everyone contributes to the common good and all our needs are met. We will all be free because we will all be slaves.

    Comment by dscott — December 5, 2012 @ 1:08 pm

  8. Tom & dscott, thanks for taking so much time to explain these concepts to me. I took a college-equivalency economics class in high school, and that was more than 20 years ago. Admittedly, I have not read Keynes. That explains my ignorance and basic-level questions. But, with explanations like yours, I am working my way out ignorance. Thanks again for the answers. You’ve been very charitable with your time, which is a commodity that we can’t create.

    Oh yeah – so the net asset value of $20 before I consume my food – is that $20 because (1) the grocer has $10 (which used to be mine), and I have $10 worth of food which I can conceivably sell?

    Comment by GW — December 5, 2012 @ 2:58 pm

  9. #8, exactly, until you consume the food, it still has value as an asset.

    Now instead of eating it, you could be a reseller of the goods turn around a say sell it to another person who doesn’t have ready access and make a $2 profit by selling to them for say $12. Now the NET asset value is $24, the $12 in your hands and the $12 of food that person got from you, that is until they eat it. Once they eat it, the NET drops to $12.

    Actually, it’s a bit more complicated than that because I deliberately excluded the first transaction for simplicity sake with the grocery store I bought the $10 worth of food and I’m not accounting for the $12 the next person brought into the equation.

    Comment by dscott — December 5, 2012 @ 4:20 pm

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