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<p>[QUOTE=&quot;NorthKorea, post: 2493301, member: 29643&quot;]I think that&#039;s actually a result of selective history. Keynesian economics tend to fail in non-reserve currency nations.</p><p><br /></p><p>By its very nature, Keynesian economics is designed for short-term application. It&#039;s supposed to be applied during times of short-term demand compression. Credit card companies used a form of Keynesian economics in marketing its product during the 90s: 0% interest rates followed by 18%+ interest rates on unpaid debts. Stimulate the economy through private debt, then have that debt repaid. Of course, the fact that the US, until 2003 or so, allowed people to regularly declare bankruptcy with essentially no ramifications, meant that debt often (say 8% of the time) went unpaid. People &quot;invested&quot; in their present without fear of irreparable harm to their future.</p><p><br /></p><p>Once bankruptcy overhaul came to fruition, people were forced to reconcile the possibility of a grim future with their current excess. As is normal for most people in a limited resource economy, they cut current consumption to preserve their future.</p><p><br /></p><p>This action left the finance, auto and middle class luxury industries holding the proverbial bag. The finance industry claimed that if they weren&#039;t bailed out, the economy would collapse. The government decided to &quot;save&quot; the banks (and kill the credit unions, instead). The auto industry claimed that if they weren&#039;t bailed out, &quot;millions&quot; would lose jobs due to supply chain issues. The government decided to &quot;save&quot; the archaic automakers (and kill innovation). The middle class luxury groups ended up benefiting indirectly from the other two groups being saved, as consumers eventually returned to consuming their goods.</p><p><br /></p><p>Keynesian theorists would argue that the government *had* to step in to prevent an economic failure. This is where the selective history comes into play. Market economics dictate that supply and demand struggle to find an agreeable price point at which supply will satisfy demand. Yes, application of Keynesian models prevented the failure of auto-part manufacturers, but it also stymied innovation/evolution of those industries, as well. The application prevented the failure of banks caught up in CDOs, but cost taxpayers trillions for the privilege of keeping their banks open.</p><p><br /></p><p>If the US hadn&#039;t stepped in to prevent the closure of GM &amp; Chrysler, the reality is that the part manufacturers would have refitted their factories to produce parts for Toyota, Honda, BMW, etc, instead. Ford may have ended up with higher costs on parts, but eventually, they&#039;d just learn to retrofit their production to match up to the available parts. With or without Keynesian fiscal policy, the economy would have survived, just in different forms.</p><p><br /></p><p>If the US hadn&#039;t stepped in to prevent the collapse of key FDIC/NCUA insured institutions, we wouldn&#039;t have seen a run on banks, as the economy isn&#039;t on the gold-standard anymore. The ensuing panic, if any, would have been driven by the media, rather than actual economic concerns. Transferring the debt from the private sector to the public sector didn&#039;t save the economy, it just kicked the bucket down the road.</p><p><br /></p><p>Now, back to the original point, the US has a tendency to apply Keynesian economics with short-run explanations, but once a sector becomes a part of the government fat, it rarely improves/evolves or gets off the subsidies.</p><p><br /></p><p>The agricultural subsidies have been on the US books since before WW2, with some tracing their roots to the Roaring Twenties. Yes, I can understand that *some* level of food production is a matter of national security, but with the innovation and technological advancements in productivity, maybe farming should be government run. It seems socialist, but if you&#039;re going to claim it&#039;s an issue of national security to pay farmers to grow food stocks to surplus, simply so they don&#039;t go out of business, we might as well call a pig a pig and have the government directly run the farms. Farmers would be government employees, rather than recipients of subsidies. Instead of paying farms to not produce crops and kill off excess livestock, we&#039;d be paying farmers to produce varying types of foodstock. Ironically, these same farmers were getting paid hand over fist for their lands due to the natural gas boom from 2009-2013, but no one hears about those farmers saying &quot;Hey, we should pay back the US taxpayer for all those years we were paid to not work.&quot;</p><p><br /></p><p>The fact that laws meant to prevent market manipulation on grain futures resulted in market manipulation of current market prices is simply ironic, but often gets ignored.</p><p><br /></p><p>The welfare programmes in the US were designed with the intention of helping people along during short-term difficulties, but we have individuals who live off of the welfare state. Again, human nature makes it hard to turn away free money.</p><p><br /></p><p>The auto and airline industries were given subsidies to prevent total failure. Once the subsidies were lifted, consolidation ensued and new companies entered the respective industries. Essentially, the subsidies just delayed the inevitable.</p><p><br /></p><p>Each time that we create a subsidy, members of Congress end up fighting tooth and nail to ensure the subsidies remain in place, so their constituents can continue to maintain the lifestyle to which they&#039;ve become accustomed.</p><p><br /></p><p>The next evolutionary step for an economy that relies on Keynesian intervention as commonplace is socialism. Rather than have the government pay the private sector to inefficiently run the economy, it seems more efficient (though marginally so) to cut out the middle man (subsidies) and have government run the economy directly (socialism).</p><p><br /></p><p>Mind you, I&#039;m not a socialist, nor do I advocate for socialism. This is merely an observation that an economy that relies up Keynesian-backed subsidies tends to be an inefficient alternative to socialism. If you want to have a market economy, allow the market to drive the economy. If you want to have a social economy, allow the government to run the economy. Don&#039;t do some amalgamation of the two in which the government pays out money to maintain the auspices of a market economy.</p><p><br /></p><p>I hope I didn&#039;t step out of line on this, as economics tends to be very political in nature. I&#039;m just thought it made sense, given my actual field of study was macro economics and environmental economic policy, to chime in.[/QUOTE]</p><p><br /></p>

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