Better Late Than Never Obvious Failure of Stimulus Becomes Obvious Even to Economists

At City Journal, Guy Sorman notes how quickly the managed-market winds have shifted. When the credit unwind started, the papers, the TV and the newsweaklies declared capitalism dead in just a little less time than it took for Kent Brockman to declare his loyalty to the Space Ants. Less than two years later, you can’t buy good press for the stimulus; the economy is frozen solid in August; the nation is rediscovering — despite the herniated efforts of local, state and federal government — the virtues of thrift; and if you search for Keynes on the interwebs, all you turn up are headlines like “How Dr. Keynes killed the patient.”

First of all, as a guy who puts together blog posts in his free time, lemme tell you that the blinding array of contextual links in just this one excerpted paragraph is impressive as all get-out.  I find that the more hurried I am, or the more tired I am, the thing that suffers first is any nonmaterial links.  That Tim Cavanaugh put in the effort to link and thus back up each and every assertion is an obvious sign that he cares very deeply about getting his message out, and getting it out right.  Bravo.

Second, the Kent Brockman reference is brilliant.

But here’s the tell: We’re already starting to see the first of the “Today’s Keynesians are misreading Keynes” walk-back arguments.

What’s funny here is that he’s absolutely right.  And while the first inclination of folks like you and folks like me would be to shake our head and mutter under our breath that great old line from Ronald Reagan: Oh, there they go again.  The thing is, I would need all of my fingers and all of my toes to count how many times I’ve countered the standard “capitalism is dead” and “capitalism is evil” and “capitalism obviously doesn’t work” with the argument that what we’re seeing today is anything but true capitalism.

The difference, of course, is that we are not seeing capitalism in the sense that actual market autonomy could provide, while there is no doubt–and there has been no doubt for quite some time now–that Keynesian economics just simply doesn’t add up.

Alright — I’ve said enough.  Read the Cavanaugh piece.  Here’s just one more taste:

“The banks probably had to be saved,” Cochrane tells me, “but the problem was that the salvation followed no pattern.” Some institutions, like Bear Stearns and Wachovia, were rescued; others, like Lehman, were not. It became impossible to know what the government was going to do next. “If governments couldn’t be predicted, nobody could be trusted any more,” Cochrane explains. Credit froze.

I have an alternative explanation: Credit froze because all over the country defaults on mortgages, car loans, student loans and credit cards were reaching historical highs. Letting Lehman die was Henry Paulson’s single act of courage, and he followed it up by doing what he does best: soiling his Depends and scaring the children with wild tales about the bank failures, derivative defaults and lover’s lane murderers that would be unleashed if the taxpayers didn’t give a trillion dollars to the largest banks on the planet. The entire ethical structure of the free market was destroyed so that Sheila Bair could be spared the inconvenience of euthanizing crippled, syphilitic ghouls like Citigroup and Bank of America.



  1. Cha Ching (a Chinese national) says:

    They should have divided 789 billion by 300 million and sent us a check to spend into the economy. Oh wait, that would be similar to a tax cut. We can’t be having that.

  2. John Buyon says:

    Keynes was the master he understood the limitations of his own work and understood the fallacies inside keynsianism himself before all of these arrogant intellectual midgets hayek, friedman and the neoliberals could even spell their own names.

    read das Kapital for a clear understanding of capitalism

  3. Anonymous says:

    and read Mein Kampf while you’e at it, canuck.

  4. Nazis sehr gut says:

    Yeh, the Germans are the best at economic and social engineering.

  5. Lord Voldemort says:

    Harry Potter would be more of a realistic read than Marx.

  6. John Buyon says:

    wow the right wing is shockingly stupid

    Das capital was written by Marx not Hitler.

    the most clearest understanding of Capitalism comes from Marx who analyzed the origins of capitalism, the historic forces leading to the nation state, with its accompanying economic systems, the main actors and the driving engines of production, and profit.
    dont even match the intellectual giant Marx only Adam smith comes close.

  7. Got brains? says:

    Free markets, personal responsibility, and throw in some morals….. you can’t go wrong. SCREW COMMUNISM, SOCIALISM, MARXISM, PROGRESSIVISM

  8. Canadian Bacon says:

    Hey idiot, I know that, Marx is German…. duh. canuck.

  9. Anonymous says:

    Lets take a collection and send John on a perpetual vacation, sans America, for Americas sake. No internet. He can read Marx all day long, everyday. While he’s about he can search for a place where socialism has ever REALLY worked.

  10. John Buyon says:

    do you know that the whole world is socialist to a large degree now?
    what is
    Social security ?
    Labor Unions ?
    environmental regulations?
    minumum wage laws
    paid leave?
    3 week vacation?
    mass education?
    workers compensation?

    these are all socialist ideas so if you hate socialism so much campaign against all these. Show me an example of a pure capitalist economy that works for longer than 5 years before it decomposes into a morass of corruption, monopolies, and tyranny.
    I will give you an example of a pure socialism that lasted 50 years and also defended and established a small nation in a sea of enemies
    the Kibutz
    in Israel.

  11. Yawn says:

    Charlie Manson.., sounds like he and his girls were a kibbutz.

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