Keynsian economic suicide

Explaining basic economics would be so much easier if one did not have to slog against the tide of misconception created by the idiotics theories of the late John Maynard Keynes and his disciples. The "stimulus" approach that has been pursued by the federal government since last year is based in Keynesian theory: The idea that deficit spending to encourage consumer demand can, through some magic that only Keynesians claim to understand, lead to economic recovery.

This "demand-side" approach fails to acknowledge a host of negative economic impacts of deficit spending. It also fails to acknowledge a basic truth: You can't make capitalism work without capital.

So when I saw Keynesian economist Dean Baker arguing with The Washington Post about the need for a second "stimulus," I felt compelled to try once again to explain this:

The first "stimulus" is, in fact, damaging the prospects for recovery and the debate over a second dose of the same poison is basically about whether we should commit economic suicide faster.

You can read the whole thing. It gave me an excuse to quote something I'd caught while compiling a market report for NTCNews.com, the bluntest possible expression of why the stock market sucks now:

"Nobody's investing because there's no reason to invest," said Dawn Bennett, CEO of Bennett Financial Group.

The Dow has lost more than 600 points in the past month, and there are really no prospects of upward momentum in the near term. Currency-exchange analyst Jamie Saettele applied Elliott Wave theory to the situation:

The interpretation of multiple markets’ price patterns indicate that the deflationary environment experienced in the summer and fall of 2008 has returned. . . .
Stock markets, whether in Europe, Asia, or the United States, all appear headed lower throughout the remainder of 2009. . . .

Saettele has more of that, and a lot of complex charts, but the basic message is: Cash out now.