And Then a Miracle Occurred

Did I miss it?

The entire world acts as if the Keynesian Miracle has actually occurred. Printing money and credit from thin air, after countless failed attempts throughout history, does seem to create wealth in the eyes of the investing world today. No longer does the artificial lowering of interest rates via unbacked money and credit distort the structure of the economy. Malinvestment will never again exist if one is to judge these things by the elevated stock, bond and real estate prices that exist today.

Of course, the (remaining) Austrian economics community thinks this to be rubbish. Unfortunately, we are becoming fewer in number and this is especially true for those, like this author, who have been investing based on Austrian economic principles. It has been a wipeout the last couple of years and Austrian oriented investors are being carted from the field.

Household net worth is soaring on the back of skyrocketing stock, bond and real estate prices from the money and credit created from thin air, thus seeming to justify the Keynesian actions of Fed chairmen Greenspan, Bernanke and Yellin. The Fed’s Z.1 report tells us that net worth rose $1.5 trillion in Q1, despite real GDP growth of -1% and a savings rate that was just over 1% of GDP. That is, there are no additional goods and services in the US economy to back up the $1.5 trillion in new claims on goods and services, and nobody cares. The second quarter looks like more of the same.  Everyone just expects that growth and savings will come….eventually. Everyone now believes that you really can get something for nothing.

While I remain steadfast in the belief that we are reaching the zenith of the greatest financial bubble ever, all of this faith in central planning exhibited by the masses has started me asking; what if I a miracle occurred and the Keynesian model actually worked?

Suppose the Keynesians are correct, shouldn’t I just put my stakes down in Keynesland and enjoy the prevailing something for nothing environment with all of the other believers?

What would a successful Keynesland be like?

The Bernanke’s and Krugman’s of the world would delight in the constantly rising GDP. The mandarins with their hands on the tools of economic policy for society would know how to guide our economic ship through the shoals and financial collapses would be a thing of the past. No doubt the proles would sing the praises of the economic overlords who delivered them into this promised land of constant economic growth.

I can hardly imagine a more dreary and frightening world, however. Keynesland would be a world without rights for the individual. Keynesland is a world where the ends justify the means. All must be sacrificed to the god of GDP expansion and his cohort, the god of financial crisis containment. There can be no permanent rights in a world that focuses on outcomes instead of the protection of the natural rights of the citizen.

Natural law and free will would be expunged from Keynesland, lest financial panic return. There is no future for the follower of natural law in this world, he must pull up stakes and look elsewhere.

Even if the Keynesian promise of something for nothing is correct, does it mean anything? What does it do for my soul if wealth can be conjured from thin air? How does a soul grow if it is not occasionally challenged by (economic) failure? Thomas Merton tells us that souls are like Olympic athletes because they too need to be pushed by adversity to become great.

I remain convinced that the economics of Keynesland would result in disaster. Its biggest problem however, would be that it would produce men without souls. If man isn’t allowed to use his free will to follow natural law he is no longer man. 

No, even if Keynesian economics were true, I wouldn’t want to put down stakes in Keynesland. There seems to be far more nobility for the individual living in Austrianland, let us keep our course set for a future arrival there. 

 Disclaimer: Nothing on this site should be construed as investment advice. It is all merely the opinion of the author.