Murray Tucker: Hooverian economics

Advertisement

Like our current president, Herbert Hoover knew little to nothing about economics. This truly great man had one big flaw. He listened to monetarist professor Irving Fisher, of Harvard, rather than employment economist John Maynard Keynes. Fisher was an incredibly bright economist whose major disciple was Milton Friedman, a lord of the neo-conservative movement who believed that low taxes and low government spending were key to high economic growth.

Today, fiscal policy (i.e., Keynesian policy) has been eliminated as a means to solve national economic problems. A combination of diehard Congressional representatives and a willing president have returned us to the days of Herbert Hoover.

While criticized as only creating more federal debt, the stimulus (which was half tax cuts, and history has shown that they do nothing to stimulate the economy) began to move unemployment to levels below 9 percent. The result of the ruinous debt ceiling/deficit reduction act has deprived America of the potential for using what FDR used to take our economy out of the black hole of Hooverian Economics.

Fools ignore history and are bound to repeat it.

Murray Tucker

Steamboat Springs and Santa Fe, N.M.

Comments

carlyle 3 years ago

Mr. Tucker, you forgot that one of FDR's planks in his first presidential campaign was a balanced budget. Mr. Hoover was the original Keynesian. You might recall JFK's marginal tax rate reduction to stimulate the 1964 economy and the Republican foolish response with an interest equalization tax. Perhaps you should read a little history yourself.

0

Murray Tucker 3 years ago

Planks in campaigns mean nothing. It's actions that count. Keynes didn't publish his Theory until 1936. So to say that "Hoover was the original Keynesian" defies historical fact.Hoover was a time and motion expert before joining the post-world war 1 effort to feed and reconstruct Europe. During the 1920's, the U.S. economy floated on an ever increasing bubble of high leverage (the stock market was the original ATM). Hoover tightened Federal Expenditures as Treasury receipts fell and potential deficit increased. He forced the Federal Government into a balanced budget, just when it shouldn't have gone in that direction. There was another factor and that was the Federal Reserve's tightening of credit-something for which the current chairman, Ben Bernake has written about and avoided in the near depression that occurred in 2008-9.

I don't know why you've brought in the tax rate reduction. You might want to explain. Also, please address yourself to what I wrote- that fiscal policy has been almost eliminated as a tool for getting us out of a downward economic spiral.

0

Murray Tucker 3 years ago

Dr. Yampavalleyboy. You're one of those who ignores history. So tell us why we should ignore it. You've got a cure, so why not write a scholarly essay on the value of a balanced budget amendment. You certainly have the support of your esteemed Congressional Representative who is such an astute economic expert and champion of this idea (along with not raising the debt ceiling to pay for debts already incurred). I think all views should be heard, especially from experts like yourself.

0

carlyle 3 years ago

Mr. Tucker, Keynes didn't publish the General Theory until 1936, true, but you must be aware of the immense ammount of material he published prior to that date. You should start with "The End of Laissez-Faire" he published after his return from the Soviet Union in 1926. Hoover was making the first pithy attempts at deficit spending and was excoriated by both Republicans and Democrats prior to the election. Keynes' wonderful "The Consequences of the Peace" put him on the map, but most modern historians think his conclusions wrong. Germany could have lived with the reparations but Helmut Schacht creatively set up what became the Third Reich. We could debate the tragic loss of Benjamin Strong in 1928 and the consequence to Fed policy NYC vis-a-vis DC, but for what result? I bring up Kennedy's policy only to hit at Say's Law, supply creates its own demand. What do you think the multiplier of government spending to be? I'm with Barro who thinks it well under 1.0. I have the education and experience to qualify as an expert in this area. Do you?

0

ybul 3 years ago

The problem with the Keneysian economic theory, is that once a government program/fiefdom is created the emperor of that fiefdom does not want to lose their job and so the theory of reducing spending in times of plenty and increasing spending in lean times is great, is just that a theory not something that ever happens.

However, as plato pointed out that in democracy it devolves into mob rule - where the mobs want to get something for nothing as we have today - we have all these programs that probably do not serve any real ends and probably create more problems while trying to solve others - ethanol - grain subsidies - etc..

The most effective way to create growth in the economy is to work towards local food production systems. However, federal legislation - to protect us - is making it difficult for that to happen as more and more red tape is being added that small farms can not cost effectively meet, while at the same time they increased the self regulated mega-processors inspection rates from once every 4 years to now every 2 years.

Woohoo -

Maybe in the health care mess we have today, government intervention is causing problems via encouraged monoculture and soil depletion which has caused the average nutrient quantity in vegetables (not continuously grown corn - which probably have seen larger declines) of about 50% across the board.

In a recent paper - wish I had the reference - it showed that the pension system in rome was the cause of its demise. Seems we could have a similar problem having 50 trillion in unfunded liabilities - I can not even comprehend how much money that is - at some point we have to start realizing that people need to take care of themselves and that government is only there to ensure that another is not taking advantage of someone else - via pollution, taxation that moves money from x to y because that is what we believe should happen.

Peace and maybe brushing up on the foundations of this country and why it was founded on the principles it was - not Keynesian economics.

0

Steve Lewis 3 years ago

I wouldn't say this is a conservative's magazine. More accurate to say the Economist advocates for economic graphs that go up, with a global view. Anyway this article is a worthwhile read:

http://www.economist.com/node/21524874

Turning Japanese.

0

Murray Tucker 3 years ago

Carlyle: Anyone who hides behind a pseudoname can say anything they want and CLAIM anything they want to claim. Unfortunately, this paper allows this, but I won't go along with the charade. You may have credentials. I certainly do, and mine are an open book. I did study the history of economic thought many years ago, but I do not claim expertise. As to mulitpliers, I wonder where you studied economics? A 1.0??? Think of the logic. Government gives me a dollar. I spend it and what you're saying is that the recipient of my dollar puts it in his pocket? I know this is simplistic. Try this. The government gives me a dollar and I spend 70c. The recipient spends 50c. Total increase is $1.20 and the spending goes on and the multipler grows. Take a reputable Macroeconomics course (I taught these for ten years) and pass it with the argument that the multiplier is 1.0 then tell me who the professor is so I can petition to get him fired for incompetence.

0

carlyle 3 years ago

I took my first macro course from Merton Miller. I taught economics at the graduate level at a major university. http://online.wsj.com/article/SB123258618204604599.html is an article by Robert Baro on multipliers.

Get a grip.

0

Steve Lewis 3 years ago

Carlyle, Posting your credentials anonymously? Please.

0

pitpoodle 3 years ago

Personally, I do not believe in Keynesian economic theory. This is the road Obama has chosen over the past three years and you see where it has taken us. Unfortunately, the people Obama hired in the past who did not believe in Keynes left the administration. But our esteemed FED head is a strong believer and his policies have left us in dire straits. I would like to see him go.

0

sledneck 3 years ago

Are you kidding me, Mr Tucker? This is a joke, right?

Sir, if you really believe this you are completely out of your mind. I suspect you know better but are just doing the "accuse the others of your crime to confuse the issue" thing.

Yes sir, the Austrians believe that low taxes and low government spending is the key to economic prosperity. We have done the exact opposite for 40 years and we stand here today on the eve of disaster.

Keynsian policy, liberal policy, crony / fascist economics, deficit spending, high taxes and a greedy, self-centered electorate that can not find it's ass with a guide dog is what got us here, sir, NOT Austrian economics. Everything Friedman, Hayek, Mises and Rothbard predicted would result from out-of-control government spending and regulation HAS or IS CURRENTLY happening.

Everything Uncle Scam touches turnd to s**t and yet there are those who would give him still more.

0

sledneck 3 years ago

And, by the way, Your 9:37 am analogy starts in the wrong place. The government can't give you a dollar until it first TAKES a dollar from someone else. You further err by assuming that the crooks inside the beltway won't skim 45 cents off the dollar they took from me BEFORE they "give" it to you...

0

JLM 3 years ago

Where did that first dollar come from?

A productive American who managed to eake out a profit or was paid for his labor.

DC collected it and promptly turned it into $0.75 through its administrative process to collect and manage and administer it.

Then and only then did they have the ability to "invest" it. Likely they "invested" it in something that did not create a new job --- like snow plowing. You have to be ready to plow snow whether it snows or not.

Or unemployment benefits, which while certainly necessary do not create jobs.

That same dollar left in the hands of the taxpayer, perhaps even an entrepreneurial taxpayer even better, could otherwise be invested with just a pinch of leverage, say 50% debt to equity, and the investment capital would be $2.

That same untaxed $2 is now invested in our economy --- $1 of the original capital and $1 of risk capital or debt --- and the impact is almost 3 x what the government might otherwise deploy.

That is why the private sector can create jobs and the government cannot.

This is also why it is folly to tax the only segment of society which actually knows how to create jobs.

And you don't need a freakin' PhD to understand that story, Doc!

0

ybul 3 years ago

Unfortunately, in today's macroeconomic situation... That dollar may have had a multiplier of 1.2 however, in also contains the future divisor via interest payments. I would counter because of the psyche of the public, their outlook on retirement any multiplier is countered by a larger divisor.

To back up this all one needs to do is look up the velocity of money and see that it is slowing so whatever multiplier that existed is grossly outweighed by the debt devisor.

An unwinding of excess debt is the cause of recessions and depressions. It needs to happen to make sure people realize that there are no sure bets. Yet the banks were given a free pass to make stupid loans - at least the big ones.

0

sledneck 3 years ago

The un-winding of debt is due to Federal Reserve manipulation. The debt was ran up because the Fed made borrowing (make believe wealth) easy/ cheap and the fat-ass sheeple took the bait.
There was no business cycle until the Fed sprang up like the weed that it is. This un-winding DOES NOT need to happen. It did not happen with todays frequency or volatility until the advent of the Federal Reserve.

Get ready folks, Your dollar, as pathetically worthless as it is right now (one ounce of gold demands 1750 of 'em vs 250 five years ago), is worth way more right now than it will be in 24 months. Thats how Uncle Scam is going to solve its problems: It is going to repay your pensions, medicare and social security "trust funds" with WORTHLESS dollars. It's gonna be funny to see all the fat, sorry-assed government parasites lose their pensions/ retirement/ beinfits. That will numb the pain of watching my country disappear from the face of the earth.

0

ybul 3 years ago

Actually, there has been some debt cycle for a very long period of time. Go read about the k-wave cycle - the tulip bulb mania - runs about 70 years on average.

Yep about the time everyone wants some asset is the time to sell. Gold is a dead asset even more so than a tulip bulb and when everyone runs to something that is the time to find the door and leave.

0

ybul 3 years ago

dead in that is a non productive asset. It is simply a store of wealth, does not grow like a tulip and produce flowers which can be sold for many years and will produce more bulbs over time - a stock split.

Though I would agree that balancing the budget is of utmost importance.

0

Murray Tucker 3 years ago

Carlyle. Now that I know your claimed pedigree, I can understand your perspective. While working on my Ph.D. from Pitt, I took courses at Carnegie Institute (now Carnegie-Mellon). For me, Merton Miller was a challenge. I preferred Martin Bronfenbrenner. Your citations place you directly in Hoovervian Economics. (Barro is at the Hoover Institute.) Miller went on to Chicago (home of Milton Friedman). so now I understand where you are coming from, and respectfully disagree with the prescriptions derived, therefrom. However, fiscal policy has been virtually eliminated and we are left with the FED which has provided a half-baked solution. Good luck with your IRA, etc. I moved 50 percent into cash May 3rd. Sorry I didn't make it 100%.

0

Steve Lewis 3 years ago

Income tax incentives and better interest rates to induce more supply is a wasted effort, if at the same time you are financially squeezing the lower and middle class. Without the middle and lower class consuming more, there will not be enough demand to consume that induced, extra supply.

The rich simply cannot eat enough steaks and buy enough cars.

0

sledneck 3 years ago

Market blow-offs are NOT economic cycles (tulip mania is a market blow-off, not an economic cycle). They don't bring down world or national economies, they just punish foolish investors and send them back to their day-job. Major world powers are brought down by the transfer of wealth by central banks like what is happening under the American peoples nose... Can't see the difference? Then, please don't vote.

0

ybul 3 years ago

If you actually spent the time reading up on the K-Wave cycle, and the cyclical nature of the economy. People take on too much debt forgetting the lessons of the last debt cycle. Has been happening for a long time going back 100's -1000's of years.

What more so brings down major countries is the pension systems - as Did the Roman Empire, Germany and most western countries are struggling because of it today.

0

rhys jones 3 years ago

yvb -- You are correct, sir, the FED needs to go, which will never happen. By now they are their own Mafia, and they will kill Presidents and blow up their own buildings, so they can continue their bloodthirsty but profitable ways. They will milk this country dry, then sail off into the sunset, leaving the rest of us to piece together the remains. Everyone in Washington knows who butters their toast, and plays along, having no choice. The FED will be here to the bitter end.

I must disagree about the anti-Christ, however. That would have to be Bill Gates. First he stole most of what got him started, then tried to squash any competition. When hauled before the Feds (gov't this time) to account for anti-trust violations, he emerges basically scot-free, only to release Windows XP which spies on America, along with all subsequent Windows. Who knows what they invade -- bank balances, your email for sure. Even if they can't decipher any encrypted contents, the headers must remain unencrypted, so all intermediaries can pass it on, and Uncle Sam is sniffing out who emails who, all the time. My buddy got hauled before the FBI about this. Watch your subject line. Who knows what other spyware Bill has implanted into all those .EXE's, undecipherable to any but his own. Now the FED (private this time) and their member banks want to brand EVERYBODY with their own account number in their bank. All transactions will eventually come into and be taken from this account, eventually eliminating the need for another medium of exchange. And enabling them to track your whereabouts at any time. Whaddya bet Gates has his thumbs in this pie too.

It'll be 1984, a few decades too late. This forum is squabbling symptoms, while the disease continues unabated.

0

Requires free registration

Posting comments requires a free account and verification.