Monday, September 2, 2013

Keynesians upset at growth

The big new on the economic from is the upward revision of second quarter growth.  Keynesians with their multipliers greater than one theory predicted less growth due to government cutbacks.  Meanwhile, the Reuters survey or economists mostly got it right, predicting an upward revision to 2.3%.

This test was important because it was the first experiment with austerity since the crash, and expansive austerity seemed to work in the short term.  It now seems the USA is batting 100% on the proposition that multipliers have been less than one for 30 years.  This economy constitutes 25% of the world economy, on average, and every debt expansion since 1980 has resulted in lower growth, and every debt reduction (sequestering and Bill Clinton) has resulted in higher growth.

So, how did Keynesians prove multipliers greater than one when a full quarter of the global economy demonstrated the opposite? It would seem that any data panel including the USA would be either erroneous or fraudulent.  It is an important distinction, because the economy is very interested in who or what is forcing a negative growth scenario on the USA, and now have strong indications that it is John Maynard Keynes, the dead man himself, who is trashing the American economy. And we know why, his fundamental assumption that the economy seeks the lowest volatility path is entirely wrong, on a macro and on a micro level.

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