John Maynard Keynes, the famous British economist of the first half of the 20th Century developed an economic model for the industrial age. There are so many theories about what Keynes said by so-called Keynesian economists, most of them seriously wrong, that it behooves us to view the facts and develop a greater understanding of what it's all about. First and foremost: Keynesian economics does not replace the laissez faire model of Adam Smith; it refines it to cover a changing world of trade.
Adam Smith's model pertains to a largely agrarian society, the Keynesian model to an industrial society, and these differ from one another in a number of significant ways. An agrarian society with a small industrial base relies on unskilled and semi-skilled labor; a labor force that is highly flexible, mobile, and adaptable to changing conditions.
An industrial society relies on semi- and highly-skilled workers, specialists in fields that are not readily adaptable to other areas of the economy, and so is far less flexible, less mobile, and not readily adaptable to changing conditions. Keynes saw all this and prescribed a role for government to accommodate these differences: that of overseer and lender (investor) of last resort. The present system of government spending is an aberration of Keynesian principle. Keynes' model did not allow for a capitalist economy but one of free enterprise in which capital represents 10% of the total money supply. We have strayed far from that mark.
We might envision the role of government in economic affairs as being very much like a market maker on the trading floor of a stock exchange. This person deals with only one issue of stock and has an account containing x number of shares of this stock. Stocks are bought and sold by investors as a regular part of trading and, as is most often the case, there is some disparity between buyers and sellers; if an investor wishes to sell shares of the stock and there are not enough others willing to complete the trade, the market maker buys the excess. Conversely, if there are more buyers than sellers the market maker sells the difference from his own account. The role of the market maker is to ensure an orderly market. This is what Keynes had in mind as the role of government.
The relationship of government to economics is a precarious one to say the very least. A successful juncture of the social, legal, and economic realities of the society is a matter of critical importance and must clearly define the extent to which government should be involved in economic processes. The history of the United States over the past fifty years shows that the failure to implement proper safeguards against undue government interest has spawned corruption that has infested the halls of state like a metastasized cancer. Lobbying for special interest, pork barreling, and government spending have unleashed a Pandora's Box of evil that has all but destroyed the economy at the macro level. The current recession, bank failures, the excesses of unrestrained derivatives trading, all point to one glaring fact: that the government has utterly failed in its oversight of the economy. We are now involved in the Second American Revolution, the prime evidence of which fact is the growing number of states proclaiming sovereignty - other words it's a polite form of secession. This I believe is the prelude to the collapse of the Federal Government, a bankrupt monolith that is completely out of touch with the people it supposedly serves. They forgot that the people have the power and that power is going to demonstrate itself in no uncertain terms.
Governments collapse all the time. It happens when the interests of the government (those in power) diverge so drastically from the interests of the people they were elected to represent that the people take matters into their own hands. It will come in our nation when an informed public, fully cognizant of the crimes perpetrated in their name (undeclared resource wars, cover-ups of 911, the Franklin Scandal, the USS Cole, the influence of AIPAC (American Israeli Political Action Committee), rigged elections, and the rest of the rot, all of which have driven the United States into unparalleled and unsustainable debt, will say ENOUGH!
"It's the economy, stupid!" This mantra from the Clinton days has always been the main concern of the people. It has now become a major concern which can only result in the collapse of the government. Not a bad thing if we think about it. For one thing the Federal Reserve would lose its best customer and the national debt would be wiped out since it was incurred by the government acting without the consent of the people. The domestic economy would still operate pretty much the same as it does now without recourse to the events in Washington DC. Federal Reserve notes would still be used for buying and selling, people would still be making a living, and the agencies of government not directly connected with the political realities of the government would still function. At the end of the day we would still have to decide, as a free people, the role of government in our economic affairs.
One thing must be made quite clear: that the excesses of government are in large part due to the unregulated monetary policy that the secretive Federal Reserve, acting without the knowledge or consent of the people and their representatives, enjoyed as they brought the republic to the verge of collapse. Regulation of the economy is the key to economic recovery on the scale that we will demand.
Regulation in economic affairs has been seen as an affront to the free flow of trade in this country, something that totalitarian governments employ to control their societies. But it's not regulation itself that is to blame, rather it is the kind of regulation in force. Up till now it had been regulation by the government in areas that allowed for taxation without representation, unbridled spending, and horrendous debt. Such regulation as has been applied by government; the wrong kind, in the wrong places, and for the wrong reasons, has been a one way street: regulation by the government without regulation of the government.
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