Keynesian Economics and the Great Depression

[StAugustine79]

False! World War II got the united states out of the Great Depression. FDR's New Deal inflated the financial bubble and there had to be a bounce back after the war to make up for the draft that affected other sectors of the economy. Keynesian economics has been a total failure. It has systemically led to increased debt due to artificially low interest rates, increased spending, inflation, and mal-investment. The Austrian school was and is correct.

[gulbirk]

Say what you want about economy. Its still a fact that there isnt a single example of a right winged capitalistic economy functioning for the people, while there are several examples of social democratic economies functioning very well.

[Salvysahagun]

FDR hated Keynes, you'll NEVER find a quote of Roosevelt crediting Keynes.

Roosevelts great great grand father was Isaac Roosevelt the co-founder of Alexander Hamilton's Bank of New York

The Nazi Policies resembled Keynes

The New Deal resembled Lincoln and Hamilton

[MrMrmike5]

I love it how 2 people claped after he finished his redistribution bit...

[Salvysahagun]

Keynes says "boost demand" but don't people want lower prices during a recession? demand raises prices because it is a function of bidding.

Agriculture Adjustment Act made millions starve, food became scarce and was latter rule unconstitutional

Their have been many years that where worse than 1929 but had VERY fast recoveries.

The Great Depression ended after Bretton Woods because the dollar became the Reserve Currency creating a surge of demand for American currency.

[losheva]

@Salvysahagun during a recession people want money to spend and confidence in the future, there is no problem of lower prices during a recession if people have not money to spend and who has money don't spend this because there is not confidence in the future.

[Salvysahagun]

@losheva

Roosevelt wouldn't let prices fall.

Money supply contracted. a good thing to do is cut prices and cut wages

[losheva]

@Salvysahagun so for you in case of depression, therefore in case of lack of demand it's a good thing cut wages? so as to suppress consumption therefore suppress demand again? sage

[Salvysahagun]

@losheva Thier is a lake of demand because thier is a lack of money.

Prices where falling, if wages where cut thier would have been enough money.

[losheva]

@Salvysahagun a) if there was a lake of demand there wouldn't be a recession (in the U.S. first in Europe now) b) if it were enough to increase the money supply to push the demand, well then it means you did not ever read Keynes and it seems pointless to continue the discussion.

[Salvysahagun]

@losheva Why do you want to increase the money supply? Thats what caused the problem! don't forget dirivatives(can't spell sorry) are not factored in to M2 or M3.

Thier is always latent demand. I want things that don't exist.

"The customer won't know what they want until we show it to them" - Steve Jobs.

If the money supply contracts 20% per se. then usually prices fall if the fed stayed out and we cut wages 20% with demand the slump would be over quite quickly.

Thats only one method.

[losheva]

@Salvysahagun Do you know that exist a rigidy of wages and prices to the down (Fisher, Taylor)? It's not automatic the drop of wages and prices after a cut of money supply.

U said that there is a lot of demand, then why Fed pumping money into demand? Is Fed masochistic? or Fed is trying to support a low demand? but for Keynes the LM is flat, so is it a Keynesian theory? or monetarist theory? there's inflation bc money supply is higher than money demand.

[losheva]

@Salvysahagun if you think that the "lack" of money is a symptom of a high level of demand, well then you have not understood anything, excuse me for saying so.

[losheva]

@Salvysahagun when you say that there is a lack of money, plus, you contradict yourself, assuming that ruled M. Friedman, how can there be inflation with shortages of money, if inflation is a purely monetary phenomenon? there is inflation when money supply is higher than money demand.

[Salvysahagun]

@losheva

Their is inflation because we are pumping money into demand and all of (I) is going to speculation

[losheva]

@Salvysahagun Apple produces speciality goods for a niche of consumer, try asking for 50 million poor people in the U.S. if they know what they want, consumer goods, food, clothes etc..

Derivatives are born because the mass of wages in ralation to GDP decreased by Reaganomics the only way to have a demand capable of absorbing the supply was indebted to customers, the derivatives are insurance risk. Find me where Keynes says that it's necessary to support demand with consumer debt.

[Salvysahagun]

@losheva

What do you think a Monetary expansion is?

Debt = Money.

To get money you MUST borrow.

you think if we pump money into consumption prices won't rise? any business owner would laugh at you for agreeing to that. The same reason the Ice cream man raises prices in the summer. Why New computers always come out right after the holidays. Why Bars raise the price of Beer during sporting events.

Production comes first. If we over produce the factory will go down but prices will fall.

[losheva]

@Salvysahagun, well u are a bit confused, there are a lot of reasons that produce inflation. Not always producers laugh if prices grow, bc there is the inflation that born by a rise of money supply, tanslate also price of intermediate goods increases so mark-up for business owner is same, different case is the price of beer during sporting events, high demand pushes up prices, but the high demand isn't the unique reason of inflation, now there is not a high demand.

[losheva]

@Salvysahagun can't exist recession with high demand, there is recession when production drop bc there is not a demand that can absorb it. If I'm a business owner decrease the production if I do not sell, it's easy to understand.

[Salvysahagun]

@losheva

Then I cut wages to pay for the losses?

[losheva]

@Salvysahagun there's debt and debt, example public debt must be anti-cyclical as Keynes said, to avoid bubbles and recessions, then if his words were misinterpreted it's not his fault, but when debt is "private", debt gets out of control. I understand that you're a "Austrian", but as Marxism, this school is utopian ideology, real world is different.P.s.Malthus studied economic cycles when Fed didn't exist. Austrian theory is one theory, and wrong for me, confuses cause and effect

[Salvysahagun]

@losheva

Not an Austrian you ignorant turd see my first comment.

[Salvysahagun]

@losheva The Central bank of England has existed since the 1600s and Malthus was a genocidal Maniac.

Marx was just came too late

[losheva]

@Salvysahagun The Bank was privately owned and operated from its foundation in 1694. It was subordinated to the Treasury after 1931 in making policy and was nationalised in 1946.

Who is the ignorant?

[Salvysahagun]

@losheva

Because it has been the monetary authority for 400 years. Hence it is a Federal Reserve.

you are ignorant

[losheva]

@Salvysahagun thanks for the ignorant, it's a compliment coming from you.

[losheva]

@Salvysahagun i didn't talk about matlhus' essay of the principle of the population as it affects the future improvement of society, but about his study in economic cycle when central bank didn't make monetary policy.

[losheva]

@Salvysahagun the issuance of currency by the central bank is not the cause of the imbalance market, but the effect of an imbalance that already exists. (Hyman Minsky)

[Salvysahagun]

@losheva

This is what discredity Marx. he supported the debt money system.

[losheva]

@Salvysahagun I close the conversation with you, advising you to search on google, "Liberal Paradox" by Amartya Sen.

[spec24]

So the gov't taking money out of the economy and then putting it back in the economy is the answer? Genius Keynsians.. just brilliant.

[PlanetShhhh]

@spec24 How is the gov "taking" money out of the economy? They do print money which affects the economy. This whole debate is far too complicated for a youtube comments area. I recommend reading a book on Keynes by Robert Skidelsky.

[mikerunow]

@spec24 Money changing hands is what makes an economy work. If everyone just put their money into their mattresses and stayed home, there would be no economy.

[catallaxy]

This video is incomplete. The graph you show starts in 1929 but, the cause of the Great Depression was really the Federal Reserve printing large quantities of money to finance the First World War, around 1913. This inflation of the money supply created the financial bubble that burst later, in 1929. FDR prolonged the Depression with his socialist policies.

[jessemaurais]

@catallaxy Bubbles are caused by speculators over-valuating commodities for the purpose of reselling. The value of the dollar has nothing to do with it.

[moses340]

@jessemaurais Bubbles are proportional to the value of the dollar. Once there is an increase in money supply by means of easy lending practices or excessive printing of money (Fiat) going after the same amount of goods, causes artifiacial inflation. Which leads to the devaluation of a currency. The same factors that brought about the Great Depression are the same factors that brought about the recent Recession. As more money became available speculation increased its just simple economics.

[moses340]

@jessemaurais Bubbles are proportional to the value of the dollar. Once there is an increase in money supply by means of easy lending practices or excessive printing of money (Fiat) going after the same amount of goods, causes artifiacial inflation. Which leads to the devaluation of a currency. The same factors that brought about the Great Depression are the same factors that brought about the recent Recession. As more money became available speculation increased its just simple economics

[skatelongboards]

@catallaxy didn't know that but thats a interesting take on things. i do not know if its true but im gonna research that. sounds like its reasonable.

[puttincomputers]

yikes! I just read up on keynes and found out that he sided with the Nazi's and supported Eugenics!

[Dawgmandede]

@puttincomputers I left that out on purpose.

[puttincomputers]

@Dawgmandede what was the purpose?

[supergirl33ify]

@puttincomputers Keynes several times used his influence to help his Jewish friends, most notably when he successfully lobbied for Wittgenstein to be allowed residency in Great Britain explicitly in order to rescue him from being deported to Nazi-occupied Austria. Keynes was, furthermore, a supporter of Zionism, serving on committees supporting the cause.[100]

[supergirl33ify]

@puttincomputers After the war started he roundly criticised the Left for losing their nerve to confront Hitler.[27]

The intelligentsia of the Left were the loudest in demanding that the Nazi aggression should be resisted at all costs. When it comes to a showdown, scarce four weeks have passed before they remember that they are pacifists and write defeatist letters to your columns, leaving the defence of freedom and civilisation to Colonel Blimp and the Old School Tie, for whom Three Cheers.

[Kosimba1]

@puttincomputers he didn't support the Nazi's, he destroyed his health and ultimately died (just after the war) from over work in the service of a British government that was fighting the nazis so that is both wrong and a slur on a man who, in his way, gave his life to defeat the Nazis. On Eugenics most people supported it at that time, Keynes was a relatively moderate advocate.

[koboy1996]

even if Keneysian economics didn't work overall, it at least temporarily relieved the problems that were facing America, America in 1933 was literally on the verge of anarchy with unemployment reaching 30%, communism was gaining power, strikes were increasingly growing in number, and the unemployed were becoming very mad leading to violence.

[dcyates]

I'm sure this has been mentioned already, but nevertheless, the implementation of Keynesian economics didn't work during the Great Depression (how can it possibly be said that such a program worked when, more than a decade later, the economy still hadn't improved yet?), nor is it working now. In fact, it's just making things far, far worse. And, I'm sorry, but the narrator sounds too much like Paul Krugman when he excuses its lack of success by claiming that it simply wasn't implemented enough.

[Porojukaha]

Keynesians. I know this is totally gonna shock you, so I want you to sit down and get a paper bag to ventilate with. You ready? Ok, here it is...........there is no Santa Clause. I know, I just shattered your entire worldview and your brain is melting around your ears, but its gonna be ok, when you wake up everything will be all better and you will probably have an austrian accent.

[Dawgmandede]

@Porojukaha Don't really get your point. Did this last year for a project. Don't really want some retards on the internet to talk crap to me.

[Dawgmandede]

@Dawgmandede Unless you were talking about keynesians. Then I apologize. 

[Porojukaha]

@Dawgmandede oh. thats probably why you dont understand then so dont worry. You are new to these things. My comment was pretty complicated and I made references that only someone who knows a lot about economics would probably understand. Basically, I was saying that everything Keynesians think is the truth is about as true as the existence of santa clause. And that once they finally realize the truth they will become followers of the Austrian School of Economics.

[corkskrewclubhouse93]

We can blame almost all of our economic problems on Keynes.

[waremi51]

America still hasn't fully recovered from FDR's four-term presidency...

[joshuancts]

@waremi51 We're in the mess we're in now because of Reaganomics.

[Beckett125]

That was the point of the AAA. In fact, there is no difference between Hoover's policies and FDR policies. FDR had made campaign promises to put the fiscal house in order instead of spending and increasing the public debt. "I cannot see a way to continue the spending, it does not work" - Henry Morgenthau, Jr. 52nd Treasury Secretary of the United States, chief architect of the New Deal

[Beckett125]

remobilized because aggregate demand had increased substantially. We know this is the cause (and why "priming the pump didn't work) because as soon as industry died down after WW2 we had another recession in 1946. In fact FDR had such a crude understand of deflation, and in an attempt to boost prices, he ordered large amounts of livestock and foodstuffs destroyed, so general agricultural prices would inflate compared to demand, instead of say, giving that excess food to charities and the starvin

[Beckett125]

Although FDR continued the same public work projects (i.e. digging ditches) as Hoover, the economy never fully recovered. You saw that between 1933 and 1941 unemployment dropped, but it never was a sustained drop. It went to 19% and then back to 23% between months. Also public works is not real employment because you're not producing a unit of commerce. There was no product that was created out of digging those ditches. Only after 15 million men were taken out of the work force and industry

[Beckett125]

Wow, the stock market caused the great depression...really? Just some numbers at you: Stock Market Crash 1929: 9% unemployment. June 1930: 6% Unemployment. 1931-Post-Smoot-Hawley: 12% unemployment. Fed raises bank reserve ratio to 40% end of 1931- 20% unemployment. Keynesianisms doesn't factor the substitution ratio. The more money you take out of private hands, the less employment there will be. Unemployment never dropped below double digits during the 1930s.

[zsezse215]

Why did Mother Teresa go to New Bedford Mass in 1995?

The whole pedophile thing is a cover story for the Vaticans fascism.

Thats why nothing ever happens to them.

The catholic church began cracking down on dissent in the

12th century under pope Innocent III.

Nothing has changed. The American Inquisition is the Spanish

Inquisition with the rule of law.

Watch Titicut Follies.

philipnute com

[shananagans5]

Keynesian economics remain popular simply because it looks like it will work on the surface and it is an easy promie polititions can make. Most people will not put the effort into understanding so this insane economic theory hangs on hurting everyone in the long run except the polititions pushing insane policies.

[bellcord]

Well balanced vid...worst FDR impression of all time though...

[Dawgmandede]

@bellcord I try. :P

[bellcord]

"Give me the money and I'll have 2 million men working by this Friday...Give me more and in 2 weeks I'll have 2 million more on the job.." Harold Ickes..The 'Can Do'' attitude that saved the country..

[herminzissou]

hahahahah,

historical fail, sure you can get full employment if you take 12 million men out of the work force.

[UncommonThinker]

The great depression didn't end until FDR dismantles and destroyed most of his new deal programs. Its amazing that most of FDR's 2nd and 3rd term policies have been forgotten by history.

[davidrodgersNJ]

We have tried spending money. We are spending more than we have ever spent before and it does not work ... After eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!

Henry Morgenthau

Treasury Secretary under FDR, after 2 terms of FDR's "New Deal".

I think that just about says it.

[kitycalifornia]

was P. Samuelson! Thus, Read Economics, but make sure its written before (1985).

[Dawgmandede]

I'm sorry if you feel like that way. Unfortunately, Keynes is a Keynesian. "He had a strong distaste for American Keynesian Economics." He encouraged Roosevelt to brush up the economy by using his method of Keynesian Economics as he speaks about in his Open Letter to President Roosevelt. Please watch my video before you try to disprove me.

[IFloridaMotocrossI]

Nah, I think Keynes was more of a Fascist than a "Economist of Keynes".  Hitler was the only true dictator to fully utilize the great anti-semitic economic principles of Keynes.

Roosevelt was more of a Conservative...

[kitycalifornia]

Given the fact that Keynes GT is a continuation of Smithan principles, I assume you would also deduct that Hamilton,Washington,Madison and Franklin were also antisemites? American Logic at its finest. BTW, There are many articles on JSTOR that address Keynes' supposed anti-semetic sentiments.

Thanks for trying champ!

[Hook242002]

@kitycalifornia ...and Smith was wrong about a lot of things in Wealth of Nations. Keynes just continued the error.

[kitycalifornia]

Keynes was not a Keynesian!!!! As a matter of fact he had a strong distaste for American Keynesian Economics, which in reality was nothing more then an extension of the Neoclassical synthesis. There is a difference between the Economics of Keynes and Keynesian economics. If you really want to know how Keynes really felt, make sure you're well equipped in Calculus and read "A Treatise on Probability" before even touching the General Theory! The only American Economist that did Keynes a favour

[IFloridaMotocrossI]

Very informative and seemingly objective on a controversial subject. Thanks for the post.

Just out of curiosity, are you a Keynesian, Monetarist, Austrianomist, etc?

[Dawgmandede]

You know, after this documentary and a lot of background information, I would say I'm a Keynesian. But, of course, Keynesian isn't the only philosophy a country requires to sustain itself. Notably, Keynesian Economics, as Keynes himself said, is used to bring countries out of depression. Thanks for the comment!

[IFloridaMotocrossI]

Yeah, I'm mostly a Keynesian as well. Although, I am more of a Pragmatist than anything. No system is perfect, and no system is completely imperfect. Everything has its pros and cons, and I try to extract the best attributes of each system to formulate something that would work best.

I think those that adhere to the Free Market are in denial of the forces of natural monopolies and economies of scale.

[Dawgmandede]

Yea. Unfortunately, that idea would never fly. Forevermore will politicians argue about the validity of one system vs. another. And unfortunately they will always fall back on old systems. Innovation has become a thing of the past in today's society!

[IFloridaMotocrossI]

Agreed. Partisanship and stupidity are much more potent and prevalent forces than receptiveness.

[kkmarivate]

@IFloridaMotocrossI by my interpretation, that would make you an economic pluralist, which is a sight for sore eyes because economics has became far too embroiled in petty ideological arguments.

[IFloridaMotocrossI]

@kkmarivate

Agreed.

[Hook242002]

@IFloridaMotocrossI Monopolies can only exist by government action. In a free market there are always opportunities for competition. Even if a company has a huge percentage of market share there is always the threat of competition from a new company. Only government can eliminate this threat through regulation, and laws requiring licenses.

[IFloridaMotocrossI]

@Hook242002

Have you ever heard of start-up capital? It's basically just the costs tied into entering a particular market. Now if I wanted to just start my own crude oil refinery, I'm out of luck because I don't have the millions worth of capital to start the company. This is why monopolies can form in a market, with or without government intervention present.

[Hook242002]

@IFloridaMotocrossI At the present it is so costly to construct a refinery (due to government regulation) in this country, that even those companies firmly entrenched in this industry have not built a new one in this country since 1976. So I would have to say your example proves my point better than it proves yours.

[IFloridaMotocrossI]

@Hook242002

That's simply because it's more efficient and less expensive to expand pre-existing refineries, which is what's usually done. My point was that monopolies can exist with or without government intervention, which you have yet to address.

[Hook242002]

@IFloridaMotocrossI...and why is it more efficient and less expensive to retrofit existing facilities??? Could it have anything to do with government regulation (environmental impact statements, zoning laws...)? So you have helped me to prove my point even further. When has a monopoly ever existed without government's help?

[IFloridaMotocrossI]

@Hook242002

Government regulation is part of the reason, but much of it has to do with production capabilities that don't increase by creating newer and more expensive facilities. It's simply cheaper to expand upon pre-existing facilities.

Well, since we're on the subject of oil, read up on the history of standard oil in the late 19th century. It was probably the largest monopoly in the history of mankind, and it existed at a time when the government wasn't involved in the market at all.