Wednesday, July 01, 2015

Like Keynes' Theory? Read the Rest of the Story.

David Stockman highlights the OTHER half of Keynes, showing that our "free trade" bunch are either ignorant dolts or robber barons.  Either way, you're screwed.

...As I detailed in the Great Deformation, the Great Thinker [Keynes] actually came out for stringent protectionism and economic autarky six years before he published the General  Theory and for good and logical reasons that his contemporary followers choose to completely ignore. Namely, protectionism and autarky are an absolutely necessary correlate to state management of the business cycle and related efforts to improve upon the unguided results generated by business, labor and investors on the free market. ...

IOW, the reason that Keynesian 'nomics don't work (see, e.g., the U-6 unemployment numbers) is that they are only half-utilized.


...Eighty years on from Keynes’ incomprehensible ode to statist economics and thorough-going protectionism, the idea of state management of the business cycle in one country is even more preposterous. Potential labor supply is a function of the global labor cost curve and now comes in atomized form as hours, gigs, and temp agency contractual bits, not census bureau headcounts.

In fact, the Census Bureau survey takers and the BLS numbers crunchers have not the foggiest idea as to what the real world’s potential labor force computes to, and how much of it is deployed on any given day, month or quarter. Accordingly, printing money and pegging interest rates in pursuit of “full employment”, which is the essence of the Yellen version of monetary central planning, is completely nonsensical....

The Fed Reserve priesthood has no friggin' idea of how many Chinamen are able/willing to work for 10 cents/hour--nor how many Thais, Vietnamese, Filipinos, nor Frenchmen.  So jacking the US money supply or whacking US interest rates is....umnhhhh...insanity.  It's exactly like firing a Ma Deuce with your eyes closed:  you can kill a lot of friends that way.

And, by gum, they have.

...When in the year 2015 you have 93 million adults not in the labor force—-of which only half are retired and receiving social security benefits(OASI)—-and a U-3 computational method that counts as “employed” anyone who works only a few hour per week—-then what you have in the resulting fraction is noise, pure and simple...At the present time, there are 210 million adult Americans between the ages of 16 and 68—to take a plausible measure of the potential work force. That amounts to 420 billion potential labor hours, if we accept the convention that all adults are at least theoretically capable of holding a full-time job (2,000 hours/year) and pulling their share of society’s need for production and work effort.

By contrast, during 2014 only 240 billion hours were actually supplied to the US economy, according to the BLS estimates. Technically, therefore, there were 180 billion unemployed labor hours, meaning that the real unemployment rate was 42.9%, not 5.5%!...

One might quibble, as 16-y-o's are not really eligible for full-time work.  OK, then, reduce "available hours" to only 375 billion and divide.

Not exactly "full employment" there, either, eh?

1 comment:

Grim said...

Well, a reason they don't work. It's also possible the general theory itself is wrong. Even if it were right, though, this is a reason to abandon either Keynesian economics or free trade.