There are three generally recognized schools of economic thought in the Socialist Democracy of Amerika: the Keynesians, the Monetarists and the Austrians. As far as I am concerned the Monetarists, for reasons I will not describe today, are just a sub-group of the Keynesians so I lump them both together here. Austrians, which I consider myself to be a member of, and Keynesians, which every single career politician is by default, have nothing in common. At each point of economic doctrine the Austrians and the Keynesians see things differently. Let me give you a couple of the most important points of disagreement.
Keynesians believe that economic growth is the result of consumer spending. You hear this all the time in the popular media. Since all government economists and almost all media outlets are committed to Keynesianism, every time a new Gross Domestic Produce number is released we are all told that "consumer spending is 2/3rds of GDP you know." If various indices of consumer spending are rising the government economists joyfully clap their hands and tell us the economy is growing wonderfully. On the other hand, if those stupid consumers decide to save their money rather than spending it, career politicians inform us that they need to intervene in the marketplace with "stimulus" to keep things going since we are too dumb to see how important it is to spend all of our money on shiny things.
If Keynesians were right about this point it would be possible for you to increase the net worth of your family by spending more and saving less. Even the dumbest stupid idiot in the world knows that is not possible. I guess that makes career politicians dumber than even the dumbest stupid idiot in the world. Austrians know that economic growth ultimate comes from savings and investment. The economy can grow only when capital is employed and consumers make the conscious decision to delay purchases until the future in favor of investment and savings in the present. The resources that are invested and saved are made available to entrepreneurs who use them to create new goods and services. The entire process of creating new goods and services, as well as the end result of that creative process, all contribute to economic growth.
Keynesians believe that the best way to stimulate consumer spending, and thus stimulate economic growth in their system, is to increase the money supply. Give more money to people and they will spend more. The more they spend the more the economy grows and the richer we all become. So in the Keynesian universe the answer to every problem that does not exist is to increase the money supply. You need look no further than this graph to see that Keyneians dominate all economic positions in government:
The money supply in the Socialist Democracy of Amerika has grown from less than $2 trillion in 1980 to over $12 trillion today. That is more than a six-fold increase in the supply of money. And what do we have to show for it? Where is all of the economic growth it was expected to create? Did the economy expand six-fold as we were told it should?
Real GDP has slightly more than doubled during the time the supply of money expanded six-fold. If increasing the money supply creates economic growth, why did that technique not work in this case? The answer is simple. Increasing the money supply is nothing more than the act of counterfeiting, whether it is done by the federal government or a guy named Guido in a basement somewhere. Only the dumbest stupid idiot in the world would believe that if the amount of money in the economy were to double overnight everyone would be twice as wealthy. All that has happened is a decrease in the value of the previously existing money, in this case a decrease of 50% would take place if the total supply was doubled.
These two examples, spending our way to prosperity and creating economic growth via inflation, are enough to prove the amazingly gross stupidity of Keynesianism. No family unit anywhere in the world believes the things the Keynesians tell the government. No family unit believes it can become more wealthy by spending. No family unit believes that counterfeit money makes it better off. But career politicians are the dumbest, most stupid and idiotic people who have ever walked the face of the earth. So quite naturally they believe what the Keynesians tell them.
Let me tell you why career politicians believe the Keynesian lies. Obviously career politicians do not want to appear to be any more stupid than they actually are. So if they decide to believe something so bizarrely wrongheaded as Keynesian economics there must be a reason for it, and indeed there is. Career politicians believe Keynesianism because it allows them to act as the economic saviors of the world. Keynesianism calls for elitist government economic planners to step up and do exactly the right things at exactly the right time to guide our economy to strong economic growth. Austrian economics recognizes that individual players in the free market are responsible for every economic good that exists in this envy-filled land. Austrians recognize that politicians can do nothing but hinder economic growth. Politicians hate that fact and will do anything they can to obscure it. If the Austrians are correct, and they are, there is literally nothing for politicians to do when it comes to the economy. Since politicians largely get elected based upon the promises they make to do things in the economy, it would be unlikely for us to expect them to admit that they are economically impotent. Quite naturally they adopt the lies of Keynesianism in order to further their careers and expand their political power.
What is more interesting to me is why the ignorant citizens of this sad land also believe in the doctrines of Keynesianism. Once again we do not have to go far to find the answer. Since the bottom 51% of the population is living off the wealth and income of the politically unprotected top 49%, an economic system needs to be created that will justify that act of theft. Keynesianism proudly steps up to the plate when envy needs to be institutionalized. Profit seeking entreprenuers are demonized and propaganda constantly spews forth from the halls of government informing us that we all must pay our fair share. The fair share, of course, means that the rich minority will pay all of the bills because they do not have enough votes to do anything about it. By voting for career politicians who promise to make us all rich by means of Keynesian smoke and mirrors it is possible for envy-filled voters to justify the act of theft by believing what the career politicians tell them about economic growth ostensibly being created by government action. Those who are rich are in that position because they have received the benefits of previous government action, so we are told, and now it is their turn to share a piece of the pie government programs created and pay the tax bills for all future government actions which will make the less fortunate rich beyond their wildest dreams. It does not work, of course, but utility has never been a means test for government programs.