By
If ever there was a rock star of economics, it would be John Maynard Keynes. He was born in 1883, the year communism's godfather Karl Marx died. With this auspicious sign, Keynes seemed to be destined to become a powerful free market force when the world was facing a serious choice between communism or capitalism. Instead, he offered a third way, which turned the world of economics upside down.
Keynes grew up in a privileged home in England. He was the son of a Cambridge economics professor and studied math at university. After two years in the civil service, Keynes joined the staff at Cambridge in 1909. He was never formally trained in economics, but over the following decades, he quickly became a central figure. His fame initially grew from accurately predicting the effects of political and economic events.
(See also: Seven Decades Later: John Maynard Keynes' Most Influential Quotes)
His first prediction was a critique of the reparation payments that were levied against defeated Germany after WWI. Keynes rightly pointed out that having to pay out the cost of the entire war would force Germany into hyperinflation and have negative consequences all over Europe. He followed this up by predicting that a return to the prewar fixed exchange rate sought by the chancellor of the Exchequer, Winston Churchill, would choke off economic growth and reduce real wages. The prewar exchange rate was overvalued in the postwar damage of 1925, and the attempt to lock it in did more damage than good. On both counts, Keynes was proved right.
Keynes was not a theoretical economist: he was an active trader in stocks and futures. He benefited hugely from the Roaring '20s and was well on his way to becoming the richest economist in history when the crash of 1929 wiped out three-quarters of his wealth. Keynes hadn't predicted this crash and was among those who believed a negative economic event was impossible with the Federal Reserve watching over the U.S. economy. Although blindsided by the crash, the adaptable Keynes did manage to rebuild his fortune by buying up stocks in the fire sale following the crash. His contrarian investing left him with a fortune of around $30 million at his death, making him the second richest economist in history.
Many others fared far worse in the crash and the resulting depression, however, and this is where Keynes' economic contributions began. Keynes believed that free-market capitalism was inherently unstable and that it needed to be reformulated both to fight off Marxism and the Great Depression. His ideas were summed up in his 1936 book, "The General Theory of Employment, Interest, and Money". Among other things, Keynes claimed that classical economics—the invisible hand of Adam Smith—only applied in cases of full employment. In all other cases, his "General Theory" held sway.
Keynes' "General Theory" will forever be remembered for giving governments a central role in economics. Although ostensibly written to save capitalism from sliding into the central planning of Marxism, Keynes opened the door for the government to become the principal agent in the economy. Simply put, Keynes saw deficit financing, public expenditures, taxation, and consumption as more important than saving, private investment, balanced government budgets, and low taxes (classical economic virtues). Keynes believed that an interventionist government could fix a depression by spending its way out and forcing its citizens to do the same while smoothing future cycles with various macroeconomic techniques.
Keynes backed up his theory by adding government expenditures to the overall national output. This was controversial from the start because the government doesn't actually save or invest as businesses and individuals do, but raises money through mandatory taxes or debt issues (that are paid back by tax revenues). Still, by adding government to the equation, Keynes showed that government spending—even digging holes and filling them in—would stimulate the economy when businesses and individuals were tightening budgets. His ideas heavily influenced the New Deal and the welfare state that grew up in the postwar era.
(To learn the differences between supply-side and Keynesian economics, read Understanding Supply-Side Economics.)
Keynes believed that consumption was the key to recovery and savings were the chains holding the economy down. In his models, private savings are subtracted from the private investment part of the national output equation, making government investment appear to be the better solution. Only a big government that was spending on behalf of the people would be able to guarantee full employment and economic prosperity. Even when forced to rework his model to allow for some private investment, he argued that it wasn't as efficient as government spending because private investors would be less likely to undertake/overpay for unnecessary works in hard economic times.
It is easy to see why governments were so quick to adopt Keynesian thinking. It gave politicians unlimited funds for pet projects and deficit spending that was very useful in buying votes. Government contracts quickly became synonymous with free money for any company that landed it, regardless of whether the project was brought in on time and on budget. The problem was that Keynesian thinking made huge assumptions that weren't backed by any real-world evidence.
For example, Keynes assumed interest rates would be constant no matter how much or how little capital was available for private lending. This allowed him to show that savings hurt economic growth—even though empirical evidence pointed to the opposite effect. To make this more obvious, he applied a multiplier to government spending but neglected to add a similar one to private savings. Oversimplification can be a useful tool in economics, but the more simplifying assumptions are used, the less real-world application a theory will have.
Keynes died in 1946. In addition to "The General Theory", he was part of a panel that worked on the Bretton Woods Agreement and the International Monetary Fund (IMF). His theory continued to grow in popularity and caught on with the public. After his death, however, critics began attacking both the macroeconomic view and the short-term aims of Keynesian thinking. Forcing spending, they argued, might keep a worker employed for another week, but what happens after that? Eventually, the money runs out and the government must print more, leading to inflation.
This is exactly what happened in the stagflation of the 1970s. Stagflation was impossible within Keynes' theory, but it happened nonetheless. With government spending crowding out private investment and inflation reducing real wages, Keynes' critics gained more ears. It ultimately fell upon Milton Friedman to reverse the Keynesian formulation of capitalism and reestablish free market principles in the U.S.
(Find out what factors contribute to a slowing economy, in Examining Stagflation and Stagflation, 1970s Style.)
Although no longer held in the esteem that it once was, Keynesian economics is far from dead. When you see consumer spending or confidence figures, you are seeing an outgrowth of Keynesian economics. The stimulus checks the U.S. government handed out to citizens in 2008 also represent the idea that consumers can buy flat-screen TVs or otherwise spend the economy out of trouble. Keynesian thinking will never completely leave the media or the government. For the media, many of the simplifications are easy to grasp and work into a short segment. For the government, the Keynesian assertion that it knows how to spend taxpayer money better than the taxpayers is a bonus.
Despite these undesirable consequences, Keynes' work is useful. It helps strengthen the free market theory by opposition, as we can see in the work of Milton Friedman and the Chicago School economists that followed Keynes. Blind adherence to the gospel of Adam Smith is dangerous in its own way. The Keynesian formulation forced free market economics to become a more comprehensive theory, and the persistent and popular echoes of Keynesian thinking in every economic crisis caused free market economics to develop in response.
Friedman once said, "We are all Keynesians now." But the full quote was, "In one sense we are all Keynesians now; in another, no one is a Keynesian any longer. We all use the Keynesian language and apparatus; none of us any longer accepts the initial Keynesian conclusions."
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Created by calvintaneng | Aug 22, 2024
Created by calvintaneng | Aug 03, 2024
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥
Keynes' Memorandum for the Estates Committee,
Kings College Cambridge, 1938
I am clear that the idea of wholesale shifts is for various reasons
[impractical] and indeed undesirable. Most of those who attempt it sell
too late and buy too late, and do both too often, incurring heavy
expenses and developing too unsettled and speculative a state of mind
(1) a careful selection of a few investments...having regard to their
cheapness in relation to their probably actual and potential intrinsic
value over a period of years ahead and in relation to alternative
investments at the time;
(2) a steadfast holding of these in fairly large units through thick and
thin, perhaps for several years, until either they have fulfilled their
promise or it is evident that they were purchased on a mistake;
(3) a balanced investment position, i.e. a variety of risks in spite of
individual holdings being large, and if possible opposed risks (e.g. a
holding of gold shares amongst other equities, since they are likely to
move in opposite directions when there are general fluctuations).
2020-03-21 10:46
The central principal of investment is to go contrary to the general opinion, on the grounds that if everyone agreed about its merit, the investment is inevitably too dear and therefore unattractive.
CALVIN ALWAYS ACT CONTRARIAN AND BUY STOCKS WHEN THEY ARE OUT OF FAVOUR
THEREFORE VERY CHEAP
LIKE BUYING JAKS AT 40 SEN ON DECEMBER 16 2014
JAKS LATER UP 400% TO RM1.80 AND CALVIN CALLED FOR A SELL
CALVIN NEVER LIKE OR CHASED HIGH FLYING HOT STOCKS LIKE DLADY AT RM76.00 OR PADINI ABOVE RM6.00
NETX AT 1 SEN IS CHEAP FOR THESE REASONS
NETX AT 1 SEN WITH 4.1 BILLION SHARES ONLY HAS A TOTAL VALUE OF RM41 MILLIONS & ZERO DEBT
NETX HAS RM110 MILLIONS CASH OR CASH EQUIVALENT
THEN MEANS WE GET GET WITH 60% DISCOUNT AS MARGIN OF SAFETY
NETX INSIDERS BEEN BUYING AND BUYING UP NETX (YOU DON'T SEE THIS IN DLADY, PADINI, ZELAN OR BENALEC)
NETX HAS GREAT POTENTIAL AHEAD AS GOVT IMPLEMENTED 5 YEAR NFCP FIBERISATION PROGRAM
BY ALL YARDSTICKS NETX IS A TSUNAMI SHELTERED STOCK WITH SAFETY MARGIN AND POTENTIAL
2020-03-21 10:51
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥
The State of Long Term Expectations
Speculation … forecasting the psychology of the market
Enterprise … forecasting the prospective return of assets
over their whole life.
Speculators may do no harm as bubbles on a steady
stream of enterprise. But the position is serious when
enterprise becomes the bubble on a whirlpool of
speculation. When the capital development of a
country becomes a by-product of the activities of a
casino, the job is likely to be ill-done.
2020-03-21 10:54
the national output equation, making government investment appear to be the better solution. Only a big government that was spending on behalf of the people would be able to guarantee full employment and economic prosperity
YESSS JOHN KEYNES CORRECT
NFCP IS BIG SPENDING BY GOVT
2020-03-21 10:54
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥
https://www.cfasociety.org/westmichigan/Past%20Event%20Presentations/Jeff%20Pantages%20-%206.19.2013.pdf
THE INVESTMENT WISDOM OF
JOHN MAYNARD KEYNES (1883-1946)
2020-03-21 10:55
Philip ( Write To Me If You Need Help)
The early warning shots of NETX at 0.005 is here. Latest news from national newspapers as government struggles to divert resources to healthcare and social services. NFCP put on indefinite hold. Only payment for phase 1 and phase 2 OCT 2020 RFP tender canceled until due notice.
So... now what Mr Calvin Tan Eng Yee? You said got tender. Please explain further. Government expanding resources to healthcare and military instead with their 50 billion allocation.
So.. without NFCP what does NETX have in its future?
>>>>>>>>
https://oilprice.com/Energy/Energy-General/Russia-Wont-Blink-First-In-...
Oil price has dropped to USD 22 per barrel. As demand and supply world wide plummet.
Oh no.
>>>>>>>>>>>
Government has started putting major projects on hold which is unnecessary to daily public and national importance.
Malaysia is looking at a shortfall of more than 58 billion ringgit for the allocation of public works due to cancellation of GST and shortfall from O&G revenue income.
NCFP project has been put on hold at all major states except Kelantan, Terrenganu, Sabah & Sarawak. Revision of packages to drop from 30 mb/s to 15mb/s speeds in rural locations.
Read more here:
>>>>>>
2020-03-21 12:34
or 2 years PH Govt thru LGE saved and saved monies for Nfcp
Nfcp already mandated in year 2020 budget and passed in parliament
Pm Muhyiddin said he will continue with Tun Dr M Rm20 billions budget
So these are past monies already allocated and distributed to Telekom Rm10.8 billions and others
Even Mukhriz said Kedah state received a big sum of cash from pH Govt allocation
So this Philip is just telling lies
2020-03-21 13:43
Listen listen listen
Govt has designated Fiber as a utility just like water and electricity
So it is a necessity not an option
During the great depression USA built Bolder Dam or also called Hoover Dam
Calvin visited Hoover Dam when I was there as a tourist
Twice I drove on the left side of the road (in USA you drive on the right side). I also visited Lake Mead
Power and water are 2 Great Depression jobs that stimulated the US economy and provided jobs then when all private businesses failed
So Nfcp fiberisation jobs is Malaysia 's answer for economic stimulation
2020-03-21 13:44
Philip as usual telling lies after lies
NFCP where got stopped?
Telekom tender just came out in March 19th for NFCP
See
https://www.tm.com.my/DoingBusinessWithTM/Documents/Tender%20Notices/E...
FGV ALREADY GOT TENDERS ALLOTED FOR TOWERS
See
https://www.theedgemarkets.com/article/fgv-unit-bags-mcmc-job-supply-t...
ALL THESE WILL CONTINUE AS PLANNED
2020-03-21 13:48
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥
Post removed.Why?
2020-03-21 10:42