Sorry for coming so late to the party, just found this website a few weeks ago.
I've debated liberals a few times on the intellectual bankruptcy of Keynes and wish I'd read this thread first. Not that I would have convinced them but perhaps some of the bystanders would have been more likely to think twice.
A few disagreements/ requests for clarity:
Originally Posted by Alex Linder
[reposting Gary North]
In a time of breakdown, Austrians will explain why it happened, and pin the blame on Keynesians: "Their system failed. They had control ever since 1940." Keynesians will pin the blame on Keynesians who did not go far enough: "more of the same." We see this already Krugman vs. Bernanke. Which version will the public be ready to believe in a crisis? In the late 1930s, we found it: the Keynesians, who blamed the free market, not the neoclassical economists. "The present system basically OK. We just need more time." Keynesians will say this: "The present system is basically OK. We just need more time."
I offer this optimistic assessment: the bad guys are going to lose. Their statist policies will bring destruction that they will not be able to explain away. Their plea will be rejected. "Give us more time. We just need a little more time. We can fix this if you let us get deeper into your wallets."
In the very long run, the good guys are going to win, but in the interim, there is going to be a lot of competition to see which group gets to dance on the grave of the Keynesian system.
People are going to want to believe in Keynesianism, as are the politicians. Just look at Greece. Country falling down around their ears, Germany threatening to send repo men to the Parthenon, and they vote in politicians saying the same shit.
The only alternative the majority will go for is something else that is simplistic and promises something for nothing.
See below for response to "good guys will win."
Originally Posted by Alex Linder
Keynesianism is in a death spiral. So is populist socialism. So is fiat money fascism. They are all in death spirals because they all reject this premise: "Lower taxes increase liberty."
Liberty will prevail. This is an eschatological affirmation.
I agree that our current system is in a death spiral; I even said that to those I was debating which they thought was hilarious doom n' gloom nonsense. Even when I showed them a report by the CBO basically saying unless the economy grows at record levels for several decades straight we are basically fucked. And that assumes that the gov would use the windfall to pay down the debt rather than increase spending.
Unfortunately, I cannot think of any time in history when chaos and collapse was followed up by an increase in freedom. Historically, jews have intentionally collapsed nations in order to make out like bandits at the fire sale afterwards. Some would argue that Hitler's ascendance was an increase in liberty, even though it went from a republic to a dictatorship. Arguing against this would end up being like arguing against keynes with liberals, so I'll just say that the big problem with dictatorships isn't during the initial reign (Hitler, Augustus, etc.), but during the succession crises between each dictator. The following dictators often have to make deals with minorities (Praetorian guards, the super rich to pay the Praetorians, etc.) in order to stay in charge and that necessitates screwing over the powerless majority.
One thing I noticed was that Keynes himself didn't seem to advocate constant deficit spending and a constantly growing debt. From my simplistic understanding of what he said, his theory isn't really a theory but rather a suggested policy of counter-cyclical spending. When the economy is bad a nation should decrease taxes, borrow money, and increase spending. When the economy is good a nation should increase taxes, decrease spending, and pay down debt. Unfortunately politicians seem to have forgotten about the part they don't want to remember.