OK - Keynes isnt quite a moron - just short sighted.

So I was a little harsh when I said Keynes was a moron.

To be fair, Keynes saw a problem and came up with an immediate solution. Unfortunately, it was only that – immediate.

Keynesian theory, which is basically to redistribute wealth thru government taxing and spending, has never once worked in the long run.

Ever.

Five years, maybe ten, things get alittle better. Sometimes, it is fairly good for 100 years or so. Then either communism takes hold or the whole house of cards falls. Either way, everyone is miserable.

What typically happens, is the government continues to tax more, to fund more social programs, and soon, individual income is non-existent. At this point the economy collapses, and the believers in Keynes say THEY must have strayed from the plan. Maybe (they think) they didn’t spend enough, or tax enough. Perhaps the programs they choose were wrong, or somehow became abused. Maybe there was someone committing fraud.

That is what Congress has been doing the last 70 years or so, and is still doing today, in 2009. Today, we are on the full path of destruction – create money that doesn’t exist and spend it.

It will help things, maybe, for a few years, if we don’t fall apart completely in the meantime.

The worst part is, once this path is chosen (which we have), to correct it we must return to Smiths free market. The pain is deep for 5 to 20 years. After that it gets better, and stays better. As long as no one messes with it.


More on Smith next.