George Soros has said that Europe will go into recession this year if governments adopt austerity, i.e., do not run huge deficits. Our new Secretary of the Treasury has demanded the same thing.
Keynesians love two things: national government deficits and central bank counterfeiting to fund these deficits. Their mantra is this: “Deficits and digits.”
Why would a deficit in your budget be wise in a recession? When you have trouble paying your bills, why should you borrow more money? When you are in a hole, why should you dig deeper? You shouldn’t.
Keynesians say that none of this applies to a national government. Why not? They say that we all cannot save money at the same time. When they say “we,” they mean taxpayers.
But if everyone cuts back on present spending for consumer goods, the money that we save has to go somewhere: in a bank, or in an investment. Everyone therefore invests more in producer goods. The money that we don’t spend on consumer goods is transferred to businesses, which then hire workers.
Exception: if banks fail to lend out the money, and instead keep it at the Federal Reserve, then consumer prices fall. That lets us live on less money. Then we will start buying again. That’s how recessions are overcome by the free market: price adjustments.
Keynesians literally cannot follow this logic. They fill pages with equations and jargon to avoid facing the obvious implications of this logic. The modern economy is run by economic idiots who cannot understand this logic.
They are going to bankrupt the welfare state with their logic. They will cause the Great default. That’s the good news. And when they do, we Austrian School economists will blame them.
They will say, “We needed more deficits. We needed more government sending. We needed more debt.” The world will finally see that these are the tailors of invisible clothes. But, unlike the emperor in Hans Christian Andersen’s tale, they will string up the tailors (figuratively speaking).