Saturday, November 5, 2011

John Maynard Potemkin

Real Clear Markets

excerpt:
He and his followers have endorsed much more wasteful spending: digging and re-filling holes, building pyramids, and in Paul Krugman's case, everything from real terrorist attacks to a fictional alien invasion. And what is their biggest alleged example of a successful Keynesian stimulus? World War II. Wars might be justified or necessary. But from an economic standpoint they are a violent, deadly version of digging holes and filling them back in: a huge portion of the economy is diverted to the task of building things that will get blown up. Wars represent the destruction, not the creation, of wealth. [ comment: Of course.  This is a legacy of World War II- the belief that massive government spending can bring about an economic recovery.]

What has also been believed was that stock market crashes cause depressions.  It didn't happen in 1987.  It didn't happen with the dot com crash in 2000.  This should be considered a logical fallacy- correlation as cause.  For example, just because your mama broke her back when you stepped on a crack, doesn't mean that stepping on cracks broke your mother's back.  It is silly superstitious fallacious thinking.  Such thinking can be ruinous.

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