Posted by: graemebird | December 22, 2008

GDR Analysis Continued:The Greatest Scientist Since Newton.

The war did not end the depression. Lo’. Miller. You have gotten yourself into the same double-bind as what Francesca did earlier. You see GDP is imbedded in your definition of what a recession is. So you think that the war ended the recession since it increased GDP. But GDP ought not be used for judging when a recession begins and ends. 

Obviously if you are overseas, technically a slave, and being shot at, this is not a powerfully productive situation for you to be in. And likewise the people who stayed at home were by and large impoverished. The war ended unemployment insofar as the Roosevelt administration dumped a lot of very stupid policies and adopted a bunch of other stupid policies. So in that sense the war ended unemployment. In the sense that it had an effect on policy. Only in that limited sense can we credit the war to ending unemployment. Only due to its serendipitous influence on policy. But the war did not end the depression. And insofar as the nominal gross domestic revenue was increased by the war it was through monetary inflation alone. And not through government spending. 

War is always a destroyer and not a producer of wealth. Factories getting bombed is no good for weath creation. One thing the war did do however, was it lead to the abandonment of hateful new deal policies in the United States, and communist policies in Russia. The production of war materials took off in both countries, aided by the abandonment of many prior anti-economics policies. But in the latter case of Russia, their production of finished machines of war was made possible, by the export of producer goods for free, from the Americans to the Russians. This is not fully recognized because of the Keynesian emphasis on finished goods and their one-eye-blind concept of the wider scope of production. 

I’ve already covered what happened in the case of unemployment in the United States. The end of unemployment had nothing whatever to do with government spending. I’ll repeat my explanation below:

“No thats entirely wrong. But thats how the matter was judged by completely bogus Keynesian economics. The unemployment of the depression was ended by the following:

1. The abandonment of policies which attempted to keep wages high and New Deal policies more generally.

2. The creation of a labour shortage by the expedient of shipping millions of men overseas. 

3. Wage controls to artificially keep wages low.

4. Massive monetary expansion.

So it wasn’t the fiscal policy that ended unemployment. And in fact World War II was the cause of further impoverishment despite the fact that everyone was now employed.

Fiscal policy didn’t end the depression via high spending. Rather fiscal policy ended the depression in 1946 when most of the lads came home and government spending was drastically cut.

But ludicrously by Keynesian methodology this would have registered as a fall in “national income”.”

We want to get all the spoon-bending out of modern economics and academic life more generally. Just as the Amazing Randi exposed James Heydrick, Gung Fu Master and powerful exponent of telekinesis….. we want to carry on the legacy of Randi and clean out the voodoo that has infected our sciences, and leave the voodoo side of our lives as the province of hopefully harmless churches. 

Before the Americans entered the war, from memory, their GDP was something like 100 billion. The very next year their war ouput alone was 100 billion and of course their GDP was a great deal more. How was this miracle of more than doubling GDP achieved?

Once we know that this subject is laced with Keynesian ignorance and sleight of hand, we can see what is going on, and not a miracle in sight. No voodoo to see here. While GDP more than doubled in no time at all, the fact is GDP is not a sound measure of economic activity in the first place. It is not possible to send millions of workers overseas, spend huge amounts of money on destructive rather than productive goods, and double economic activity. Its impossible. But GDP is not a measure of economic activity. And it was indeed possible to more than double GDP very quickly but thats neither here nor there. 

Were we to instead judge matters primarily by measuring Gross Domestic Revenue, the proportional increase in this more sound indication of economic output, would be far more modest. And the increase in NOMINAL Gross Domestic Revenue was due entirely to monetary inflation. 

“Which is why economics is not even a social science, but a loosely collected set of anecdotes.”

The science of political-economy, or economic-science, is INDEED a science. Its the most powerful science that there is. It can end poverty at break-neck speed. And it can put the other sciences on a firmer foundation. There is no science more powerful and useful than economic science.

Ludwig Von Mises was probably the greatest of all scientists since Newton.


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