Feed: Why Democracies Will Always Go Bankrupt - AggScore: 12.7

Why Democracies Will Always Go Bankrupt

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When I was growing up, finance was mothers milk to me, especially as I was a bit of a math geek. But for my formal education, I was trainedrather rigorously, and in spite of my lazinessas a philosopher and a historian. This odd combination is why I have such a jaundiced view of economics I dont find economics particularly intimidating, or even particularly challengingits just finances snooty but poor and slightly daft older cousin. Historys surprisingly ignorant and blinkered accountant. Philosophy and Maths lightly retarded, Puritanically rigid, and altogether rather embarrassing spawn.divimg srchttp1.bp.blogspot.comSSUbVSGKVYTSyAbvy9UwIAAAAAAAAAhw3SpCuDZnmss320rodinthinkerphilosophy.jpg border0 alt width248 height320 divNow, its all good and fine for me to rant about how useless economics isbut these arent empty complaints on my part I can point to a single, specific, monumental failing of economicsa failure in the discipline which pretty much proves my pointThe United States is going bankruptand economics cannot explain why.divIn fact, a surprisingly large number of economists choose to emignoreem the problem of Americas looming bankruptcy altogether or claim there is something called a structural deficit a highfalutin way of pretending that it cannot be fixed, and therefore doesnt need fixing or elseas is the case of the fools backing Modern Monetary Theorythey make the claim that all deficits are just debts the government owes itself, so therefore the American government cannot go broke, so thereforeand lets ring out the QEDthe fiscal overindebtedness is actually emnotem a problem because it doesnt even actually emexist!emdivdivThey really do claim that. And no, they are not high.Of course, sovereign overindebtedness emdoesem exist, and it emisem a problema terrible, lifeordeath problem As a lot of historians have pointed out, sovereign bankruptcy presages and ushers the collapse of great nationsoften emviolentem collapse. And this is something we want to avoid, nodiva namemoreaSome schools of economic thought recognize that deficits are bad because they lead to bankruptcy, and that therefore fiscal budgets should be balanced so as to avoid them. But they do not explain emwhyem this is the casethey have no argument to explain why deficits happen in the first place. That these clever Austrians point to something that has happened before, and therefore infer that it will happen again if similar conditions are met is not an argumentit is an observation, like saying that the sun has risen countless times in the east, so it will likely rise again in the east tomorrow morning.This is a true observationbut it doesnt explain emwhyem the sun will rise tomorrow in the east. Since the Austrians cannot explain emwhyem deficits happen and eventually lead to national bankruptcy, they are simply empositingem them, much like tenets of a religion. These arguments might appeal more to our experiences in the real worldespecially when compared to the ema prioriem drivel of NeoKeynesians, Monetarists, MMT weenies, and their ilk Peddlers of arguments as unsound as atonal clamor. But ema posterioriem arguments based on intuition and common sensegussied up in German though they may be, and attractive though we may find themare of no help, because they are based on faith, not reason.