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Tom Velk

Keynes, Greece and Common Sense

Small “c” conservatives across the G7 are calling for spending cuts and other measures to reduce government debt, get the government “out of the way,” reduce graft, waste, corruption and otherwise eliminate politics from investment decisions. A key assumption for these people is that more government means less efficiency, less growth and more political payoff.Economic resources, when employed by governments, are used to keep politicians in office, reward powerful special interests, quiet the mob, buy votes, and keep bureaucrats happy. A great quantity of economic energy is used up on these political matters; not enough energy remains to provide real income growth income.“Let us put economic energy in the hands of the productive, energetic, saving, and investing private class: they have no goal other than profit and growth, they are not running for office” is the alternative strategy suggested by opponents of big government. The idea is that real growth is the only cure for economic distress. Real growth means more stuff — more real final goods and services, ranging from carrots to cars to cummerbunds — produced with the same or, best of all, with less input of land, labour, and capital.When the firms and persons who employ economic energy — who use inputs like land, labour, and capital — get more final stuff from each unit of input, there arises additional true profit for everyone who supplies the inputs. These sellers of input get paid a higher wage (for labour), better rent (for land), or improved interest (for capital) to the extent their supply of economic effort is responsible for growth in final output. Only in this way are true wages, rents, and interest restored to pre-distress levels. Only in this way can long-run expansion in total wealth occur.The prospect of such growth dividends motivates owners of economic energy to seek… Read More

The I.M.F. and the French Lady Lawyer

A composite conversational about the International Monetary Fund:Europhile: The one-time chairman of Egypt’s Bank of Alexandria (a major middle-eastern financial player), Mahmoud Abdel Salam Omar (“MASO”) was arrested in New York and given the notorious on-camera “perp walk” after being charged with messing around sexually with a maid during his stay in the super-fancy Pierre Hotel. Just shows you how important it is in the financial industry to maintain European standards of behaviour.Bystander: By that, do you mean the standards maintained by French bankers and politicians?Europhile: Exactly. And solid European judgment in control of political money is now desperately needed. Portugal, Italy, Greece, and Spain (the “PIGS”) have been spending and borrowing so much, the private sector will no longer lend money to them. The Greek mob’s antics might well take down the entire Eurozone. Luckily, we have a Socialist playboy called D.S.K.—who wants to be elected President of France—in charge of a huge, $100+ billion (U.S.) dough pot called the International Monetary Fund. We can be sure he will bail out our fellow Europeans.Bystander: No, that guy is in jail. Besides, lenders—especially the Germans—are unwilling to give more of their own money to the big-spending PIGS.Europhile: Not to worry about the jailed playboy. We have a friend of his, a lady lawyer—Christine Lagarde (C.L.) by name—who doesn’t know much about economics (though the French have put her in charge of their finances), and who believes in bailouts for spendthrifts,  now holding the top I.M.F. job. Moreover, the Germans, especially Mrs. Merkel, want a European—even a French one—to run the I.M.F., so that at least some of the money going to the PIGS will come from somebody “international,” that is, somebody who isn’t German.Bystander: Who will be willing to fund such bailouts? Won’t that French lady lawyer end up bailing out the French banks who… Read More