The monetarist school of thought has evolved within this last century and a half from holding “right-wing” Jacobin-styled (neocon/Knightian) egalitarian goals, to then pursing libertarian means, and has since been perverted back to simpleton “conservatism;” inasmuch as “conservatism” means (to your average person) holding the beliefs of mild center-leftism plus hardcore corporatism, which basically just amounts to socialists trying to rig up a capitalist system (Keynes, anyone?). Crony “capitalists” are not conservatives, and moreso not actual capitalists, considering that the vein of actual conservatism is equivalent with capitalism (even if some true conservatives might support certain little forms of state intervention). The closest thing we have in the mainstream to conservatism is some guy quibbling about how much money should be stolen from productive people and placed in the hands of the state, which is of course an incredibly crucial 5% less than those damned evil Democrats want. Just poison your ears via that brainless blithering idiot Neil Cavuto and you will promptly get what I mean.
Even within this last half-century, we (“we”) have found ourselves convinced by economists and financial analysts alike that central banking should be used as a tool to smooth out market fluctuations while also preventing economic collapse. Central planners have successfully combined the Keynesian mindset that market fluctuations can be intertemporally smoothed out using fiscal policy with the modern monetarist mindset that markets can be guided away from clogs and burrs in the monetary system by manipulating the yield curve and relieving or increasing the burden of credit upon the system, reducing the pressures of credit gridlock while reducing the risks associated with runaway inflation. Indeed, one can scarcely tell Keynesians and monetarists apart nowadays: spending and printing are simply two levers to be used to speed up and slow down the economy by manipulating the price level and the velocity of money. It has been argued that “New Keynesians” should be called “New Monetarists” because they synthesize Keynes, Knight, Fisher, and the economic body of thought surrounding their writings.
This polemic will not even pretend to deny that it is a polemic (unlike most). Indeed, many revered economic texts have found themselves rightfully characterized as such; Keynes’ infamous Chapter 24 of the General Theory can hardly be called much else than political posturing for a “Keynesianized” economy (or at least what he imagined); the “euthanasia of the rentier” conducted through the intentionally and endlessly sustained annihilation of the marginal efficiency of capital. Such promotions cannot be viewed as anything other than a radical political proposition intended to alter the fabric of society itself. In this paper, it will (hopefully) be argued that modern economic thought has taken both the worst of Keynes and the worst of the monetarists, and synthesized them into a radical totalitarian-centrist plan, intended to build corporatism for the “power elite,” (wall street hacks) and socialism for the rest.
look what i did – jekyll island fiat scratch
Monetarists and Austrians, at one point, joined forces in attacking the Keynesian style of monetary policy. The 1970’s showed that the old Keynes was not good enough, and perhaps even dangerous. Friedman, undoubtedly an ally in many ways to Austrians, stabbed at the heart of Keynesianism and the Phillips Curve, injecting a radical and sobering moment into economic thought. At the same time, Austrianism found its resurgence in the mid-1970’s and beat Keynesianism over the head with the simple, and again sobering, importance of Wicksellian thought: printing money exogenously cannot suffice to serve the desires of individuals.
Indeed, monetarists themselves in such times could see their connection to Wicksell, and found no problem with it. The early 1980’s saw a radical shift in monetary policy when Volcker let the market find (“find”) its actual interest rate (really, resulting interest rate) compared to the Keynesian liquidity trap that the 1970’s found idiotic central planners consumed by. However, by the latter elements of that same decade, the same party that put Volcker in position to pull the plug on the printing press was now running massive financial deficits: Keynes found his way into the Republican Party and the last vestiges of true conservatism and all libertarianism were banished from politics. Political parties are not suited for intellectual integrity, as anyone but a blind leftist can readily submit.
Next came what can rightfully be titled the perversion of monetarism: Monetary policy, under Greenspan, again became a tool for market stabilization during the “Great Moderation.” Manipulating the yield curve by pressing down on, or increasing, the bond-printng involved in controlling interest rates, because the new goal of monetary policy, and unadmitted-yet-unabashed GDP targeting, became the new task for politicians through the use of fiscal policy and market manipulation. Indeed, “market monetarists,” neither of which they stay true to, argue for NGDP targeting in modern times as both a solution to monetarist deflationary collapse and Keynes’ simultaneous falling of consumption and investment spending owing to a collapse in aggregate demand. New Keynesians have been arguing for years that discretionary policy could solve these issues easily, but for pointless political deadlock and the penultimate issue of opposition to politics as a whole (better known as libertarianism). It is no wonder that brainwashed brainwashers such as Paul Krugman chortle at the principles held by anti-government conservatives; neocons are no problem for him, as Reagan proved to us that pro-government conservatives can get along quite well with financial lever-pullers and economic fine-tuners.
Never in our history has a more dangerous combination of ideas found its way into the mainstream: Keynesianism and monetarism. Sadly, and I mean very sadly, monetarists had the chance to take the next step in Chicagoanism by aiding the Austrians in their goal of destroying the institution of central banking entirely. Indeed, Friedman himself, as I have mentioned, argued for abolishing the janky institution called the “Federal Reserve,” while arguing that depressions before the total centralization of money-printing were sparse and mild, especially compared to the radically volatile business cycle we now again find ourselves concerned about, in 2015 wherein Keynesians and monetarists both fear deflation as the “Great Satan” of our time. A far cry from the monetarists of yesteryear that feared credit gridlock from both dramatic increases and decreases in the money supply.
Instead, monetarists half-assedly popped on a crap-quality broken condom and jumped in bed with Wall Street corporatist hucksters, empty-skulled socialist mentally retarded folks, and Keynesian central-planning control freaks. The resulting love child was Ben Bernanke, the guy who was supposed to follow in the tradition of Milton Friedman, but instead took only the father Friedman’s worst qualities while wringing out any last drop of sanity from mainstream monetarism.
Now monetarists of the newest variety (New Keynesians, New Classicists, market monetarists, et cetera) have gone off the deep end. Aggregate demand is the name of the game, and collapse prevention has merged with market stabilization to become the dangerous-in-theory and evil-in-practice policy of printing money to levitate stock and asset prices while letting the government finance its debt with more debt. Even Keynes thought that the debts should be paid off on the upswing of the business cycle. Now we have nihilist-in-a-bad-way financial alchemists pumping up a financial sector that is increasingly bloated with corporate debt and a government that is increasingly totalitarian.
I mentioned the validity of the New Classical idea of exogenous shocks causing issues for an economy. However, anyone with an ounce of sense can tell you that there is more than one way an economy can fall into depression. Despite this, there is a whole chorus (or cacophony) of new-school monetarists (such as Eugene Fama and his ilk) that would have you believe that money is somehow endogenous to the market system, even when produced and controlled by unelected government stooges and their crony capitalist friends. Morons like Fama literally believe that there is no such thing as a bubble. Meanwhile, Friedman could have told you forty years ago that too much inflation can cause credit crises and deflationary depression.
Unfortunately, it seems that the monetarists we are stuck with today genuinely believe, like Keynes, that excessive price inflation via monetary inflation merely drives up prices, while price deflation and monetary deflation (or “disinflation”) are a mortal threat that we must combat with increasingly absurd and unconventional tactics. I want the old monetarists back.