You hear it on the BBC, when James Naughtie talks about the ‘Pump Prime’; it is what lies behind every recent speech by Obama, though he no longer dares utter the word stimulus; and it forms the core of the thinking, if we can call it that, of Paul Krugman, the Prince of New York.
Yes, it’s the Keynesian Multiplier, that fabled beast of yore which proclaims that for every £100 pounds borrowed and spent by government, £150 pounds of value will be added to the wealth of the country, because government central planners are always wiser and much more intelligent than those pesky entrepreneurs in the free market.
This marvellous magical wizardry pops out from the mathematics of Keynes (or more precisely, the mathematics of Richard Kahn), in a strange process reminding one of fractional reserve banking.
Generally accepted by most government officials and most economists, the Keynesian Multiplier only possesses one problem: it is complete bunkum.
If it was true, then the Soviet Union would have been the most gloriously wealthy paradise on Earth, with billions flocking to live there to eat self-roasting chickens flying into their mouths; if it was true, the millions of useless government bureaucrats in this country who loaf behind expensive desks all day grazing on bacon sandwiches, surfing the Internet, and pretending to “work”, all paid for with borrowed government money, would actually be doing something useful; and if it was true, we would all now be in a magnificent V-shaped recovery with the people’s laurel-wreathed hero Gordon Brown bathing each night in a golden vat of love, stroking his Nero-esque harp and surrounded by a grateful populace of mere ordinary people worshipping his gilded economic magnificence.
The Keynesian Multiplier is really a Divisor and should be renamed something like the Keynesian Fractionator. For every £100 pounds of money borrowed by the government, we actually get something more like £65 pounds of value, with the other £35 pounds being wasted by box-ticking bureaucrats. Wealth is thus destroyed.
So every time the government borrows £200 billion pounds, what they are really doing is wasting £70 billion pounds, right there, by digging up holes and then filling them up again. They are borrowing this money in your name to lead you towards a future of poverty.
Or so claims Jim Rickards, of Omnis, in this recent King World News interview [which followed another interview earlier this month]:
In the same interview, Mr Rickards also moves on to talk about how US Treasury Bills are the new opium for the American Empire, in the same way that the British Empire pushed opium into China to avoid paying for Chinese export goods with silver bullion.
For those interested in that topic, Mr Rickards has also written the article, below, for more extensive coverage of this idea:
Actually the US military takes up a tiny fraction of the debt load. Believe it or not America only spends 3% of the budget on the military.
The treasury notes are for the vast American welfare state that liberals are supposed to pretend does not exist. They were so busy pretending America did not have welfare that they ended up ruining the country.
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