OK so this is kind of wordy... Let me try to point out the guts...
no one would deny that in an economy operating at 100 percent full capacity - as in the kind of European war economy that Keynes analyzed in the 1940s - crowding out may occur. But that is a highly unusual state of affairs and is precisely not what a progressive analysis of capitalism should take for granted. There is no reason to believe that the US economy at any point in the last 20 years has operated close to that absolute limit, at which trade offs are zero sum.
Keyne's "how to pay for the war" booklet is all about how to suppress consumption through saving, rationing and such. Actual consumption needed to be suppressed, because factories needed to make tanks instead of cars. The book is not about how to print money, deal with finance markets, etc. We'd call that "fiscal policy."
Fighting WW2 genuinely pushed the UK's financial limits. The problem wasn't ability to borrow, inflation, money markets & such. The problem was the ability of its economy to support such a big military effort.
The point of this blog, I think, is that there was never a "how to pay for the war" pamphlet for afghanistan. US & NATO industries and economies were capable of supporting the war, accounted for as a deficit, without austerity like Keyne's prescribed for the UK. Hence capacity.
There's also a key difference between WW2 and the war on terror, which is fiat money created in the 70s (around Nixon's time). Right around the start of the war on drugs.
That matters less than you seem to think. Printing money doesn't magically create more stuff, nor does it change the economy's ability to create more stuff. It just changes who has the ability to buy what the real economy creates.
> Printing money doesn't magically create more stuff, nor does it change the economy's ability to create more stuff.
You're right, there's not much to this until the monetary system is based on fiat-currency, at this point there's a soft obligation (maybe? I don't understand fiat well enough) to back the created money by building things in the real economy.
But what the USA has created with the fiat-based money is war, which adds bomb-making and building reconstruction into the real economy.
The war on drugs seems to create corruption. The only real connection is the time period in which USA's congress passed laws for money laundering, war on drugs, and fiat money (a little bit before, iirc)
no one would deny that in an economy operating at 100 percent full capacity - as in the kind of European war economy that Keynes analyzed in the 1940s - crowding out may occur. But that is a highly unusual state of affairs and is precisely not what a progressive analysis of capitalism should take for granted. There is no reason to believe that the US economy at any point in the last 20 years has operated close to that absolute limit, at which trade offs are zero sum.
Keyne's "how to pay for the war" booklet is all about how to suppress consumption through saving, rationing and such. Actual consumption needed to be suppressed, because factories needed to make tanks instead of cars. The book is not about how to print money, deal with finance markets, etc. We'd call that "fiscal policy."
Fighting WW2 genuinely pushed the UK's financial limits. The problem wasn't ability to borrow, inflation, money markets & such. The problem was the ability of its economy to support such a big military effort.
The point of this blog, I think, is that there was never a "how to pay for the war" pamphlet for afghanistan. US & NATO industries and economies were capable of supporting the war, accounted for as a deficit, without austerity like Keyne's prescribed for the UK. Hence capacity.