When the Great Depression hit America in the 1930’s, British economist John Maynard Keynes developed a macroeconomic theory that is still being used today. The theory is that economic stability is directly correlative to supply and demand.

Keynes believed that increased government spending and lower taxes help stimulate the demand for goods and services. Having a central bank like the Federal Reserve could theoretically prevent major financial calamities simply by pumping more currency into the money supply when consumer spending is down.

But if we look at what actually caused the Great Depression, if we are actually paying attention, this theory seems pretty duplicitous. The 1929 crash was triggered by manipulating supply and demand values in the stock market. The stock market is not really about investing, after all. It is about gambling.

Let’s go back further. London in the late 1600’s. Goldsmiths and jewelers would take gold and jewels from clients to store in their vaults for safe keeping. They issued receipts for the stored value. Receipts began to be used as a more efficient form of payment, rather than having to go back into the vault and extract the valuables.

Vault owners, later known as bank managers, realized fairly quickly that only a fraction of the clients would return to collect their physical deposits. In legally questionable fashion, the managers began issuing more receipts than they had gold in their vaults. If every client managed to return for their deposits at the same time, they’d be screwed.

Since that didn’t happen, the banks discovered they could make much more from lending against the receipts, so they started paying interest to those who deposited their wealth. This was the birth of the interest-building savings account.

Back to the stock market. Only about 10% of Americans held stock in 1929, yet a third of U.S. citizens lost their lifesavings after the crash. Most of the decade of the 1920’s were highly optimistic due to lowered interest rates and a 60% increase in the money supply. People were encouraged to take more risks as banks were offering easy credit.

In the stock market, if an investor, or group of investors, decide to “short sell” a particular stock, which is essentially betting against the stock, the price is driven low enough to devalue something that is increasing in value. This begs the question of whether supply and demand is truly an ethical concept. Short sellers push for a stock price to decline by borrowing stock and then immediately selling it. They wait for the stock price to go down to buy it back at a cheaper price.

This is how the greedy few cheat out the masses and destroy livelihoods. We saw this during the sub-prime mortgage crisis of 2008, in the crash of 1987 and in many micro recessions over the past 30 years.

A retaliatory effort against bear market short sellers was made in January of 2021. A GameStop (video game retailer) enthusiast on Reddit had found out that a hedge fund called Melvin Capital bought a large number of short trades in the company, which was struggling at around $4 a share at that time. GameStop devotees on Reddit rushed to buy as much stock as they could, causing a 600% increase in value over a period of 4 days. This cost a number of large Wall Street firms billions of dollars. Melvin Capital alone lost more than $3 billion.

Short selling has been banned again and again over the past 4 centuries – primarily in the U.K., Holland and France, with the U.S. following close behind. It always manages to resurface. The SEC (Securities and Exchange Commission) was created to regulate short selling in 1934. Nothing really changed. Even The New Deal was ruled unconstitutional by corporate interests after about 5 years of allowing the average American a fair shake. The deregulation of government power over various industries from the 1970s to the present helped to establish even more predatory practices, with minor hand slaps attempting to look like regulation of what was already wildly out of control.

Deregulation might seem anti-Keynesian without governmental control of the market, but I beg to differ. Because ethics is a topic that is addressed but never really unpacked by Keynes, “supply and demand” easily gets translated into tactical market manipulation. If Keynesian economics espouses government spending to increase jobs, pursuing the high expenditures of war and international coups has been the primary U.S. agenda since well before the 1930’s.

Economist Naomi Klein illuminates in her book The Shock Doctrine how the rise of disaster capitalism has taken the ethical ambiguity of scandals like the short sell and traded up for far more manipulative tactics: profits gained from natural and manmade disasters, energy “crises”, military torture methods and the “war on terror”.

The famous quote by Milton Friedman, deceased U. of Chicago economics professor, explains it all: “Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around…the politically impossible becomes the politically inevitable.”

The only thing that keeps our Keynesian-based economy from completely tanking is war. With the world’s reserve currency in U.S. dollars, America has managed to retain its superpower status since WWII by engaging in international occupations.

Russia didn’t need to go to war for financial reasons. That was a Western tactical move, rooted in the Keynesian belief that if inflation is less important than unemployment, severe measures must be taken to keep people in the workforce. Keynes is quoted as saying:

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens – and not one man in a million will detect the theft. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.”

Whether Keynes was actually a pacifist who believed in equality like he claimed, his economic system does not work without financial disenfranchisement. What ideas are lying around to replace this? Should we invest our tax dollars in whatever stocks Wall Street investment firms are attempting to short sell? Then the billions they’ll be forced to pay back can start a fund for Universal Healthcare.