It is obvious that the theory underlying this doctrine radically misconstrues the essential facts about industrial production. The difference between the “productivity” of a worker handling the tools of a bygone state of technology and another working in a plant equipped with the most modern machines is not due to the personal qualities and the effort of the worker but to the quality of the shop’s equipment. If the worker is to get all the “increase in productivity” brought about by the investment of additional capital, nothing is left for the people whose saving created this capital and made its investment possible.

And the man touted as a silver tongued orator can’t even talk up the markets. He actually managed to talk them down. Big time.

The US economy still needs to recover from the festering malinvestments that accumulated during the previous two booms. By pushing interest rates down to zero and bailing out the very people who made such bad financial decisions in the first place, the Fed and Treasury are doing everything they can to exacerbate the problem.

For our elected officials who combine the “math error” with statements about S&P’s past errors in assessing the risk of the mortgage backed securities in the years leading up to the financial collapse, one quick reminder: S&P was never indicted for being too pessimistic—quite the opposite. If anything, it seemed to understate the magnitude of the risks.

So long as banks and the Fed continue expanding credit, the distortions grow more and more pronounced. But as the distortions grow, it becomes more and more clear, to more and more individuals, that the capital structure is seriously out of sync with the actual structure of demand. As that understanding spreads, investors change their behavior. When major bubbles of complacency and misunderstanding are punctured suddenly, as we’ve seen recently, financial panic ensues and systemic unemployment results – as the realization spreads that far too many workers are employed in the production of higher-order capital goods like Southern Nevada real estate development or heavy machinery in Michigan. Restoring genuine full employment will require that society’s capital structure reflect genuine market demand. But that will require ending the artificial and ultimately destructive credit machinations of the Federal Reserve and the banking industry.