Registered: Apr 2005
10-16-12 12:10 AM
Quote from morganist:
I thought keynesians were more about maximising employment.
No, the chief objective of Keynesian economics is to smooth out the business cycle. Which indirectly, is supposed to maximize employment. As Scat mentioned, instead, they exacerbate the business cycle.
In practice, the FED has a dual mandate which is contrary to the Keynesian principles they invoke when it's convenient for them to do so: 1) strong dollar and 2) strong employment. Congress and the Executive hold the other side that equation (in theory), and are supposed to run deficits during bad times (check), but surpluses during good (nope). The Fed is supposed to lower rates during bad times (check), and hike them during good (nope). This is the schizoid "policy" our leaders subscribe too. In reality, they're only Keynesians when it's convenient for them to be Keynesian. When the hard part comes, neither the Congress or FED hold up their end of the bargain so we get these repetitive asset bubbles/busts that are extremely destructive to the economy, and ironically, the "dual mandate" the FED is chartered to uphold (strong employment). What's going on here is Congress and the FED operate off a very short time horizon (2 or 4 year Congressional or Presidential cycle), and vote for monetary policy that benefits their reelection chances, not in the best interest of the nation or the economy!! This is no different than the quarterly or semi-annual time horizons adopted by Wallstreet Executives, that in retrospect, encouraged reckless risk taking. Sound familiar? The same mentality that's infected Wallstreet has infected Congress and FED. This is why Keynesian economics does not work. The "hard part" is never implemented because bureaucrats always vote to keep themselves in a job, rather than do what's best for the Country! So now, we're run by cowards who've exchanged short-term gain for long-term pain. Sound familiar? Offshoring? Social Security? Medicare? This is the entire political mantra of the last 50 years.