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trading1
Registered: Jan 2006
Posts: 273 |
10-15-12 11:46 AM
If both Austerity and the demand support view of Keynes are being mocked as inadequate for the current crisis then what is the valid alternative, is there one?
Thank you for any information
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achilles28
Registered: Apr 2005
Posts: 7534 |
10-15-12 12:11 PM
If Keynesian principles are necessary and prudent stave off a recession, why aren't they heeded to restrain booms? Remember, during periods of strong growth, Keynesians are supposed to hike interest rates and run surpluses. Whatever happened to that? Oh, right. Politicians forget the discipline part and focus on cheap money. That's the entire point: Keynesian economics works in theory, not practice. In practice, it's machinations are corrupted by Politicians and Central Bankers who abdicate the pain to keep themselves, and their friends, in a job.
The question is what to do? Let the economy heal itself. Unfortunately, much larger structural problems were concealed by decades of cheap credit. The real answers are unpalatable: institute big tariffs against third-world producers, slash income and corporate taxes, deregulate, radically shrink the size and scope of Government, balance the budget overnight, end public sector unionization, end all bailouts, let the banks fail. None of those measures will see the light of day. The "solution", bare minimum, is to withdraw currency debasement, and let the economy find it's natural equilibrium. The problem, is that this equilibrium point is more than 20% GDP less, than where we stand today. No politician wants to touch that, nor does Congress.
Bill Gross said the US Dollar will collapse if America continues down this financial path. There's a huge contingent that agree with him.
The answer to your question is simple: Let the Free Market WORK.
When it's allowed to work, huge portions of America will find itself broke, penniless, jobless, and realize it's been lied to for the past 2 decades.
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Scataphagos
Registered: Apr 2009
Posts: 9159 |
10-15-12 12:16 PM
Quote from achilles28:
If Keynesian principles are necessary and prudent stave off a recession...
Not to mention the fact that recessions are CAUSED by monetary restraint neccssary to cool the inflation caused by Fed/Gummint excesses with money...
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achilles28
Registered: Apr 2005
Posts: 7534 |
10-15-12 12:23 PM
Quote from Scataphagos:
Not to mention the fact that recessions are CAUSED by monetary restraint neccssary to cool the inflation caused by Fed/Gummint excesses with money...
True. Solving problems it creates? Worthless and destructive.
Really, the market should set interest rates. The Fed shouldn't exist. The price of money would be determined by supply and demand. As demand rises, the cost of money increases, exerting a negative feedback loop on overheating conditions. As demand falls (recession), money becomes plentiful and cheap (stimulative) etc. That assumes a fixed or quasi fixed money supply. Doesn't really work under fractional reserve banking, where one conjured loan satisfies as collateral on another banks sheet to leverage more debt against it.
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morganist
Moderator
Registered: Sep 2008
Posts: 3404 |
10-15-12 01:13 PM
Quote from achilles28:
If Keynesian principles are necessary and prudent stave off a recession, why aren't they heeded to restrain booms? Remember, during periods of strong growth, Keynesians are supposed to hike interest rates and run surpluses. Whatever happened to that? Oh, right. Politicians forget the discipline part and focus on cheap money. That's the entire point: Keynesian economics works in theory, not practice. In practice, it's machinations are corrupted by Politicians and Central Bankers who abdicate the pain to keep themselves, and their friends, in a job.
The question is what to do? Let the economy heal itself. Unfortunately, much larger structural problems were concealed by decades of cheap credit. The real answers are unpalatable: institute big tariffs against third-world producers, slash income and corporate taxes, deregulate, radically shrink the size and scope of Government, balance the budget overnight, end public sector unionization, end all bailouts, let the banks fail. None of those measures will see the light of day. The "solution", bare minimum, is to withdraw currency debasement, and let the economy find it's natural equilibrium. The problem, is that this equilibrium point is more than 20% GDP less, than where we stand today. No politician wants to touch that, nor does Congress.
Bill Gross said the US Dollar will collapse if America continues down this financial path. There's a huge contingent that agree with him.
The answer to your question is simple: Let the Free Market WORK.
When it's allowed to work, huge portions of America will find itself broke, penniless, jobless, and realize it's been lied to for the past 2 decades.
I thought keynesians were more about maximising employment.
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