The monetary play is more or less played out at these level of interest rates, so the only arrow the politicians have left in their quiver is the fiscal side. There is zero chance they won't use that arrow, seeing as how they feel they must be seen as doing something. None of em want to be known as a do nothing congress or administration, so they'll do something wrong rather than nothing. If what they do is wrong, then they play the blame game and say it was the other guy's fault. If they're going to run up the deficit, I'd rather they cut taxes instead of up the spending, because then the market will determine where the capital goes, not the politicians. That ought to get the money going to productive assets, rather than the boondogles which most assuradely will come to pass when the Obama administration starts their recovery program.
I think it is fair that those who say Keynesian economics is dead or stupid to state their suggestion for an alternative at this point as related to this crisis.
This is more of a philosophical school that examines the causes of events and has never AFAIK presented any quantitative way of dealing with issues and that is why it has no valauble publications to offer in journals.
THAT is a question I'd love to hear them answer... Sadly the answer is "banks lending and people borrowing"... It's amazing... The patient is near dead from the drugs and recovery to them is him showing a desire for more drugs..
Good post Thunderdog. What's more, Keynes had a lot to say and even the full application of "his" theory isn't a full application of what he had to say. Totally agree with the "use debt to cure debt is nuts" school of thought. Part of the problem is that they're applying theories that might work if the problem was about one country. But its not. In 29 the us had overcapacity ... now China has. Countries like Australia are congratulating themselves on being "safe" from worldwide depression ... but have been borrowing money from the rest of the world for 7 years (every quarter, every!). An interesting time is coming our way.
i think that's correct - keynsian can be implemented if a nation has the self dicipline to pay it back in the better times but instead, it just became a crack habit
I disagree. In 'normal circumstances' his theories cause more steady, solid growth: it 'fades' the up and down spikes. However, his theory was never meant to be applied to an 'un natural' boosted, sick economy.
Keynsian economics managed to turn a regular depression into the Great Depression. It helped nobody do anything useful. Think about it. The Great Depression - the one in which Keynsian economics was implemented - lasted many many years longer than any other depression before it. It wasn't until Keynsianism was abandoned that the economy really grew again.