The dumbest article ever written

eladamrine

Because that kind of spending is unsustainable. The point of fiscal and monetary policy is to move the economy to non-inflationary levels of full employment. When unemployment levels deviate from the natural levels of employment you should stimulate the economy by increasing spending and the income from the created jobs can sustain the elevated levels of spending.

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Fiscal & Monetary policies are designed and executed by government, in the attempt to exert control over the economy. They can be disinflationary, or inflationary. Disinflationary stimulus would have high interest rates [monetary] and high taxes [fiscal] Inflationary are simply the reverse, low interest rates [monetary] and low taxes [fiscal]

As previously detailed, interest rates [monetary policy] and deficit spending [fiscal policy] have no discernable influence on employment levels. In point of fact "full employment" is simply a theory, it is, and never was meant to be interpreted literally. The primary driver of long term unemployment is the "wage rate."

I must admit i am having great difficulty recalling a lot of the economics material i've read but i always thought that it was the neo/classical economists who advocated the market as capable of self regulation and the efficient market theory. I thought the Keynesians argued that the market could not regulate itself and government intervention was required to reach full employment.

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Economists such as Adam Smith, Ricardo, Bastiat and others did argue that the market was capable of self-regulation.

Efficient Market Theory was not an economic theory per se, rather it enters under "Finance Theory" and was developed from the work completed by Bachelier, developed by Markowitz, Sharpe, Treynor and others. Modigliani crossed the finance/economic divide, working in both camps.

Keynes certainly argued that government intervention was required in the "markets."

knobby22

I disagree.
Isn't it obvious that if the present situation was left to run without any government intervention that the recession will be deeper.

I see nothing wrong with the government undertaking infrastructure works that keep people employed which in turn helps to keep retailers etc. employed also.

It's fashionable to bag Keynasian ideals if done properly - and I don't mean the kind of fascist socialism that Bush has employed so far, I don't see what is wrong with smoothing the bumps in this manner.

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This current crisis was a direct consequence of government intervention, or attempts to micro-manage the economy and various markets. To solve the crisis, it would rather be in the interests of all if government left the market to adjust the malinvestments made under government suasion.

Government infrastructure development, or deficit spending results in taxes being redistributed to areas of the governments choice. Thus visually, they are seen to be doing something.

What is not seen, are the job losses as a result of higher taxes contracting discretionary spending in all other areas of the economy.

Keynesianism, is the posturing of village idiot.

jog on
duc

ducati916 said:

eladamrine


This current crisis was a direct consequence of government intervention, or attempts to micro-manage the economy and various markets. To solve the crisis, it would rather be in the interests of all if government left the market to adjust the malinvestments made under government suasion.

Government infrastructure development, or deficit spending results in taxes being redistributed to areas of the governments choice. Thus visually, they are seen to be doing something.

What is not seen, are the job losses as a result of higher taxes contracting discretionary spending in all other areas of the economy.

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I don't disagree that much of the present crisis is due to government ineptitude, but this is not caused by them acting with Keynesian principles.

The USA and GBR for example has enjoyed boom times and yet the government of both these nations were running large deficits before the present problems. This is not Keynesian behaviour. Now they are all attempting to use his name as an excuse for their present behaviour, much of which isn't in the least following the correct course. . e.g. Bush repeatedly trying to directly influence the market diectly and indirectly.

I repeat there is no reason that if governments acted responsibly and built surpluses then wisely spent these surplases during a downturn doing things to make the country more efficient through enhanced infrastructure and by looking after people that have become unemployed that this will reduce the severity of the downturn.

I do agree that governments should not be influencing the markets except in the form of regulation. The purpose of the regulation should be to provide market transparency to help free markets work more efficiently and to ensure that capitalism works for the good of all, not an ogliarchy.

Knobby22

I don't disagree that much of the present crisis is due to government ineptitude, but this is not caused by them acting with Keynesian principles.

The USA and GBR for example has enjoyed boom times and yet the government of both these nations were running large deficits before the present problems. This is not Keynesian behaviour. Now they are all attempting to use his name as an excuse for their present behaviour much of which isn't in the least following the correct course. . e.g. Bush repeatedly trying to directly influence the market diectly and indirectly

I repeat there is no reason that if governments acted responsibly and built surpluses then wisely spent these surplases during a downturn doing things to make the country more efficient through enhanced infrastructure and looking after people that have become unemployed due to the downturn, that this will reduce the severity of the downturn.
.

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We are considering two different deficits.
*Current Account Deficit
*Government [Tax] revenue deficit [Fiscal deficit]

Keynesian policy is advocated with regards to a fiscal deficit. The US was, and is in addition, running a CAD deficit.

Now, if the government is running a fiscal deficit that must by definition mean that they are overtaxing the economy, after all, it is not required to run a surplus for essential "public domain" services.

Thus, taxes should be cut. This would result in the incomes rising, with increased spending in the economy. Which brings us to an interesting point addressed by Keynes: this theory is the "Propensity to Consume." Before going into any depth on this fatally flawed theory, I'll read any thoughts you may have.

jog on
duc

Germany had embarked on a Keynesian policy: government spending became increasingly important in guiding the economy into the military channels that Hitler wanted. Franklin Roosevelt followed a parallel policy, after his programs of domestic spending failed to extricate America from the Depression.

In his preface to the German edition of The General Theory, dated September 7, 1936, Keynes indicated that the ideas of his book could more readily be carried out under an authoritarian regime:

Nevertheless the theory of output as a whole, which is what the following book purports to provide, is more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output under conditions of free competition and a large measure of laissez-faire.

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Obama, at least in the early stages of his campaign against Clinton, stressed his wanting to leave Iraq as soon as possible [practiable] This seems lately to have been diluted. Afghanistan, in fact, seemingly is looking at an expansion of military.

Roosevelt, really only managed via deficit spending to exit the Depression after the onset of WWII. As previously detailed, deficit spending & interest rate manipulation achieve nothing in relation to unemployment.

Keynes treatise, ostensibly was in regard to minimising, or eliminating unemployment.

jog on
duc