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Economy
The Keynesian Dead End
2010-06-27
Spending our way to prosperity is going out of style.

Today's G-20 meeting has been advertised as a showdown between the U.S. and Europe over more spending "stimulus," and so it is. But the larger story is the end of the neo-Keynesian economic moment, and perhaps the start of a healthier policy turn.

For going on three years, the developed world's economic policy has been dominated by the revival of the old idea that vast amounts of public spending could prevent deflation, cure a recession, and ignite a new era of government-led prosperity. It hasn't turned out that way.
Posted by:Goodluck

#8  Leave California.

Given that the Federal Register runs in excess of 75,000 pages/year that's a *VERY* temporary solution.
Posted by: AzCat   2010-06-27 20:46  

#7  The financial reality is I cannot expand my business and hire more workers because of the government.

Leave California.
Posted by: Secret Asian Man   2010-06-27 18:09  

#6  The reason there is no growth in the economy is very simple. Regardless of how much money is thrown at the problem and even if the money was given directly to small businesses the overlaping tiers of regulation are so time consuming and expensive businesses cannot expand. I manage a small business in California. I bought a pre engineered pallet rack that exceeded all required specifications (load, seismic and sprinlers, etc.) in the US. It took almost a year to get a building permit to install the rack system. If I were to buy a larger building I would need to install another pallet rack system. I can not afford to buy a building and have it sit for a year while I deal with endless regulations that were already satisfied by the manufacturer. If you count escrow and other delays the cost of the building with improvements will sit for 15 months before I get any use from it. The financial reality is I cannot expand my business and hire more workers because of the government.
Posted by: Dave   2010-06-27 16:50  

#5  Keynes wrote in the Forward to the German Edition of his General Theory
"The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory."
No more need be said about Keynesianism and why collectivists love it.
Posted by: tipper   2010-06-27 14:30  

#4  I believe it was Joseph who advised Pharoah to save up during the seven fat years for the coming seven lean years.
Posted by: Fred   2010-06-27 11:47  

#3  Maybe Keynes was right - but as you point out, governments generally only apply half of Keynes.
Posted by: Glenmore   2010-06-27 11:24  

#2  Keynes maintained that governments could mitigate the effects of recessions by counter-cyclical policies. Ie, running surpluses during expansion periods and then spending the surpluses during recessions.

The only Western government in recent times to have done this is John Howards govermment in Australia which paid off about 100 billion in debt in the 10 years prior to the GFC. The (Labor) government could then spend during the post GFC period without racking up big government debts and Australias recession was mild. So maybe Keynes was right.
Posted by: phil_b   2010-06-27 11:05  

#1  Keynes may be wrong about government spending as a direct economic stimulus. As an indirect stimulus, it may yet work (for a little while) - if fear of inflation motivates people with savings to spend. The key is that spending must be backed by assets or earning capacity to have a net stimulative effect. So far the fear of deflation is still enough to offset the fear of inflation.
Posted by: Glenmore   2010-06-27 10:15  

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