Keynesian economics boils down to: when you find yourself in a depression, if you can only get people to spend more money, that will get you out of the depression. To which the common man will say: DUH! If these people were on a sinking ship, they might as well declare "The problem here is the boat's internal air to water ratio is too low. If we can figure out a way to restore the previous ratio, the sinking should stop." They then advise the captain to deploy air compressors which blow air into the ship. Keynesian economics never asks the question "what is the root cause of this depression?". It is almost as if to them the root cause IS "people aren't spending money", which any intelligent bystander would rightly identify as a symptom, not the root cause. The problem: how does a government get people to spend money? They can create money. They can make it less expensive to borrow money. They can even mail people checks. But when people are uncertain about the future, or are in debt up to their eyeballs, that money just ends up in the mattress or is used to pay down debt which means no additional consumer spending. In response, the Keynesian proclaims their theory is sound, but we just aren't doing cash injections to a large enough degree. Inject MORE money. It's still not working. So now what's the latest development? Lo and behold, we are now in a situation where millions of Americans are going to have to spend more money, by law, on healthcare. In the past, the problem has been the government creates billions of dollars, which just went to Federal Reserve banks and sat there because nobody wanted it. Now they've figured out a way to create money and mail it to people in the form of tax rebates used to offset a more costly health insurance plan that they have been forced to buy. End result: the government has figured out a way to FORCE the spending of additional dollars in the economy. What a relief. The boat's surely going to stop sinking now, right?
I like the analogy Lionel. Many people are unaware of the history of the great depression. The massive government spending got the economy going which caused a bubble. In 1936 FDR was re elected by a wide margin. The bubble burst in 1937 and at the time created what was known as the Roosevelt depression. We are now taught that he ended the depression. Once again the left having control of the education system ends up changing history.
How many times do Keynesian policies have to fail? Are we too far gone? I was wondering the other day---"Where is James Madison"? Do we have anyone to equal the intellect of a James Madison, Thomas Jefferson or Ben Franklin?
I think we do have some statesmen, but they are still too few. The corruption has entrenched itself in a government so large that the opportunities for graft are like holes in a fish net. Is it too late? One cannot predict. However, if we stay silent and do nothing the end is certain.
this is a good article, thank you. a friend got a PhD in economics a few years ago. I asked if she followed the Austrian school of thought and she said, "of course not!" I couldn't understand it. they're graduating little Keynesians, but why? when I studied economics, part of the syllabus included economic history. I was sure anyone who had repeatedly seen the failures of the keynesian thought would say it's invalid, but alas... how do you change this?
I don't know Minnie. If you simply look at the facts it is clear that the Austrian school of economics is more effective. Keynesians are all about control which sounds like socialism...
I guess the rhetoric from the left is easier to sell. when things look gloomy, the left says, "WE will figure it out and make it better! give us more control and we'll fix your problems," vs the alternative which says, "the problem is our excessive involvement; we will now step out of the way and let YOU figure it out." on one hand, you're free from the government. on the other, you're free of having to even think about how to sustain yourself. which type of freedom do people prefer? it's a sales pitch and the right has done such a poor job of selling their candidates lately.
this is simplistic, of course, I'm just trying to explain myself without writing an essay about this.
Getting the masses to understand or get on board with the idea that it's best to fend for yourself (freedom) than it is to have the gov holding your hand and calling the shot in your life (socialism) will be a difficult task. They won't watch pertinent movies or read history books (they aren't entertainment), so what options does that leave us with? Rap songs?
I had someone working for us once who told me she hated having to be an adult. She voted for Obama twice. Some people just want others to make their decisions for them.
If these people were on a sinking ship, they might as well declare "The problem here is the boat's internal air to water ratio is too low. If we can figure out a way to restore the previous ratio, the sinking should stop." They then advise the captain to deploy air compressors which blow air into the ship.
Keynesian economics never asks the question "what is the root cause of this depression?". It is almost as if to them the root cause IS "people aren't spending money", which any intelligent bystander would rightly identify as a symptom, not the root cause.
The problem: how does a government get people to spend money? They can create money. They can make it less expensive to borrow money. They can even mail people checks. But when people are uncertain about the future, or are in debt up to their eyeballs, that money just ends up in the mattress or is used to pay down debt which means no additional consumer spending. In response, the Keynesian proclaims their theory is sound, but we just aren't doing cash injections to a large enough degree. Inject MORE money. It's still not working. So now what's the latest development? Lo and behold, we are now in a situation where millions of Americans are going to have to spend more money, by law, on healthcare. In the past, the problem has been the government creates billions of dollars, which just went to Federal Reserve banks and sat there because nobody wanted it. Now they've figured out a way to create money and mail it to people in the form of tax rebates used to offset a more costly health insurance plan that they have been forced to buy. End result: the government has figured out a way to FORCE the spending of additional dollars in the economy. What a relief. The boat's surely going to stop sinking now, right?
http://en.wikipedia.org/wiki/Roosevelt_R...
http://en.wikipedia.org/wiki/Undistribut...
The Broken Window Theory.... Should be, The Broken Theory Theory...
http://cafehayek.com/2011/08/the-microec...
this is simplistic, of course, I'm just trying to explain myself without writing an essay about this.