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Thread: Why Keynesian Stimulus Fails

  1. #111
    Veteran Member GordonGecko's Avatar
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    Quote Originally Posted by TNVolunteer73 View Post
    The resan Keynesian economics fail is debt.. sooner or later the Bill comes due.
    Saving your post....for when Trump's deficits start to climb after his spending and tax cuts kick in.
    Thanks from Blueneck

  2. #112
    The Covfefe are Coming! BitterPill's Avatar
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    Quote Originally Posted by Daktoria View Post
    Keynesian economics depends on aggregate demand, but the very problem of economic stagnation is referring to aggregates in the first place. By focusing on aggregates, society gets caught up in a bystander problem. Individuals hold back, banking on someone else in society (from the mere mass of society) coming up with a good idea.

    The problem is when this goes on too long, the very notion of coming up with good ideas gets deterred. People get accustomed to getting ahead in life by being yes-men suck-ups, so they don't know how to come up with good ideas. Eventually, this gets so bad that it doesn't matter how much money you throw at the problem. It will never get solved. Instead, people will have geared their minds towards a vicious cycle of absorbing resources, and failing on purpose to make an excuse to absorb more resources. That is people learn from experience instead of thinking before they act, so they will deliberately do everything wrong on purpose before doing what's right just so they can keep on experiencing.

    Heck, it can get so bad that when people are confronted with doing what's right, they'll just stop doing altogether because they know it's the end of the road, but they don't want the free ride to end. Instead, they'll expect desperate people in desperate straits to do or die, remembering that dead men tell no tales, so negligence won't be reported and can just be swept under the rug.

    The bottomline is Keynesian Stimulus fails because it's psychologically unsound. Over the short run, yes, you would expect stimulus spending to make resources available so people can take advantage of them, but over the long run, people just won't have good ideas to take advantage of resources with.
    The reason Keynesian policies supposedly fail is because Keynesian policies aren't being followed.

  3. #113
    The Covfefe are Coming! BitterPill's Avatar
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    Quote Originally Posted by TNVolunteer73 View Post
    The resan Keynesian economics fail is debt.. sooner or later the Bill comes due.
    See, that's the problem.

    If you knew anything about Keynesian economics, you'd know it proscribes austerity when the economy is doing well, and increased government spending when the economy isn't doing well.

    We certainly have the increased government spending (via borrowing) when the economy isn't doing well part down; where we fail is paying off that accrued debt during the good times.

    Keynes would not approve.

  4. #114
    The Covfefe are Coming! BitterPill's Avatar
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    Quote Originally Posted by Libertine View Post
    Considering that during the Obama years we saw over $9 trillion in fiscal stimulus, and over $5 trillion in monetary stimulus, that would have wiped out every households consumer debt in the US today.

    The same spending would have made every US household consumer debt free, what would that have done for our consumer driven economy? Instead we only received an increase of $4 trillion in economic activity in exchange for the $14 trillion in stimulus.
    Do you have any links to post?

  5. #115
    Veteran Member bmanmcfly's Avatar
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    Quote Originally Posted by publius3 View Post
    Well....

    You mean that DOESN'T work?? Shit, here I thought I figured out perpetual energy.

  6. #116
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    Keynesian theory will work for the purpose it was intended, not for what it is being requested to do. It was understood that there will be typical economic cycles. It is responding to typical cycles that it was designed, not to address depressions or deep recessions. During the low cycles, Keynesian theory suggests that it is appropriate the government to assume debt to finance projects, such as infrastructure, to kick start the private sector. The important factor that seems to be ignored, is that with the return of the high cycle the debt occurred would be immediately serviced. It was understood that a continuing ever increasing debt would be harmful and prevent adequate recovery. One, the continued financing of debt reduces the government funds available for other purposes and that it puts the government in the position as competing with the private sector for financing.

    We continued to be in the grasp of the Great Depression from 1929 to 1939. In a manner of speaking, government spending did get us out of the Great Depression, only it was European government spending for military products which meant that the US government did not need to finance it. As all know, we entered the conflict in 1941 which finally ended the Great Depression. Employment is easy to address when most able bodied men were going into the military. After the end of the war, US manufacturing fundamentally was the only game in town, so to speak. The manufacturing capacities of Europe and Asia were destroyed during the war. This allowed our economy to continue its growth and adequately address the war debt. Keynesian theory never perceived of or was designed to address a 20 trillion dollar debt. The Mr. Obama's stimulus in the initial days of his administration might have done better if it had been dedicated to infrastructure projects, in the short term maybe not, but in the long term I don't think we would have this level of national debt.
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