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Thread: Why Keynesian Stimulus Fails

  1. #11
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    Keynesian Stimulus I believe calls for the government to stockpile money and then if there is an economic downturn that money is released to stimulate the economy. That is not what Obama did. Obama spent money in large quantities that the government did not have. Any small stimulating effect is countered with a devalue of the dollar and a burdening of the government by using borrowed money. It is foolishness of the highest order.

  2. #12
    Junior Member Claudius the God's Avatar
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    That is not what Keynes advocated. You seem to have a misunderstanding of the nature of money. Governments do not need to stockpile their own money.

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    Quote Originally Posted by Daktoria View Post
    When has Keynesian stimulus worked?
    Every time. You simply cannot spend money into the economy without it having an effect on the demand that drives hiring and investment.

    Where it's questionable is in its durability. When the spending stops, so too does its benefit. However, during the time the economy is being stimulated, momentum shifts upwardly, always correcting momentum that was going downwardly. In short, business and consumers cut back when they think things are getting worse. Then they loosen up when they believe good times are ahead, since economic mood is a self-fulfilling prophecy.

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    Quote Originally Posted by septimine View Post
    Keynesianism works for a time, but long term you end up needing to continue to pump money in to stay in place. The system works by propping up systems that should fail, leading to less efficiency in the markets, thus eventually the system fails because it becomes too inefficient to work.

    We've propped up the auto industry, we're propping up the banks. What happens when we do that is that structural changes that need to happen in those industries DO NOT HAPPEN. So then money and other assets that could be put to better use elsewhere stay in failing industries. If the auto industry restructured, a lot of engineers might choose other industries as would a lot of other potential business owners and accountants and so on. Instead the money sits, the people sit, and more and more money will be needed as the market becomes less efficient when companies are propped up rather than being allowed to fail.
    It looks like you have a lot of misinformatio n to unlearn. The basic premise of Keynesian stimulus is that it's a) temporary and b) sees the money from government deficit spending go into the markets freely by those who have jobs to build demand.

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    Quote Originally Posted by Daktoria View Post
    J.P. Morgan intervening was Keynesian policy?
    No. The panic led to reforming of the banking/financial sector. It may have also helped to get Keynes to see the results of the panic and offer up a way to allow the markets to correct themselves with a little help from governments.

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    Quote Originally Posted by Daktoria View Post
    I don't see how an economic policy that lead to millions of men flinging bullets at each other, and tens of millions dying, is a success.
    After WWII, it didn't have anyone flinging bullets at each other. The success was in ending the Great Depression. The government spending ended the high unemployment and allowed firms to ramp up production to meet demand. Buit Keynesian policy did not start a war, ever.

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    Quote Originally Posted by justoneman View Post
    Keynesian Stimulus I believe calls for the government to stockpile money and then if there is an economic downturn that money is released to stimulate the economy. That is not what Obama did. Obama spent money in large quantities that the government did not have. Any small stimulating effect is countered with a devalue of the dollar and a burdening of the government by using borrowed money. It is foolishness of the highest order.
    So, you're complaining that Bush spent us into deficits and didn't pay off the debt after Clinton left surpluses? I'd agree that Bush was an irresponsible turd on economics (housing bubble) squandering surpluses (unpaid for wars with tax cuts? Stupid).

    No matter, because Obama further doing deficit spending to keep the economy from continuing its free fall was still the right thing to do and to allow for repayment of the deficits down the road. (as a % of GDP).

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  9. #19
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    Yes indeed unless one decides that a depression is required to clear the markets of their excesses. This is how the free market folks pay for the deregulated messes they create during the boom years. What they insist upon is an old fashioned debacle, a complete abrogation of any duty to manage cycles in any way whatsoever. There is no depression deep enough for them to wade into via fiscal policy. By allowing for fiscal policy, they break one of their key ideological commandments : The government is worthless and cannot, should not and does not work at any level whatsoever with one exception, the government is great at killing people.

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    Quote Originally Posted by Claudius the God View Post
    Yes indeed unless one decides that a depression is required to clear the markets of their excesses. This is how the free market folks pay for the deregulated messes they create during the boom years. What they insist upon is an old fashioned debacle, a complete abrogation of any duty to manage cycles in any way whatsoever. There is no depression deep enough for them to wade into via fiscal policy. By allowing for fiscal policy, they break one of their key ideological commandments : The government is worthless and cannot, should not and does not work at any level whatsoever with one exception, the government is great at killing people.
    Look at the markets before they were regulated and totally Laisezz Faire. They periodically (every 7 to 12 years, or so) saw large failures in the markets and deeper and longer recessions before Keynesian and New Deal policies got the recessions down to central banks adjusting interest rate policies to keep recessions far milder and lasting fewer months.

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