To the point of Keynesianism
continuum: To your point, driftwood-nu, (and this is a cursory understanding of macroeconomic theory, so please retort) a massive increase in public sector spending comes at a direct cost to the private sector. That increased public spending has to come from somewhere in the form of capital, so the government sells more bonds. So far so good, except that we’re running a 0% interest rate, so our bonds don’t look too appealing—to anyone. Instead the government must issue new money, which used to be printed but is now moved around electronically, artificially increasing the money supply and causing inflationary pressure.
Now the private sector is facing a double whammy: low rates of return on savings (punishing those saving for a rainy day) and inflationary pressure where their dollars aren’t going as far.
IMO, the only way out of this morass is to unwind our debt—slowly, but steadily— and deal with the headaches and heartaches one step at a time.
Keynesians say you cannot save out of a recession. While true, you can’t either spend out of a multi-trillion debt hole. #austrianeconomics
yes you so can.
Keynesian economics could not be more appropriate right now. The higher the debt, the more you spend. Spending on what is the key issue. If you are like the UK government and spend money on failing banks who are largly responsible in the first place then its perhaps not the best of investments but generally, government spending increases aggregate demand which in turn, due to the multiplier effect stimulates growth in GDP. Simple. With this growth in GDP an upwards sprial is encouraged, at which point you being to level the country’s deficit.
i.e. spend like mad. Encourage investment, increase consumer spending, increase government spending. See the benefits of the investment. Pay off debt.
