Picture 2

Picture 2

Feb 7, 2013

Keynsian Economics Has Failed

Unfortunately, liberal elites are still the slaves of a dead economist, John Maynard Keynes.  Economists have not recognized the failure of Keynsian economics.  I think the uniform failure of deficit spending to promote growth has to be recognized.  If the model worked, we would not be talking about Japan's lost decade, or more accurately lost generation.  Japan's debt is now over 200 percent of GDP.  Their growth rate in response to an ocean of deficits is uniformly poor.  The story is similar in Europe, particularly Southern Europe.   There is no way Uncle Sam can continue to borrow 40 cents of every dollar spent.  When governments get this far behind, they usually pay off the debt with hyper inflation.  This never ends well.  The usual outcome is social disintegration followed by dictatorship.  For example, the hyper inflation of Weimar Germany after WWI lead to Hitler.  The Federal Reserve's constant quantitative easing in search of economic growth is going to lead to increasing inflation and interest rates.  They are buying 70 percent of the debt Federal Governments incurs each month.  Once interest rates go up, the deficits will balloon, 160 billion dollars a year for each percentage point.  We have got to cut spending and stop the coming train wreck.

No comments:

Post a Comment