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animal spirits, deficit spending, economics, economy, federal reserve, general theory on employment, government spending, jm keynes, john maynard keynes, keynes, krugman, milton friedman, paul krugman, politics, spending, stimulus
I saw a Paul Krugman article from late last year posted in a forum recently. In the article, Krugman argues why Keynes was right on government spending, and goes on to blame the problems in the US and the Eurozone trouble on a failure to abide by Keynesian policies.
In actuality, Krugman exemplifies precisely why Keynes’ spending policies have never worked very well. It’s not that Keynes was wrong on the theory. Recessions are often caused by monetary contraction and running government deficits creates more money supply, which can fix this issue in a blunt-force way (albeit, sometimes very inefficiently). Oftentimes, these monetary contractions are even created by the government itself, as was the case during the Great Depression.