Keynesians Believe Governments Have to Manage Economy in Macro-Economic Way

Nobel prize winning economist Paul Krugman is, of course, a Keynesian. All economists – or practically all – are now Keynesians. So are all government officials. “We’re all Keynesians now,” announced Richard Nixon in the ’70s.

That is, they all believe that government has to manage the economy – in a macro-economic way.

The theory is simple: when private industry and private consumers drop the ball…the government should pick it up and run with it.

And so the feds are out on the field:

At the Treasury, the boys from Government Sachs are all suited up…shooting some hoops with their pals from Wall Street. Got some investments that went bad? Bring ’em over! The Paulson crew has $700 billion to work with. If you’re a major bank or financial institution, and you don’t mind playing ball with the Paulson team, you could score some real money.

And over at the Fed, Ben Bernanke is hoping to kick a field goal. He’s still got 150 basis points to go in this game. Then, the key Fed rate will be zero. He’ll use every one of those points, we guess. And he’ll continue lending money to whomever will take it. Want to see an ugly bank balance sheet? Just look at the Fed. The bank – a private bank, by the way – is selling off its safe U.S. government securities in order to take on board the kind of ‘assets’ that smell like a teenager’s gym locker.

And that still leaves the “fiscal stimulus.” Yes, dear reader, get ready for it. Big spending projects. Paul Krugman is using his new stature to tell politicians what they want to hear most. This is not the time to be timid about spending money. Keynesian economics requires Congress to run big deficits – to make up for the spending that consumers and business have more sense than to do. ‘It’s the responsible thing for government to do,” he will say. ‘And don’t worry about the deficit. We’ll take care of that later. America is such a big, dynamic, flexible economy…we’ll figure out how to deal with the deficit after this crisis is over.’

The Washington Post is now talking openly about something that would have seemed impossibly scary and absurd a few years ago – a $1 trillion deficit.

It’s coming, dear reader. It’s coming.

Yes, the feds are setting a different kind of trap for modern Americans. Watch out for Caesar’s money!

Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

Latest posts by Bill Bonner (see all)

Leave a Reply

3 Comments on "Keynesians Believe Governments Have to Manage Economy in Macro-Economic Way"

Notify of
avatar
Sort by:   newest | oldest | most voted
GaryB
Guest

Economics is often called the dismal science. But it’s an insult to the hard sciences like mathematics, chemistry, physics etc. to call economics a science. It’s soft, woolly-headed waffle. Probably because the processes and outcomes that economic theories are applied to involve human behaviour which is chaotic and emotional and driven by fear, greed, and panic.

Charles  Norville
Guest

good call – yea economics is a human invention that is like a multi headed hydra, like ‘Manopoly’ its a game that seems real and exciting until you run out of paper money, ie ‘the bank’.

trackback
Hangover Nation | Bear Market Investments

[…] Keynesians Believe Governments Have to Manage Economy in Macro-Economic Way […]

wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@marketsandmoney.com.au