This American Life recently did an excellent show about John Maynard Keynes; especially regarding his life, his economic policy, and how it relates to Obama's stimulus plan. I've got fairly clear views politically, but find it nearly impossible to "pick a side" when it comes to economics: both sides of the big issues seem to make an equal amount of sense. This may be over-simplified, but I believe I can summarize the argument to four levels:
1.) Anti-Keynesian: FDR and his New Deal are given more credit than he deserves; his policies may have even extended the depression.
2.) Keynesian: The New Deal was mishandled; most of the gains it could have fostered were negated by tax increases and efforts to balance the budget.
3.) Anti-Keynesian: Economic downturns shouldn't be meddled with in the first place: they are nothing more than natural correction cycles.
4.) Keynesian: Even if that's true, without intervention, a recession will fall into a downward spiral and destroy the economy: less production -> less spending -> even less production -> even less spending, and so on, ad infinitum.
I'm not quite clear on how inflation fits into this; who can take it further?
posted by MplsGuy at 8:19 PM
1 Comments:
Yeah, the inflation nut is a tough one to crack. I was reading about Peter Schiff's stance and his expectation of hyperinflation (essentially the dollar having little value like Weimar Germany in the 1920's-30's) if the stimulus package passes. He has a salient point about the false premise of the consumer economy-that it's debt-ridden and needs to come down. He's so hot right now, Schiff, due to his correct prediction about the housing bubble and credit market collapse, but I think he's becoming a bit of a fear mongerer now. He is right in that the U.S. needs to shift to a saving, production based society. Saving is happening naturally, seen in the huge drop in consumer spending, and my hope is that it continues if the economy gets back on track.
Doing very little, as Schiff argues, is not the right thing to do. Governments have a responsibility to do something in these situations. Currently, China is a good example of the potential threat their gov't is concerned about- the massive layoffs are getting the party worried over widespread revolt. China is known to have a tight fist over its people, but it could happen anywhere. Spots in Europe are like this too. I think that could happen here as well, or lead to a large scale world war, and that could be long and costly in more terms than just financial. I'm willing to take the lumps over a longer period of time with little economic growth (like Japan in the 1990's) as long as we correct the market and hold down any major human catastrophe in the process.
This guy has a critical view of Schiff that I found informative:
http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html
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