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Animal Spirits and Unemployment
The Internal Contradiction of Short Term Stimulus
The debate over whether or not continued deficit spending should be pursued is often characterized as a choice between the short term beneficial effect of Keynesian stimulus as against the long term growing, and ultimately unsustainable, government debt to which continued stimulus would contribute. If one accepts the view, propounded by Keynes’ biographer Lord Skidelsky, that “The government…is the only agency that can prevent total spending in the economy from falling below a full or acceptable employment level. If private spending is depressed, it can restore total spending to a reasonable level by adding to its own spending or reducing taxes” then the choice is indeed a conundrum.
Proponents of the position articulated by Lord Skidelsky have advocated a form of “jam today” approach; pursue fiscal stimulus today, but pair it with a commitment to impose austerity during the “medium term”. This is thought to be an elegant solution that enables the government to nurse the economy back to growth without jeopardizing its solvency. It implements Keynes’ recommendation that “The boom, not the slump, is the right time for austerity at the Treasury.”
This view, however, assumes there to be a reliable relationship connecting increases in aggregate spending to increases in employment; that is the point of the quote from Lord Skidelsky above. The absence of such causality would undermine the case for deficit spending. In its absence, government might boost GDP, for a time, without increasing employment, in which case the recovery would be “jobless” and its only accomplishment would be to boost measured output for a few more quarters while further burdening government with debt.It is one of the salient facts of our current situation that, in the US at least, such a linkage appears not be operative as it is experiencing a jobless recovery.
John Hicks' Doubt
One can find, within the citadel of Keynesian theory, an explanation for why this may have occurred. Sir John Hicks, the creator of the “IS-LM” model which has served as the core of Keynesian economics since he published it in 1937 [1] , came to question the implicit linkage between spending and employment embodied in his model. In a 1980 article [2] , Sir John recognized that the decision to hire in response to an increase in demand depended upon expectations about how permanent would be the increase in demand; “An excess [of demand] which is expected to be quite temporary may have no effect on input [hiring]; it is not only the current excess, but the expectation of its future which determines action”. Sir John had rediscovered the insight of the great 19th century political economist John Stuart Mill that “demand for commodities is not demand for labor”.
Sir John uncovered an irony at the very center of the Keynesian approach. An economic downturn may be caused by a decline in confidence triggering a decline in private spending, but in order for Keynesian stimulus to generate employment, a certain level of “Animal Spirits” is required; businesses will only hire if they expect demand to last. In our present predicament, the imperative to begin reducing government debt in the not too distant future places in question a belief that current deficit spending will lead businesses to conclude the boost in demand will be long lasting.
What to Do Now
In spite of this, many economists persist in calling for more stimulus, primarily because they cannot think of what else to do, which more reflects the paucity of their imaginations than any real limitations. One obvious place to look is the constraining effects the accumulation of financial market and homeowner mortgage debt –built up in the run up to the crisis and made worse by the subsequent collapse in real estate values – has imposed on economic activity. The need of banks to hoard capital to cover losses and to meet tougher anticipated future capital requirements has led to the first protracted decline in US bank lending since the Great Depression. The ill effects of foreclosures and destruction of household wealth on consumer spending place a major drag on economic activity. Until something is done to restructure the balance sheets of the banking and mortgage sectors, growth and employment are unlikely to fully recover, regardless of the buoyancy of Animal Spirits.
Keynes, above all economists, understood the role that expectations play in determining employment and, were he to consider our predicament, he may well question the efficacy of Keynesian stimulus. He would likely lead the search for other approaches, for, as he famously replied to an interviewer questioning the constancy of his views “When the fact change, I change my mind. What do you do, sir?”.
[1] Mr. Keynes and the Classics, Econometrica, April 1937,
[2] IS-LM – an Explanation, Journal of Post-Keynesian Economics, Winter 1980-1
Posted by Dan Aronoff, via the The Sceptical Market Observer
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John Maynard Keynes must surely be one of the most misquoted and mis-represented people ever !
It is important to remember that John Maynard Keynes was most concerned and focused with the economic after-effects of the first world-war and the resulting Treaty of Versailles. It is simply wrong to transfere everything J.M. Keynes said during that period into the economic situation we face today. It is not only wrong, but also foolish and misleading.
So here are some facts about what John Maynard Keynes wrote, from his book "The Economic Consequences of the Peace", published in 1919.
Europe after the Treaty of Versailles
Keynes outlined the causes of high inflation and economic stagnation in post-WWI Europe in The Economic Consequences of the Peace.
"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some... Lenin was certainly right.
There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
Keynes explicitly pointed out the relationship between governments printing money and inflation:
"The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."
Keynes also pointed out how government price controls discourage production.
"The presumption of a spurious value for the currency, by the force of law expressed in the regulation of prices, contains in itself, however, the seeds of final economic decay, and soon dries up the sources of ultimate supply.
If a man is compelled to exchange the fruits of his labors for paper which, as experience soon teaches him, he cannot use to purchase what he requires at a price comparable to that which he has received for his own products, he will keep his produce for himself, dispose of it to his friends and neighbors as a favor, or relax his efforts in producing it.
A system of compelling the exchange of commodities at what is not their real relative value not only relaxes production,
but leads finally to the waste and inefficiency of barter."
Keynes detailed the relationship between German government deficits and inflation.
"In Germany the total expenditure of the Empire, the Federal States, and the Communes in 1919-20 is estimated at 25 billion marks, of which not above 10 billions are covered by previously existing taxation.This is without allowing anything for the payment of the indemnity.
In Russia, Poland, Hungary, or Austria such a thing as a budget cannot be seriously considered to exist at all."
"Thus the menace of inflationism described above is not merely a product of the war, of which peace begins the cure. It is a continuing phenomenon of which the end is not yet in sight."
Keynes ended with this ominous warning:
"But who can say how much is endurable, or in what direction men will seek at last to escape from their misfortunes?"
The economic mess in Germany laid the foundation for the rise of Hitler.
The wars bring the inflation brings the crash brings the stimulus brings the inflation brings the crash brings the war brings the inflation brings the crash....etc ad nauseam
employment is a function of capital - not "aggregate demand" whatever the fuck that is....keynes was a quack serving his bankster masters....the massive debt the usa contracted to bail out trillions of dollars of failed investment as a negative effect on gdp - and lord knows what a fraud that number and concept is.....marginal productivity of debt is negative.....you can kiss economic growth and employment good bye until balance sheets are massively reconfigured - ie. failed firms and "investors" put out of business....
Stimulus works if raw materials prices have fallen below production costs. For example, if steel, copper bars, aluminum ingots, coal, oil, etc. fall below a certain level it makes business sense to stockpile these materials and wait for the next business cycle to sell them and prevent wild price rides and inflation. This plain good business. In addition, the possession of these assets serves as a backstop for the currency preventing inflation. This is the "flywheel effect" that a good government would utilize to maintain a solid economy. It's just good business sense. Today, raw materials prices are high, that should tell government to lay off the gas pedal.
First class article. At last people are going back to what Keynes actually said and proposed in the full context of the times he was writing his General Theory.
Keynes would never have countenanced the persistent and remoseless in fusion of government spending and debt in the economy. Having spent nearly all his life in government he must have been well aware of the hubris of politicians and bureaucrats who think they can pull big levers to drive growth. Hayek was warning against this core weakness in the General Theory even while the print was still warm.
The animal spirits of business allied to risk, uncertainty and profit (Frank Knight) are the basis of real growth with Schumpeter's creative destruction thrown in. Having dug deep into probability theory. Keynes stresed that the future was unpredictable and uncountable. That puts a great deal econometric modelling on thr scrap heap.
it is perfectly obvious what is the sole driving force behind Keynesianism as it is practiced - power and politics.
Thus the ideas of a great economist have been perverted and besmirched.
A single economic hypothesis has been turned into a cult.
Speaking as the owner of a small business with about 65 employees, I am not paying attention to Keynesian stimulus (or not) or consumer demand.
I am paying attention to the most anti-business administration in my lifetime. Every time I hear Obama saying "the rich" or "those earning more than $250,000" (many of whom are small businesses) aren't paying their fair share, it causes me to hunker down even further until the day he is gone. We are also in the midst of the biggest orgy of regulations I can ever remember. If Obama doesn't want to tone down the rhetoric, how about a moratorium on new regulations until after the election?
No way I am I hiring while I am being treated like Public Enemy #1.
Keyne's answer is usually regarded as brilliant and wise. But few people have realized how Keynes self-destructed himself with that quote. For if you need to change your mind when the facts change, it is because your theories fail to accurately predict the facts and are thus wrong. This is one of the basic principles of the scientific method.
Yes, better to claim that no facts can be known so you can never be wrong about anything!
Sir John Hicks said employers don't like transitory markets.
Heh heh heh
No, he said they don't hire during transitory markets; they'll make whatever buck walks in the door (even the imaginary ones farted out by fractional reserve banking)...unless and until, of course, none do.
We shipped all our manufacturing base overseas, then sit puzzled as to why the jobs are all gone and we look longingly at McDonalds to please hire some more min wage part timers? 'Animal Spirits' yea the great fry cook bear in the sky, and the grand mop-up eagle rules over america.
Enjoy your min wage service sector based economy america, land of the losers.
ALL of this is bullshit. Economists continue to FAIL in terms of constructing an economic model that deals with reality. Infinite growth on a finite planet, or even in a finite universe is impossible. Moreover, the laws of nature make absolutely NO promises with regard to anyone's survival. Suck it up and deal with it already.
The ONLY thing that matters is energy, because witihout energy, NO work gets done, be it by a machine or by human labor. This is why capital allocation (in terms of energy and money) is so important and needs to be thought about critically.
Right now there is tremendous capital going to people who bring NO REAL VALUE to the economy (paper-pushing fucknuts). This is capital mis-allocation. Until that changes, conditions will continue to get worse in the broader economy until we have total collapse.
This is why I say to crash the system now. The sooner we do, the sooner compensation will find its way to people and technology that are actually worth a shit.
Typical physicist bullshit - smash it to pieces and perhaps we can figure out how it really works.
Typical "prophet", offer no REAL solutions. My company provides real value products to our customers everyday. Business is good, but margins continue to collapse as the cost of the very finite commodities continues skyward.
The only solution I see (and the article actually hints at) is massive human deflation.
Hedge accordingly.
All total bullshit. We shipped all our jobs overseas in return for min wage service sector based economic model, then wonder why things suck so bad?
Yes...but "All chiefs and no indians" fucks you up too! So it's not total bullshit. Would YOU run a company with 100 actual workers and 150 "administrators"? That IS what we've got now...in a sense.
If you are referring to the financial sector as a (w)hole, then yes.
If you are referring to the malinvestment in wasteful unproductive militarism (including Homeland Defense), then yes. (Most government waste is also military related. 60% of federal civil servants work for the military, Homeland Defense, or the CIA).
Small businesses, not so much.
Do consider, much government so-called 'extra' overhead has to do with maintaining records and reporting for public accountability ... which is a VITAL thing for democracy to work. The public sector also strives to provide service to everyone, without exclusion. Private businesses can and do typically conduct their business in secrecy, and aim to exclude services (education, food, water, medical care, etc.) whenever it is 'unprofitable' to provide.
It's amusing that these great economists all look at the demand side without considering the obvious supply side.
We've collectively spent the last two hundred years industrialising, automating, and replacing human labour with mechanical labour. Once, there was an ideal that we would not need to work as many hours to achieve the same output. Well, guess what? We've arrived! Since it now requires less labour to support ourselves, logic would suggest that increasing the supply of money to stimulate demand isn't actually going to achieve the goal of employment anymore. It will simply be saited by increased machine labour.
What we're starting to see is a genuine oversupply of human labour. It doesn't matter if our populations shrink or grow anymore. We simply produce excess to our needs. Lose a billion people, and we'll still have structural unemployment.
The time has come for a substantial restructuring of the supply side of labour. It's the only answer that has recently proven successful (in Germany).
We need to force down hours across the board to employ the unemployed, and to remove the taxation welfare burden from the workers.
It's been done before. The 8 hour movement was a massive success.
Further to that, I argue that our 5 day 8 hour weeks are now becoming increasingly a structural problem. For starters, they have gross inefficiencies in resource usage. Factories and offices sit idle for 40% of the daylight hours. Workers commute all at once causing strains on infrastructure and natural resources.
Our legacy 7 day week will have to stay simply because the Gregorian calendar is far too engrained. However, we are already slowly shifting to 7day trade in many service industries.
The problem is, there's no easy way to create a win-win for business and individuals.
I modelled one solution that attempted to achieve both and complete fairness.
It's radical, and won't be without its issues. But this model increases our overall efficiency and days off substantially even if we decided to stick to the 38 hour week. I'm talking 16% fewer commutes, 40% extra business production, and a whole lot of 4 day weekends.
Briefly, it requires 5 offset 'shifts'. Each 'shift' uses 20 days for it's cycle, and 20 weeks to repeat. No one works more than 4 days in a row. But 7 day trading is seamless. Each 'shift' is fair. No one is stuck working 'weekends' forever. Everyone works an equal number of days.
The cycle or 'week' goes like this: 4 days working, 2 days off, 4 days working, 2 days off, 4 days working, 4 days off. Each of the 5 'shifts' is the same, but offset by two days giving perfect coverage with every single day achieving 60% of the workforce at work while the remaining 40% relax.
I modelled it for my country (The land downunder) based on the full 38 hours. The model should work for any country if only the population and participation rate figures are changed.
The best part of this model is the efficiency gained doesn't have to change if hours are cut. Realistically, it could even achieve greater efficiency by cutting hours, and extending operating hours with overlapping start/finish times. (ie some staff start at 7am, some start at 9).
The full model extends off the page, but it's a repeating pattern.
Take a look:
http://imgur.com/SSbjW
Yes, I know it's waay too radical for the current world, but one day, we might be forced to consider this.
myne,
Do you know of any manufacturing firms or other types of businesses using this model? I'm just curious if you have any details on this.
There are some companies that have worked with here in the US that work rotating 12 hr shifts in manufacturing.
Rotation usually goes like this: 2 on/3 off 2on/2off 3on/2off and then repeat.
Not yet! But I hope that someone in HR somewhere sees my posts one day and says "Hey, let's try that!"
It's really the best model I could come up with that looks at four problems:
Infrastructure efficiency - congestion, energy usage (ie electrical grids).
Personal time and savings - extra days in a row not working, lower working week, reduction in lost time and energy to commuting.
Business efficiency - maximising land and asset utilisation (within a daylight hour working concept), reducing rents/capital outlays, achieving 7 day trading.
Fairness - the concept of the traditional 2 day weekend isn't going to go away any time soon. Employees are more likely to agree to this if they gain something and don't sacrifice all of their Sat/Sun weekends. A rotating roster was the only model that could work. It's impossible to create a perfectly repeating pattern (that's memorable) with a multiple of 7 cycle.
I see this as smoothing the load on almost everything substantially. It should even work fine with 24/7 rosters like Medical care. You can switch either every 4 working days (which would drive people insane) or every cycle (which should be much more bearable with 4 days off beforehand.
I like the way you think, myne. Except that people with relatively "secure" jobs at stable companies don't work 38 hours a week, we work upwards of 60. I'm not the only one out there in that boat, I'm sure. We just never get reported on. Thirty-eight hours a week...damn, I wish I could only work 38 hours a week!
On a slightly related topic on another forum, someone brought up that people who are slow learners, have personality disorders, or are just socially inept have traditionally been able to function adequately in agriculture-related positions, where significant levels of human interaction and advanced reasoning are not necessary. However, since our economic model has changed over the last 100 years from agrarian to industrial to service - and since the number of illegals has gone through the roof - these individuals have been effectively squeezed out of the segment of the labor market in which they have historically been most productive. (I never understood why people tried to get jobs for the autistic and mentally disabled in offices, where they can function only marginally (if they can function at all and are not just given menial work as charity cases) and often are forced to deal with stresses and situations that they are simply unable to handle.) This segment of the labor force, albeit small, often ends up on the dole, becoming a drain on already strained government assistance programs.
Would love to see someone like you figure out a way to make these folks useful again.
See, that's the stupid thing about people.
I get that you're doing your bit to get ahead, but the messed up thing is you're actually contributing to unemployment and you're probably not even being compensated for the extra hours. Then there's the fact that you're paying higher taxes to support the half a job you've made unavailable.
The bigger picture is that you're shooting yourself in the foot. Not only will you pay more, but you'll earn less (by not being paid overtime, paying mroe tax, having cheaper people competing if you slack off) and you'll probably become unfit (more cost) and run up the risks of dying at the ripe old age of 50. Is it worth it? The big picture says that you will be healthier, happier, and taxed lower if you allow others to take up the slack.
Note, I am not attacking you. I'm just attempting to point out the bigger picture. We're a race. We're supposed to work as a team. Your production is in excess of your needs, so you're being forced to be a team player and support those who can't find work.
As for making mentally disabled people useful... I don't know enough about them honestly. I know we tend to stick them in recycling centres or quasi-charity furniture/other manufacturing industries. Not sure if that's ideal.
Consider the utility of an autistic in auditing the Fed.
Remember the Simpsons episode when Homer's boss told him if you don't come to work friday don't bother showing up monday? Homer exclaims 'whoohooo.........4 day weekend!!!!". LMAO.
People talk about other countries working conditions......in the south US the republican model is hire skilled labor for nothing, work as many days/hours possible with no benefits and no regards for safety.
rsnoble,
With all due respect. I live and work in the US South have so for 20 of my 47 yrs and I am also very aware of pay rates benefits etc.(being that I work in the Human Resources field) I've participating in gathering data from companies for benefit surveys. Granted you may find some small mom&pop operations that don't give benefits but that is the exception not the rule. You would really be stretching it to find a company down here that does not provide benefits to it's workers. O/t pay over 40 hours is mandatory. Health/Dental/Vision/401k is commonly found at most companies. Fed OSHA and state OSHA very strict to sometimes ridiculously cautious about safety.
maybe it was like that in the south 50-60 yrs ago but not now.
First off i feel priveleged and honored to have someone of your stature here at zh. I know many respectable person wouldn't come within miles of ZH especially using their real name. I know i no longer use mine here but i think it out of protest at myself for having such fear. Mill of course is one of the greats but i think he as with the entire pantheon of economists would laugh at the irony of bailout nation. Those who speak of animal spirits the most and indeed dishing it out (for your viewing pleasure of course) demanding and getting "the sacred cow?" It truly does not only give lie to the entire enterprise but questions the very moral fabric upon which our American experiment is woven. No one can deny the rage OR FEAR in the USA now. This technology which with such ease embraced us all with such prosperity now is seen to have a dark under belly. All the rage in the world cannot change that. We shall see if what awaits is a cataclysm ala the Arab Spring or potentially the collapse of the euro. We do know this: but for those standing in the way of animal spirits what is happening "there" would be happening here already. Americans can be forgiven for not wanting to "go back" no? And so it will be as it always was: he who stands together with his brother will be found to have seen the true wisdom of this age.
No shit, but we will suffer greatly for this major mis-allocation of capital (be it energy or money). There is a very real cost for creating capital.
All fear does is cloud your judgement, educate yourself and those you associate with such that you are all becoming better, stronger day by day. This is really all one can control anyway. Even then, life makes no promises regarding your survival.
Know your neighbors and hedge accordingly - ARMY AMEDD 1987-1991
Did Keynes address what policy actions the government would take when the whole freaking populace is beating down the bank's doors demanding their accounts be closed and disbursed entirely in cash?
You'll see some real animal spirits when they discover it can't be done.
whole freaking populace?
20% of 'em are on food stamp cards and another 10% on unemployment.
who has money? people have iras and pensions. there's no door beating. people are afraid to have cash...might get robbed. lol
Manthong,
This is the reason I asked a couple of questions. The 'wrong economists' is irrelevant because we do not have a choice; all owned by the fools that are still running the show. And, of course, it is structural but it is what it is and we are here now, and so what? I don't know how to get out of debt without paying it off or bankruptcy----I certainly would not have the luxury of borrowing once under water.
The structural problem really has to do with the entire society being cared for as well as we care for the bankers and politicians. I am interested in how we do this without tearing down the house which is exactly the issue you raise.
The deal iset up to be run as always where: winner take all and 'too bad' for the losers. We have all been losers under these rules with a few exceptions. The bankers and politicians expect to inflate their way out of this normally, but this time we have a different plan. Steal everything, buy gold, an island, and escape all the shit that has been swept under the carpet since 1980. these dudes have already taken everything----they are thieves and the assumption is that they take the money and run while we wait in the bank and FDIC lines for $100 per day to be returned to us---if we are that lucky.
anyway, thanks for the post because what you suggest is on its way----when the banks are closed---everyone will pay----that is the plan, imo om
WE need our leaders to bring all the business leaders together and to sit down and make a bold plan to get back on track.
Reduce taxes, both personal and capital gains. Make incentives for business to repatriate capital. Lift restrictive regulation
on business including EPA. Incentivize small businesses to hire with long term programs. Postpone national healthcare.
Put construction workers back to work on infastructure projects. Train unemployable workers with new skills that are in demand.
Lift the bans on oil drilling. Once we get this country going again, the debt problems will be easier to solve.
the time to reform the system has passed. it's time for a revolution.
i'm in favor of a central plan so bold, it gives up on the idea of central planning once and for all.
Thats a main part of their plan, making things so bad and pissing people off that theyre ready to accept anything, like support a 1 world govt and 1 currency. Hey, people actually believed Obamas nonsense, with a cult-like zeal...that was the first test.
All this is useless, until the criminal elements in control of the market are dealt with. As long as a home is infested with termites, all the replacement of broken wood is wasted money (except for the termites).
Keynes theory did not apply to structural problems and we have structural problems. We must correct our trade deficit. Jobs in construction will not come back in ten years and maybe never. Many jobs in manufacturing are gone through either technology or relocating factories and they will not come back. We must become competitive to get the manufacturing jobs back. That means lower corporate taxes. More flexibility in labor and benefits; some industries must cut both. None of this is easy and the government spending more money is exactly the wrong thing to do. In essence all of our growth for the last 15 to 20 years has come from expansion of debt and the government borrowing instead of the consumer is trying to perpetuate a failed model. It will not work.
The other issue is the Obama "Stimulus" was very poorly targeted. Keynes wanted government money, other than the automatic stabilizers, to be focused on promoting private investment. It seems that was avoided in the Democrats plan.
Direct gubbermint employment please. 5M-10M workers. Just like in the WPA. Dont rely on giving banks a moutain of cash and assuming that somehow small businesses will then circuitously end up hiring.
Do those makework jobs provide growth or (ironically) fill a credit hole?
Does that fiscal stimulus end at some point in the future?
What happens when it does?
http://www.youtube.com/watch?v=U4IobhGhrh0
Sorry already have plenty of government workers we cannot afford. Included are the military-industrial complex "keeping us safe", the bankers creating $ out of thin air and fractionally lending it out, those on disability and in the prison system, lobbyists, etc. who leech off the productive.
Besides Obama already pissed away his stimulus money on idiotic projects.
You're relying on the wrong economists. All one has to do is ask the Austrians. Simple as that.
Mises said in quite succinctly in 1931 -
"Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later it must become apparent that this economic situation is built on sand."
You might want to take a look at the statist's recent manipulated GDP for confirmation of Mises theories.
YES! In essence all credit expansion does is allow for further mis-allocation of capital, which at the end of the day only makes things worse. Credit expansion should be thought about critically and directed at innovation with very real expectations outlined first along with honest risk assessment.
This is a very tall order when fraud is the status quo.
Crash the system, crash it now. The sooner we do, the sooner compensation (in whatever form that may be) finds its way back to paper who are actually worth a shit.
Duh. Business is "monkey see monkey do". Business owners care about how many customers bought stuff last week, not about what Ben Bernanke or any other economist said or did. And rightly so.
When there is an automatic decline in employment due to technology, that unemployment might be considered permanent and in this case, the employees not needed are redundant. This is not to say that the population is redundant although, I have heard this argued quite eloquently.
So what is to be done with this 'redundancy'?
next:
“The government…is the only agency that can prevent total spending in the economy from falling below a full or acceptable employment level. If private spending is depressed, it can restore total spending to a reasonable level by adding to its own spending or reducing taxes” then the choice is indeed a conundrum."
I love this sentence. It makes it so clear that 'reducing taxes' is a trick to use for bad times and not simply to re-elect politicians. So Reagan's tax cuts during his first term, had they been rescinded by 1984 or so would have been the appropriate silver bullet for that event-------------uh, what were we doing with a 15% base tax rate for the times of plenty over the following twenty-five years and tax gifts to the wealthiest of our population in addition to a very low federal tax rate?
Since we each benefitted immensley(at least in principle)----what are we whining about now?
Seems like to me we had our cake and ate it too-----and, dasmmit, I only stayed for less thyan half the show!
By the way, instead of shooting or imprisoning or shipping the unemployed to Africa as neo-colonials----why don't pay them for having been alive when we needed them? Maybe some of them are useful human beings in other ways besides being trolls for the MIC.
Hope to hear from you om
I always thought the notion of "Animal Spirits" was the dumbest thing we ever discussed in Economics. People can believe the market if getting better as much as they want and beleive they are getting richer. The problem is that all the belief in the world doesn't matter if you have no ability to attain wealth.
The system where the stock market became the only path to wealth creation has obviously failed for 85% of the population and only truly worked for the top 1%. Of course perhaps that was Keynes true plan all along.
Why do I get a flashback of "Fear the Boom and Bust"?
“When the fact change, I change my mind. What do you do, sir?”
I print more Sir!
Sincerely,
Ben $. Bernake
+QE3
I hope Obama and Ben go on a printfest, I'd love to see my $5 silver at $75 overnite. Go for it!