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Federal Government Follows Keynes Off A Cliff
The old Keynesian fiscal paradigm was simple, and it simply failed over and over again. Keynes believed in something you would know from any “Home Economics” course was bad policy- that you can borrow your way into prosperity. The idea was that you could use the power of the State to control the money supply,the power to tax, and the power to spend (and borrow) to “manage for results” instead of just letting normal market forces, supply and demand, self-correct themselves.
For Keynes, a believer in large-scale state and corporate management of national and global economies, it seemed almost an insult to human intelligence and creativity to let market forces take their “natural course” when human could imagine and invent, and manage, their way around the problem.
This all seemed rational, and there were many formulas that were proposed to explain it all. Keynes, a corporate progressive, basically taught his disciples that if things get bad, use borrowing to inject money into the economy by government spending. In truth THIS DID NOT WORK!
The “Great Depression” was only resolved AFTER World War Two when the GOP ran its “Have you had enough already” campaign and stopped or reversed most of the “New Deal” programs which, from 1930 to 1945, FAILED utterly to do anything they promised. By the beginning of the 1950’s the halting of much of the governments “borrow and spend” program had unleashed a massive economic boom.
Today’s corporate progressives are also disciples of Keynes, and they believe in the whole theory, root and branch, despite evidence of the failure of such policies, and now their policies are beginning to jeopardize the very fabric of America’s economic system, as the following three articles seem to indicate, with mounting evidence from numerous quarters that Timothy Geithner is not only ill-qualified to fill out his taxes but that he is a Keynesian disciple who refuses to learn from the lessons of history.
Greenspan Says U.S. May Soon Reach Borrowing Limit
http://preview.bloomberg.com/news/2010-06-18/greenspan-says-u-s-nearing-limits-on-borrowing-capacity-restraint-needed.html
“Perceptions of a large U.S. borrowing capacity are misleading,” and current long-term bond yields are masking America’s debt challenge, Greenspan wrote in an opinion piece posted on the Wall Street Journal’s website. “Long-term rate increases can emerge with unexpected suddenness,” such as the 4 percentage point surge over four months in 1979-80, he said.