Recipe for Economic Stagnation

The American Thinker ^ | July 21, 2009 | Andrew Foy and Brenton Stransky

[Scanian]

As political talking heads ponder the necessity for yet another stimulus package our domestic economy is wallowing with unemployment approaching 10%. Politicians on the left continue to embrace the last pork loaded stimulus bill claiming that while it didn't quite meet expectations for curbing job loss -- things would certainly be much worse without it.

In the meantime, Republicans argue that while the government's attempt to stimulate the economy was all well and good -- the legislation was severely misguided and not enough of the new borrowed and printed money is getting into the economy fast enough. Lost in this debate is any discussion of whether we need government stimulus at all.

This article will very briefly review Keynes and Friedman's basic economic theories as well as empirical economic data and use this information to explain why the government's actions during the current recession will only act to intensify the downturn and prolong recovery efforts.

John Maynard Keynes advocated for interventionist government policy to alleviate economic recessions and depressions. Keynes argued that demand is the key variable governing the overall level of economic activity and during economic downturns economies can fall into ruts characterized by decreased demand. He promoted economic policy by the government to stimulate demand, for example by spending on public works. Keynesian economic philosophy provides the theoretical basis for the Obama Administration's policies to rescue the economy.

On the other side of economic and fiscal policy issues is Milton Friedman, who demonstrated that Keynesian economic policy lead to stagflation (the combination of low growth and high inflation). Friedman formulated an alternative macroeconomic policy to Keynesianism called Monetarism, which argues that the government cannot micromanage the economy because business owners, investors and consumers will realize what the government is doing and shift their behavior

[bitterohiogunclinger]

“To paraphrase Mr. Einstein - to repeat the same mistake over and over again is stupid - so stupid that you might start to think it’s being done intentionally.”
There is no doubt that it’s being done intentionally, with reckless disregard for the Constitution and with the help of a complicit media. The only true question is will everyone continue to lie down like numbed sheep or will there be a positive backlash?

[LibLieSlayer]

We are in the beginning of a true depression... and things will get worse... much, much worse.

LLS

[LibLieSlayer]

Friedman had been proved correct over and over again.

LLS