A Keynesian Paradox?
by Larry Perrault on May 28, 2010 at 12:48 PM
Robert Romano discusses the Keynesian Paradox in this article, quoting:
The threat of a double-dip recession is real, but it should not be cause for more government “stimulus,” deficit-spending, bailouts, and low-interest monetary easing. The primary reason for the current market downturn is unacceptably high levels of sovereign debt and spending in Europe, the U.S., Japan, and elsewhere.
This poses a Keynesian paradox, defying Keynes’ essential proposition that in a recession, governments must engage in deficit-spending in the absence of private investment. Only, when the economic downturn began in 2007, that’s exactly what Western economies did. Now, they’re going broke, creating more dislocation in the markets — which the deficit-spending was supposed to cure.
Hence the paradox. The deficit-spending promised to bring the economy around, but instead it put too much pressure on government balance sheets, and now the global economy is suffering badly as a result...
There’s a paradox because the Keynesian paradigm is false. Whatever help a "stimulus" might be, is a distraction from reality that ought be faced and tended by the private economy itself. See that fire in Greece that will spread to Europe and by all indications here and other industrial Western or Westernized nations that have swallowed the Keynesian paradigm? That’s the tail end of a couple of generations of applied socialism and its Keynesian economic partner.