Liquidity Trap

What really needs to happen is the private side needs to deleverage first before the government does. When you are at the bottom of a k-cycle, certain infrastructures are already over-built and require new technology and new infrastructure. The government cannot do much until there is demand for new infrastructure with new technology and that technology will likely come from private sources - or the demand for the new technology from private sources will be called for from the government.

A lot of information to grasp. Thanks for the link.

Maxx said:

It's as Keynesian Krugmanesque as it can be:


http://www.businessinsider.com/paul-mcculley-keynesian-stimulus-2011-10

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I really liked this bit of the article.

...because of enduring negative animal spirits caused by legacy issues associated with bubbles

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Animal spirits. That always tickles me. Animal spirits. There's your 'voodoo' economics, right there.

But I digress.

Keynes called for stimulus as a tool to be used to help a fundamentally strong economy weather a rough time, recognizing the problems inherent in that approach, and noting that it should be a tool for extraordinary times.

He never called for ongoing deficits through good times and bad, and would be appalled at the continual generation of bubbles.

We're so far past Keynesian stimulus that Keynes would probably be shocked.

Here's a Marxist view, which will probably go down better than Austrian with a lot of folks here.

And here's a more Reasonable viewpoint.

Keynes was against the very sort of large structural deficits that characterize contemporary federal budgets and policy, believing instead that deficits should be "temporary and self-liquidating." And Keynes believed that any sort of counter-cyclical spending by government should be directed toward increasing private investment, not simply spending current and future tax dollars on public works project.
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If the Federal Reserve had not been keeping money artificially cheap for the past couple of decades and it worked to lower interest rates and increase the availability of money in a given moment, that would mean one thing. Promising to keep rates low for the next couple of years - after years of loose money and statements that all those bubbles weren't bubbles at all - doesn't mean the same thing.

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Maxx said:

Money is as money does, seems like an more reasonable assessment. PLUS: not all events are bubbles and it's too bad Keynes and Marx are dead, but we have to face up to the times we live in even if they are not quite what times used to be. Remember what Gandalf told Frodo about that.
You don't want to be the one that ends up nipping precious and falling into the volcano.

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Again, in english this time, please?

Don said:

Here's a Marxist view, which will probably go down better than Austrian with a lot of folks here.

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Now why should Marx and Frederic Bastiat fundamentally be that different from each other? They were both considered leftists

It's only modern socialists and social democrats that have abandoned the fundamental criticism of the state in Marx works. Marx himself overlooked that later when he started to want to be more of a red wellfare state Bismarck - something that lead to criticism of Marxism from people Bakunin.

And there is never enough money to service the state from the rich and the corporations. If you take every single penny from the rich, it may fund the state economy for a few months or a year, and then the state is out of money. Consequently, money runs out.

So it is always the poor and the workers that end up paying for a state, through sales taxes, property taxes and income taxes. Kruegman and modern Keynesians believe that money is inexaustible, and that inflation only happens to countries like Zimbabwe and the Weimar republic.

ludicrous