D
Deleted member 17791
Insane in the brain
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- Feb 15, 2022
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They think you can just spend your way out of a recession without suffering major long term problems.
The whole idea is saving when times are good and spending a lot when times are bad. I'll explain the reasoning.
Say you have an economic crash, unemployment is high and people are scared of losing their jobs, so they spend less, resulting in the economy moving more slowly. So the government steps in and spends money on public works programs, bail outs etc to get the economy moving again. This results in an economic expansion where the state can lay back and pay off its debts.
So what is the problem? The problem is that the economy is far too complex for the state to know what to invest in, the state ends up fuelling the expansion of industries to the size that they're bigger than what the market would naturally allow. This is what is know as zombie companies, corporations that have gotten high on debt fuelled expansion but can't become profitable.
Keynesian economic policy fuels the creation of these zombie companies, the economy becomes chockablock with these over leveraged institutions which results in the whole economy becoming less productive. The economy becomes less productive because there is a high percentage of companies that must deal with excessive debts instead of lowering prices or investing in new technologies.
So because the economy becomes less productive, the state is unable to lay off its fiscal policies, they must continue to keep interest rates lower than historical rates. This means the government can never get back to a state of relaxation and lower it's debts to be prepared for the next crash.
So during the event of the next crash, the economy still has the government artificially lowering interest rates, artificially money easier to borrow, artificially propping up these zombie companies, so the state must lower interest rates even further to save the economy, they must spend even more than before to get the same effect as last time.
Keynesian economics results in a feedback loop of ever increasing magnitude of state intervention of the economy to just get the same returns. It's a drug and eventually the house of cards will fall down.
The whole idea is saving when times are good and spending a lot when times are bad. I'll explain the reasoning.
Say you have an economic crash, unemployment is high and people are scared of losing their jobs, so they spend less, resulting in the economy moving more slowly. So the government steps in and spends money on public works programs, bail outs etc to get the economy moving again. This results in an economic expansion where the state can lay back and pay off its debts.
So what is the problem? The problem is that the economy is far too complex for the state to know what to invest in, the state ends up fuelling the expansion of industries to the size that they're bigger than what the market would naturally allow. This is what is know as zombie companies, corporations that have gotten high on debt fuelled expansion but can't become profitable.
Keynesian economic policy fuels the creation of these zombie companies, the economy becomes chockablock with these over leveraged institutions which results in the whole economy becoming less productive. The economy becomes less productive because there is a high percentage of companies that must deal with excessive debts instead of lowering prices or investing in new technologies.
So because the economy becomes less productive, the state is unable to lay off its fiscal policies, they must continue to keep interest rates lower than historical rates. This means the government can never get back to a state of relaxation and lower it's debts to be prepared for the next crash.
So during the event of the next crash, the economy still has the government artificially lowering interest rates, artificially money easier to borrow, artificially propping up these zombie companies, so the state must lower interest rates even further to save the economy, they must spend even more than before to get the same effect as last time.
Keynesian economics results in a feedback loop of ever increasing magnitude of state intervention of the economy to just get the same returns. It's a drug and eventually the house of cards will fall down.
