The overhang of excessive debt burdens is still with us today and the problem with the government stimulus programs that were put into place is that they were not designed properly; the multiplier impacts never did kick in. So we can’t “grow” our way out.* Now government sectors in virtually every jurisdiction, even those without all the blemishes like Canada, are tightening their fiscal belts. Companies and banks retain their extreme stash of cash, if we dare suggest, because they see the same economic environment that we do and want to survive the next downturn...The debt-plagued U.S. economy has little or no organic strength and once policy stimulus wears out, the economy sputters; that has been the lesson of the past two years.*Bill: Certainly it would have been better to have had better stimulus. However, note Keynes on "real" stimulus spending: "wars have been the only form of large-scale loan expenditure which statesmen have thought justifiable" [ref, DeLong]. That is, as Krugman et, al have said forever, we did not really spend enough for Keynesian Multipliers to kick in. But the Sisyphusian bain of Keynesians is the latter quote from the Master himself.
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Notes to myself, possibly of interest to others.
-- Bill Northlich
Monday, August 29, 2011
Keynesians Agonistes: Growth - So Near; So Far Away