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Keynesianism is like making waves in a pond and pointing out how much higher the water has risen. It ignores where the resources come from and the jobs being p

Keynesianism is like making waves in a pond and pointing out how much higher the water has risen. It ignores where the resources come from and the jobs being performed in other parts of the global economy that must be cut, often in some other country, because the resources are being used for something else. If a country is going into debt to stimulate, its pulling resources from other countries where jobs have to decline. But perhaps those declines are more spread out and harder to measure and understand. So we can make the mistake of thinking they don't happen. But what if a country stimulates by printing money, not borrowing? Money is only a medium of exchange, not an actual resource. Creating more of it just means more it has to be used to get the same result, if you look at what really happens over time, as opposed to comparing prices the day before you print with prices the day after.

jganetsk 10y ago
It's totally misleading to think of the economy as a pond holding a fixed quantity of water. The water level does change, and sometimes you need to make waves to do it. For this, you should read Paul Krugman's babysitting co-op analogy, a basic description of how an economic depression functions: https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op
- stretchwithme 10y ago
  The babysitting co-op Krugman referred to was a barter market where people can only trade ONE thing. And where each member had to contribute 14 hours worth of babysitting a year just to pay for using the system. That's why there was more supply than demand in that "market" when it started. https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op
- stretchwithme 10y ago
  At any given moment, the available resources ARE fixed. They aren't increased by moving them around. If you increase the amount of money available, that bids up prices for the existing resources. If low skilled labor is already fixed at an artificially high price (like a minimum wage), a general price increase will reduce the value of the fixed wages paid under these arrangements and increase employment. But you could accomplish the same thing by lowering the minimum wage. No additional value is created by stimulus. The extra money is just undermining the effect of things that have been hobbling the market all along. But creating more money has other destructive effects and causes people to make unsound investments. It creates bubbles. These bad results can take years to develop. All the quantitive easing the Federal Reserve did after the financial crisis has helped re-inflate the housing bubble. Rising rents that also cause people to have to move or suckers them into buying into the bubble. A replay of earlier stimulus. While all the churn in the economy benefits some industries, it destroys wealth for all income levels in the long run. It puts the country in further debt and makes us weaker. Instead of resources flowing to industries that make the country more prosperous in the long run, we over-invest in real estate. Without all the subsidies, both direct and indirect, real estate would be a much smaller part of the economy and there would be more capital for investments that actually create more wealth, instead of things that merely appear to do so in the short run.

jganetsk 10y ago

It's totally misleading to think of the economy as a pond holding a fixed quantity of water. The water level does change, and sometimes you need to make waves to do it. For this, you should read Paul Krugman's babysitting co-op analogy, a basic description of how an economic depression functions: https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op

stretchwithme 10y ago
The babysitting co-op Krugman referred to was a barter market where people can only trade ONE thing. And where each member had to contribute 14 hours worth of babysitting a year just to pay for using the system. That's why there was more supply than demand in that "market" when it started. https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op
stretchwithme 10y ago
At any given moment, the available resources ARE fixed. They aren't increased by moving them around. If you increase the amount of money available, that bids up prices for the existing resources. If low skilled labor is already fixed at an artificially high price (like a minimum wage), a general price increase will reduce the value of the fixed wages paid under these arrangements and increase employment. But you could accomplish the same thing by lowering the minimum wage. No additional value is created by stimulus. The extra money is just undermining the effect of things that have been hobbling the market all along. But creating more money has other destructive effects and causes people to make unsound investments. It creates bubbles. These bad results can take years to develop. All the quantitive easing the Federal Reserve did after the financial crisis has helped re-inflate the housing bubble. Rising rents that also cause people to have to move or suckers them into buying into the bubble. A replay of earlier stimulus. While all the churn in the economy benefits some industries, it destroys wealth for all income levels in the long run. It puts the country in further debt and makes us weaker. Instead of resources flowing to industries that make the country more prosperous in the long run, we over-invest in real estate. Without all the subsidies, both direct and indirect, real estate would be a much smaller part of the economy and there would be more capital for investments that actually create more wealth, instead of things that merely appear to do so in the short run.