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> * Keynes basically advocated for massive government stimulus to make up for national economic slack* This is an inaccurate summation of Keynesian policy. Key
by CalChris 9y ago
> * Keynes basically advocated for massive government stimulus to make up for national economic slack*
This is an inaccurate summation of Keynesian policy. Keynes recommended counter-cyclical policies much like a feedback loop. Growing too fast? Cut spending. Growing too slow? Spend more. Keynesian is different from pure free market theory which is like an open loop.
My EE120 Linear Systems prof at Berkeley also taught in the Economics Department. So the idea that you'd want a feedback loop rather than an open loop makes a lot of sense to this gearhead.
> * 1. Governments are less efficient than free markets at spending money. See China.*
See GPS.
> * 2. It tends to lead to central bank stimulus (dilution and tight control of currency values).*
Yes. That is the mechanism.
> Everybody racing their currencies to the bottom
No. Europe is not racing the euro to the bottom. Japan is not racing the yen to bottom. The US is not racing the dollar to the bottom.
Et cetera.
- dforrestwilson 9y agoA feedback loop makes sense, but the problem still seems to be that the counter-cyclical stimulus ends up being immortal. OK so if we aren't all devaluing our currencies lower and lower what explains the deflation we have been witnessing across the globe?
- CalChris 9y agoYes, feedback loops loop. That's what they do. The trouble with open loops is that they crash and crashes are really bad. Keynesianism came to the forefront after the Great Depression which was horribly mismanaged by conservatives free market zealots. Crashes are really really bad. Roosevelt came into office with 25% unemployment. Let me say that again. Crashes are really fucking bad and are to be avoided. In the US we currently have low inflation (1-2%) but not deflation. Same with Europe.
- dforrestwilson 9y agoIt sounds like you are ignoring Libor, and excluding food and fuel from your CPI.....
- CalChris 9y agoI am certainly excluding Libor (which would be very strange to include) and I'm definitely not excluding food and fuel from the CPI. Airline Fares Cable Television Household Fuels Leased Cars Lodging Away from Home Medical Care Motor Fuels Motor Vehicle Insurance New Vehicles Personal Computers and Peripheral Equipment Rent and Rental Equivalence Telephone Services Tuition and Fees, College Tuition and Fees, Elementary and High School Used Cars and Trucks https://www.bls.gov/cpi/ https://www.bls.gov/cpi/ Looking at Libor, it has never been in deflation in 30 years: http://www.macrotrends.net/1433/historical-libor-rates-chart http://www.macrotrends.net/1433/historical-libor-rates-chart
- dforrestwilson 9y agohttp://www.economonitor.com/blog/2017/06/negative-rates-part-1-beyond-the-zero-bound/ http://www.economonitor.com/blog/2017/06/negative-rates-part...