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Just to clarify, Keynesianism isn’t particularly about who you tax but when tax and spending should occur. The idea is to be countercyclical. Cut spending and

Just to clarify, Keynesianism isn’t particularly about who you tax but when tax and spending should occur. The idea is to be countercyclical. Cut spending and increase taxes during a boom, cut taxes and increase spending during a bust. Keeps inflation during boom and deflation during a bust from being too high. The idea is to keep the boom from burning itself out (prevent leading to a crash) and to shorten the depth and duration of a bust (and eliminate them if possible). Keynes did point out that poor people are more likely to spend money they receive than the rich, so if you’re trying to get out of a demand-caused bust, dollar per dollar, redistributing to the poor is more effective. During a bust, the rich especially have a liquidity preference so they’ll hoard cash instead of spending it.

andi999 5y ago
Somehow Keynes is very popular during the bust and somehow falls out of favor in the subsequent boom.
- AnthonyMouse 5y ago
  Since then we've learned two things. The first is that inflation isn't the demon it was historically made out to be. Hyperinflation is bad, but some stable and predictable <10% annual rate of inflation mainly hurts people hoarding cash, which is a dumb thing to do in general. But if you have a moderate rate of inflation and just stop accumulating new debt during a boom, the old debt gets devalued over time, and then it's always "better" to only pay the interest now and pay the principal tomorrow (i.e. never). The second, specific to the US at this particular point in history, is that the dollar is such a strong reserve currency that the government can create trillions of dollars out of nothing and still not get hyperinflation. The risk of this is that you go too far and people stop using it as the reserve currency, but apparently that risk isn't worth the trillions of dollars in "free money" you get by discounting it.
  - rrrrrrrrrrrryan 5y ago
    > the government can create trillions of dollars out of nothing and still not get hyperinflation. The risk of this is that you go too far and people stop using it as the reserve currency If the other big central banks around the world print money at similar rates, the US dollar will remain the reserve currency. The pandemic was global. If the US were to enter a recession alone (which would be strange), and then chose to print lots of money, that's when its reserve currency status might be threatened.
stretchwithme 5y ago
Prosperity is generated by production not consumption. And who's most likely to invest in improving productivity? I don't worry about stimulating demand when bubbles collapse. The viable parts of the economy get to pay lower prices for everything. That stimulates ORGANIC recovery and growth and avoids re-inflating the bubble in the fake parts of the economy that will only re-collapse again. Delaying the collapse of unsustainable pricing and investment in non-viable sectors only makes their collapse bigger and more wasteful.
- CRConrad 5y ago
  > Prosperity is generated by production not consumption. Ya sure? So, if the economy produces oodles of luxury goods, but nobody gets to live in luxury by using them, because they're all put in storage -- "it's all about production, not consumption, dontchaknow?" ... How does this production lead to prosperity? Production and consumption go hand in hand.

andi999 5y ago

Somehow Keynes is very popular during the bust and somehow falls out of favor in the subsequent boom.

AnthonyMouse 5y ago
Since then we've learned two things. The first is that inflation isn't the demon it was historically made out to be. Hyperinflation is bad, but some stable and predictable <10% annual rate of inflation mainly hurts people hoarding cash, which is a dumb thing to do in general. But if you have a moderate rate of inflation and just stop accumulating new debt during a boom, the old debt gets devalued over time, and then it's always "better" to only pay the interest now and pay the principal tomorrow (i.e. never). The second, specific to the US at this particular point in history, is that the dollar is such a strong reserve currency that the government can create trillions of dollars out of nothing and still not get hyperinflation. The risk of this is that you go too far and people stop using it as the reserve currency, but apparently that risk isn't worth the trillions of dollars in "free money" you get by discounting it.
- rrrrrrrrrrrryan 5y ago
  > the government can create trillions of dollars out of nothing and still not get hyperinflation. The risk of this is that you go too far and people stop using it as the reserve currency If the other big central banks around the world print money at similar rates, the US dollar will remain the reserve currency. The pandemic was global. If the US were to enter a recession alone (which would be strange), and then chose to print lots of money, that's when its reserve currency status might be threatened.

stretchwithme 5y ago

Prosperity is generated by production not consumption. And who's most likely to invest in improving productivity? I don't worry about stimulating demand when bubbles collapse. The viable parts of the economy get to pay lower prices for everything. That stimulates ORGANIC recovery and growth and avoids re-inflating the bubble in the fake parts of the economy that will only re-collapse again. Delaying the collapse of unsustainable pricing and investment in non-viable sectors only makes their collapse bigger and more wasteful.

CRConrad 5y ago
> Prosperity is generated by production not consumption. Ya sure? So, if the economy produces oodles of luxury goods, but nobody gets to live in luxury by using them, because they're all put in storage -- "it's all about production, not consumption, dontchaknow?" ... How does this production lead to prosperity? Production and consumption go hand in hand.