Home / Deficit / Keynesian Leaders Demand More Deficits to Avoid Recession.
Print Friendly and PDF

Keynesian Leaders Demand More Deficits to Avoid Recession.

Written by Gary North on April 10, 2013

George Soros has said that Europe will go into recession this year if governments adopt austerity, i.e., do not run huge deficits. Our new Secretary of the Treasury has demanded the same thing.

Keynesians love two things: national government deficits and central bank counterfeiting to fund these deficits. Their mantra is this: “Deficits and digits.”

Why would a deficit in your budget be wise in a recession? When you have trouble paying your bills, why should you borrow more money? When you are in a hole, why should you dig deeper? You shouldn’t.

Keynesians say that none of this applies to a national government. Why not? They say that we all cannot save money at the same time. When they say “we,” they mean taxpayers.

But if everyone cuts back on present spending for consumer goods, the money that we save has to go somewhere: in a bank, or in an investment. Everyone therefore invests more in producer goods. The money that we don’t spend on consumer goods is transferred to businesses, which then hire workers.

Exception: if banks fail to lend out the money, and instead keep it at the Federal Reserve, then consumer prices fall. That lets us live on less money. Then we will start buying again. That’s how recessions are overcome by the free market: price adjustments.

Keynesians literally cannot follow this logic. They fill pages with equations and jargon to avoid facing the obvious implications of this logic. The modern economy is run by economic idiots who cannot understand this logic.

They are going to bankrupt the welfare state with their logic. They will cause the Great default. That’s the good news. And when they do, we Austrian School economists will blame them.

They will say, “We needed more deficits. We needed more government sending. We needed more debt.” The world will finally see that these are the tailors of invisible clothes. But, unlike the emperor in Hans Christian Andersen’s tale, they will string up the tailors (figuratively speaking).

Continue Reading on www.cnbc.com

Print Friendly and PDF

Posting Policy:
We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse. Read more.

5 thoughts on “Keynesian Leaders Demand More Deficits to Avoid Recession.

  1. G. Kuhns says:

    Actually, Keynesians don’t really love deficits, they love government. The bigger and more pervasive the government the better. Government happens to feed on money – whether it is earned by someone or counterfeited is not important to a Keynesian.

  2. There is a big difference between Keynes and progressives. Keynes believed in government SAVING money (not spending) during the good times to relieve excess demand (for goods, labor, materials, etc).; and spending during bad times for the opposite reasons. Simply stated, government should define an efficient operation to maintain essential operations during good and bad times, & it doesn't grow or shrink. Excess revenue goes in the bank during good times & infrastructure needs, replacements, productive projects, etc. are done in bad times, paid for by accumulated savings.

    Our progressive government spends on non-productive and corruption like drunks during the good times and bad times. The proper definition is "looting".

  3. Keynes was incredibly naive. Governments don't save money, they buy votes with it.

  4. If you borrow you postpone disaster until tomorrow and so get votes today. Obama likes to say he averted a great depression. What he did was postpone a recession and, with his enormous deficits, create an impending Great Depression. Unfortunately voters vote based on today and not tomorrow so he got reelected.

  5. Bankrupting the welfare system is a good thing…
    Do you think the gubmint commie unions have figured out what this house of cards will do to unfunded pensions? Ask some Enron folks…