ilia25
I can do math
- Jan 12, 2012
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Or if your economy is depressed so that monetary policy cannot counteract the negative effect of reduced spending. As a rule, you are correct, governments are not economic engines. But they can and should function as an engine starter when the engine stalls. That is a basic textbook policy.
Only if you are Keyensian.
That's Econ 101, actually. Besides, the economy behavior since the beginning of the crisis was pure Keynesian -- low inflation despite trillions of new money "printed" by the Fed, low treasury rates despite trillion-plus government deficits -- those two things that were not supposed to happen if Keynes was wrong. And in fact, most conservative economists and the likes of Paul Ryan were predicting both high inflation and investors running from treasuries years ago. Precisely because they never bothered to learn what Keynes figured out back in 1930s.