Who else can tell [the politicians] how to reverse a recession by borrowing a trillion dollars?
...we as a profession are making our voices heard in a way we never get the chance to do when the credit is flowing, businesses are investing and consumers buying what business wants to sell. Then, we make arguments based on data, otherwise known as "facts", processed through regression analysis and logical rigour, which few humans read. (I know, I am an economics journal editor.) Now, on the other hand, we call for trillion dollar stimulus plans on the basis of little more than citing John Maynard Keynes--and politicians revere us. Citing Keynes gives us special licence to talk economics without using any. To paraphrase the lawyers' dictum, when the facts are on our side, we pound the facts; when theory is on our side, we pound theory; and when neither the facts nor theory are on our side, we pound Keynes--and to great effect.In this latest version of trickle-down economics, the taxpayers are borrowing trillions and giving it to the bankers. Bankers will then lend to businesses which will create jobs. That's the theory.
This will end badly for the taxpayers. Eventually, there are three solutions to this much debt: higher taxes, inflation, and default. Or a combination.
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Source:
Ben Steil. Keynes and the Triumph of Hope Over Economics.
Council on Foreign Relations. February 6, 2009.
http://www.cfr.org/publication/18483/keynes_and_the_triumph_of_hope_over_economics.html?breadcrumb=%2Fbios%2F1637%2Fbenn_steil
© 2009 Michael Cale
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