Keynes' final book was a defense of government spending. This is why the book was hailed as a masterpiece. It backed up what all Western governments were already doing: spending money on welfare projects and running massive deficits.
Keynes believed that there could be permanent depression and price deflation. He said that prices do not always clear markets by balancing supply and demand. The General Theory is a convoluted, deliberately incomprehensible book devoted to disproving the fundamental premise of all economics, namely, that the search for profit motivates buyers and sellers to exchange scarce resources...
Keynes was incoherent. This was deliberate. Why do I say Keynes was deliberately incoherent? Because when he chose to write clearly, he was a master of prose. Read The Economic Consequences of the Peace (1919) or Essays in Biography. When he could not sustain an argument, he adopted the strategy of incoherence. Most of The General Theory is incoherent...
What was Keynes after? A fascist state: the fusion of private ownership and socialism...
Keynesians are deflationists, meaning "the free market will produce permanent depression and deflation apart from government spending and central bank inflation." They believe that, without government spending, huge deficits, and central bank inflation, the economy will go into a deflationary spiral and not recover. They invoke the paradox of thrift and the liquidity trap as reasons. Both rely on the same idea: "money saved in a bank is not simultaneously money lent by the bank to increase production or consumption." It is a fallacious idea. It is "currency under the mattress" economics. It is "break in the flow of funds" economics. It is crackpottery...
Whenever you hear about the need for a government stimulus-spending bill, think "crackpot economics." Whenever you hear that deficits don't matter, think "crackpot economics." Whenever you hear about the need for quantitative easing, think "crackpot economics."
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My thoughts: Gary North explains once again that Keynesian soultions will not lead to economic growth and prosperity.
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