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Tuesday, 19 June 2012

Keynesian economics self destructs

Many people, in their hearts, know that the solution to too much long term unsustainable debt is not to spend more.

The wider western world calls for more spending to solve the global debt crisis.  "Groupthink" Keynesianism has largely unified western economists' policy, having been taught from a single text.  Diversity of ideas has been annulled.

France, Greece, the US and many other economies all advocate the injection of more money to stimulate economies, or to defer serious bankruptcies.  Their arguments for stimulus rest on collective economists' popular belief.  Consensus dogma dominates alternative thought.  Political leaders use hostility and fallacious arguments to suppress alternative solutions.  

But the global debt crisis has persisted for years.  Numerous huge stimulus programs have not worked.  After TARP, QE1, QE2, twist and others, more stimulus is still "needed".

Most western leaders even more strongly now advocate that the solution to the debt crisis is to spend more money. The extra money can only be created by borrowing more, or printing more.

The Keynesian theory might be correct that more debt is required to solve the debt crisis.  But in practise that creates more debt.  The debt required is huge, in the trillions.  Printed money without backing is not valuable money.  The consequences will be that the debt crisis will be amplified. 

Most people know that you can't solve long term debt problems by spending more.

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