The Keynesian approach to economics is derived from the idea that the government can smooth out economic highs and lows to create a more stable situation.
It is controversial, but is currently in use world wide.
The question is why isn't it working? John Maynard Keynes established a school of thought in economics that touted government involvement in the economy.
This school of thought was in conflict with the Austrian School of economics, which subscribed to the idea that the government only stifled economic action when it interfered in things.
Yes, there would be ups and downs, but the economy would naturally find an equilibrium or so the theory went.
The Austrian approach became the standard with the Regan Administration and pretty much dominated through the last Bush Administration.
Then the economy went haywire and a return to Keynesian theory has become popular.
The government has intervened in the economy in a huge way by pumping cash into it and driving the federal deficit annually and in the long term, through the roof.
We'll add $1.
8 trillion dollars to the national debt this year.
To give you a point of reference, the national debt was $5.
6 trillion in 2000.
Now it is over $13 trillion and should exceed $20 trillion in another five years.
That is not healthy.
So, has the Keynesian approach worked? Yes and no.
It has helped stabilize everything, but it hasn't really turned things around.
With TARP and the Stimulus money running out, the economy is now on its own again.
Instead of standing strong, it is staggering around like a drunk after a bender.
Real fears of a double dip recession and perhaps depression are rising.
The question is why hasn't the Keynesian approach worked or, at least, worked better? The answer is scope.
Specifically, the scope of the economy.
It is no long restricted to just the borders of a particular country.
No, we've become one big global economy.
As a result, pumping money into just the United States doesn't account for the problems in Europe, Asia and what have you.
Look at it a different way.
Let's assume the United States represents the entire world.
The entire country goes into a massive recession.
Would pumping money just into New York solve the problem? No.
It would stabilize New York while the money lasted, but that would really be about it.
Once the money was gone, New York would rejoin the country in its economic misery.
This Great Recession has proved a simple fact.
The world has changed economically.
The old theories are just that - old.
New approaches are needed.
One look at Washington, D.
C.
, does not provide much optimism that this lot will come up with something creative.
It is controversial, but is currently in use world wide.
The question is why isn't it working? John Maynard Keynes established a school of thought in economics that touted government involvement in the economy.
This school of thought was in conflict with the Austrian School of economics, which subscribed to the idea that the government only stifled economic action when it interfered in things.
Yes, there would be ups and downs, but the economy would naturally find an equilibrium or so the theory went.
The Austrian approach became the standard with the Regan Administration and pretty much dominated through the last Bush Administration.
Then the economy went haywire and a return to Keynesian theory has become popular.
The government has intervened in the economy in a huge way by pumping cash into it and driving the federal deficit annually and in the long term, through the roof.
We'll add $1.
8 trillion dollars to the national debt this year.
To give you a point of reference, the national debt was $5.
6 trillion in 2000.
Now it is over $13 trillion and should exceed $20 trillion in another five years.
That is not healthy.
So, has the Keynesian approach worked? Yes and no.
It has helped stabilize everything, but it hasn't really turned things around.
With TARP and the Stimulus money running out, the economy is now on its own again.
Instead of standing strong, it is staggering around like a drunk after a bender.
Real fears of a double dip recession and perhaps depression are rising.
The question is why hasn't the Keynesian approach worked or, at least, worked better? The answer is scope.
Specifically, the scope of the economy.
It is no long restricted to just the borders of a particular country.
No, we've become one big global economy.
As a result, pumping money into just the United States doesn't account for the problems in Europe, Asia and what have you.
Look at it a different way.
Let's assume the United States represents the entire world.
The entire country goes into a massive recession.
Would pumping money just into New York solve the problem? No.
It would stabilize New York while the money lasted, but that would really be about it.
Once the money was gone, New York would rejoin the country in its economic misery.
This Great Recession has proved a simple fact.
The world has changed economically.
The old theories are just that - old.
New approaches are needed.
One look at Washington, D.
C.
, does not provide much optimism that this lot will come up with something creative.
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