John Maynard who? (part 1)

By Randell Tiongson on December 31st, 2009

John Maynard Keynes: 20th century economist and father of the ‘Keynesian’ Theory.

What the heck is Keynesian Economics? Simply put, “it is a macroeconomic theory that argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle” (wikipedia.com). In other words, this is a theory that gives the government a huge say in the economy.

Governments, whether they admit it or not cling to Keyne’s theory like it’s the gospel truth especially now. Governments feel the need to dictate the direction of the economy as they feel that only government intervention can solve the crisis.

Really? Here’s a thought. Isn’t government, to a large degree, responsible for the mess we are in? When you really look at the root cause of many of today’s economic problems, one major thought comes into my mind – cheap money. Cheap money or a very low interest scenario allowed for an unrealistic prosperity that was not only unsustainable, it was bound to crash – and indeed, it crashed big time. Particularly in the US and Europe, the stock market took the cheap money and recklessly gambled with it; while people took it and wantonly spent it like there’s no tomorrow. Yes, cheap money allowed for growth but when you really look at it retrospectively, the growth made many reckless and deleted the word prudence in their vocabulary. In other words, it was a bubble.

… catch part 2

Share

2 thoughts on “John Maynard who? (part 1)”

  • Keynesian theory seems to be a good one if you first look at it. But it has been showing major cracks. Right now, the US, which employs the Keynesian economics, is in a deep economic hole due to too much spending and borrowing. It is trying to solve the problem by more spending and borrowing through the government stimulus programs. Short-term, the stimulus looks good but long-term there are serious consequences. Someone who has the opposing view (Austrian economics) will contend that a boom must be followed by a bust – that is, a recession must be a welcome thing to cure the excesses. The free-market must run its course. But the US has been postponing (or trying to shorten) the recession.

    If the US doesn’t change its course, hyperinflation and/or higher taxes are certain to happen. The US dollar will keep losing value relative to most currencies. This decade might become worse for the US than the last decade if corrections are not made. (Gold, precious metals and commodities are the opportunities in this type of scenario.)

    HAPPY NEW YEAR, EVERYONE! May blessings and prosperity be with you all this 2010! – Bon-Gonna Li and family (January 1, 2010 1:54 am)

  • I like to learn from your information Randell, just notice in this particular topic, it seems that I don’t see the meynard’s theory that is being adapted by the government is the problem…” while people took it and wantonly spent it like there’s no tomorrow. Yes, cheap money allowed for growth but when you really look at it retrospectively, the growth made many reckless and deleted the word prudence in their vocabulary…” I think the root cause is there…the government should have stimulated the economy however, you mentioned the root cause already…Do you mean the government should do much more than just giving out cash? Do I understand it as regulation, metrices installed to monitor and measure the efficiency of the stimulus? other else? How and what do you mean by God’s economy? If you are referring to churches or evengelical churches well, I think we have to pray that bros.and sis should be educated financially…What about churches quarelling for little things like the song that should be sung in the worship service – what a cheap cause to divide and aha not to mention money because there are so many of Christian churches already being divided due to money matters…so how about the God’s economy? will you expound it further…thanks…

  • Leave a Reply

    Your email address will not be published. Required fields are marked *

Copyright © 2015 by Randell Tiongson | SEO by SEO-Hacker. Designed, managed and optimized by Sean Si

Be a pal and share this would ya?
John Maynard who? (part 1)