Kasz216 said:
It's simple... the "second recession" was really just an extension of the first. It was't because of contractionary polcicies after listening to classical economists. We're currently about to go through a second recession with no contractionary policies. It's just the natural outcome of massive government spending to try and "make up the difference". It's why even New Keynsians are against it. It's a simple matter of goverment plans causing immediate crowding out. The government can't spend forever, and whenever it's stopped, a "second" recession happens which is really just a part of the first. All government spending does is mask the problem, by hiding it by "defeating" a recession through the numbers. As soon as the spending stops, no matter when you stop it... (and eventually you do) things drop back down to where it was, until a normal fix can happen. All government spending does is delay the "normal" fix and delay peoples misery. |
I believe we're about to enter a second recession, not because of our defeceit spending, that was intended for a short period of time, versus Europe's, which was undertaken for years, before the recession.
Inflationary policies, when the economy is already is in its long term output, is not Keynesian. Keyensianism accepts NAIRU and that all such things can do is cause inflation. It also is simply common sense that you can't run defeceits forever, and that you need to have surpluses. All I'm saying is it makes no sense to try to balance the budget, in the worst time possible. It's so counter intuitive.
All this boils down to, I think, is your reluctance to identify yourself, what a "normal" fix is. It seems that you yourself don't understand what it means. I believe that recessions are primarily caused by demand shocks. Although such shocks may have been caused by things such as the housing bubble, the dividends bullshit, etc, such things aren't the actual cause of the recession. A crash in the stock market or real estate market, affects your wealth, but with sticky wages, shouldn't affect your income. There is a reduction in wealth, but everyone should still be able to buy the same ammount of stuff they bought. And what happens when we lose a bunch of wealth? We cut back on spending, consumer spending.
Until consumer confidence returns, and it will, I believe it makes sense for government to lower taxes, give stimulus packages, cut interest rates, and increase government spending. Such things will increase output to its normal level, get producers to continue producing instead of liquidating their capital, get people to keep getting their paychecks, and hasten the recovery of consumer confidence.
Once consumer confidence returns, and consumer spending returns to its normal level, then the government can cut back, and begin to worry about raising taxes, interest rates, cutting transfers and spending.
