What is Wrong with Keynesian Thought

The precepts behind this Piece have long needed an evaluation, practically since Keynes himself, and should be examined from the viewpoint of actual existence. Sticky Wages might exist, but Layoffs and Reorganizations express more value than Government replacement of Demand, a Condition guaranteeing Inflation and Waste Spending. Government Spending as Stimulus works only if there is lack of specialization of labor; any degree of labor specialization means that Government Spending only supports the Wage Demands of limited groups of specialized personnel, and does so in a manner which actually increases the unemployment of unskilled labor. No Study I know has been specific because of the political dynamite of the clime, but Stimulus may increase Unemployment in the Aggregate; the Inflation generated actually cutting Private Consumption. The Reader should understand that Economics is all about balance, or a distribution of resources among various Production functions, and Government Spending always has counter-cyclical adverse effects, often greater than the nominal benefits desired.

The multiplier effect of Stimulus is often much in question, though One could not detect it in the writings of Economists. It is always assumed to be at least 1, though there is some evidence that more efficient alternate use of Resources is the real number 1, not the nominal Dollar value stipulated by Government–which does not even account the Inflation engendered. Nobody stipulates this harsh fact, but the multiplier effect must be greater than the Tax rate necessary to repay the assumed debt under Stimulus, or the Stimulus has an negative effect on the Economy; even if the Repayment is assumed to be delayed, as is normal for Stimulus Spending. One has to be careful, for We could technically stimulate Ourselves straight into a Depression, and not realize it until We have already left the normal correction of a Recession.

The propensity to under-consume has always been an endangered Species, a Bird rarely seen in the Wild. Economists are doing the Tap Dance, trying to explain How a return to normal Savings patterns among Consumers leads Us into Recession. Current analysis seems to imply that Government debt aggregation must be complemented by Consumer debt aggregation, else there is no Stimulus; i.e., We must spend our way to the Poorhouse, else We won’t have a Job when We get there. There is something wrong with that Scenario, and Congress may need to review its passage of the stricter Bankruptcy law, just to accommodate the greatly increased Traffic through the Court system. There are Those, both within and without the Economics profession who would say I am too harsh in analysis of these factors; I can only say that Bankruptcy can be even harsher, and Politicians are reaching for the unreachable Stars. lgl