I really like this Piece from Paul Krugman, though I do not agree with his conclusions. It at least explains the Race of Death trying to connect Labor, Finance, Capital, and Production. The Keynesian approach fails to stipulate the relationship of Treasuries to M1 and M2 in that Treasuries are the creation of Money when they are eventually Cashed; even if only to be renewed. It is the old Story of the original Holders of the Funds getting back their starting funds, plus a considerable amount of Interest, while the Government still owes the same magnitude of debt plus Interest payments. Keynesians would not call this a massive growth in the Money Supply, yet it does make an incredible number of people feel considerably Richer than they are; all based on the printing of Paper. It would work from the Keynesian View, if the production managers believed the misconception. They, and Consumers, fail to appreciate the great growth of Wealth; they maintain their original stance, and well, people are still unemployed.
Ferguson’s listed Remarks are also some bother to myself as well. He asks who is going to buy the Treasuries, as any competent economist should understand immediately: exactly those People who find further Investment Capital to enhance Production to be currently unprofitable. This means the Government is only providing an alternate Investment center for massive amounts of funds no longer devoted to Production growth. I don’t know if it is valid economic policy for Government to provide an acceptable rate of Profit for obtained funds which, in many instances, came from economics Profits that corroded the original Boom.
A little Hint to the Readers here: Downturns are the natural Pressure value which presses economic profits from an economy. These economic profits always build up in a Boom, as Producers start charging above viable Price to increase their Profits. The Downturns result from normal Profits being suppressed under the economic profit pricing. Now many in Government suggest paying Business to build those economic profits through paying Interest on those Profits during Downturns is a genuine good economic policy. I would dissent, as it simply continues an imaginary pursuit of artificial Wealth. It prevents normal Profits from reasserting its control over the economy, and creates a false new Class of Wealth. lgl