What happens when you keep spending more than you have? Your economy contracts. Can you inflate it with easy currency? Sure thing -- up unto a point.
This Keynesian conversation is going to be very interesting to watch over the next few years. Lots of countries trying different things. I imagine no matter how it turns out, there will be quite a bit of spin, though. But still, it's better to have examples than just listen to theory, even if the examples are murky.
From what I hear, more QE is coming from the ECB. That might have a generally good effect on many economies. Or it might just be fun to blow through for a few months. We'll see.
I don't think Keynesians advocate "spending more than you have" forever. The thrust, as a I understand it, of their arguments is that deficit spending can be useful in getting out of a downturn and can have beneficial aspects. Of course, if done improperly, it can have bad effects.
I don't think Keynesians advocate "spending more than you have" forever.
As you indicate, Keynes by-the-book does not. He would have us actually save during booms, so that we can pump up the economy in the busts.
However, in practice, those in power who follow Keynes seem to be doing so not because of any belief in the economics, but because it justifies their wish to buy greater power by wielding more money. Thus, they don't follow the invest-when-booming part of the model. The result is that the government spending is at best balanced, and much more often it's in deficit.
The problem here is not spending more than we have, but spending it in the wrong things. And now cutting the wrong things. Banks are using the money to keep their balances healthy, not to lend money to productive business.
This Keynesian conversation is going to be very interesting to watch over the next few years. Lots of countries trying different things. I imagine no matter how it turns out, there will be quite a bit of spin, though. But still, it's better to have examples than just listen to theory, even if the examples are murky.
From what I hear, more QE is coming from the ECB. That might have a generally good effect on many economies. Or it might just be fun to blow through for a few months. We'll see.