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In Britain, Keynesians Fall Out Of Favor - Ny Times

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http://www.nytimes.com/2010/10/21/world/europe/21austerity.html?ref=business

The British economist John Maynard Keynes may live on in popular legend as the world’s most influential economist. But in much of Europe, and most acutely here in the land of his birth, his view that deficit spending by governments is crucial to avoiding a long recession has lately been willfully ignored.

In Britain, George Osborne, chancellor of the Exchequer, delivered a speech on Wednesday that would have made Keynes — who himself worked in the British Treasury — blanch. He argued forcefully that Britons, despite stumbling growth and negligible bank lending, must accept a rise in the retirement age to 66 from 65 and $130 billion in spending cuts that would eliminate nearly 500,000 public sector jobs and hit pensioners, the poor, the military and the middle classes because of what he insisted was the overwhelming need to reduce the country’s huge budget deficit.

In Ireland, where the economy is suffering through its third consecutive year of economic slump, Keynes is doing no better. Devastated by a historic property crash and banking bust, the Irish government is preparing another round of spending cuts and tax increases.

Combined with what Dublin has already imposed, the cuts could add up to as much as 14 percent of Ireland’s gross domestic product, an extraordinary amount for a modern industrial country. Ireland’s budget deficit reached 32 percent of total economic output this year.

Indeed, across Europe, where the threat of a double-dip recession remains palpable, what is most surprising is not simply that governments from Germany to Greece are slashing public outlays but that the debate hinges more on how fast to do so rather than whether such substantial cuts are the right thing to do under the current circumstances.

“Everything Keynes established about the primacy of maintaining demand at a steady pace is gone,” Brad DeLong, a liberal economist and blogger at the University of California, Berkeley, said mournfully.

“Europe obviously thinks it can focus on sound finances while the U.S. manages world demand,” he said in a telephone interview, “but unfortunately we are not doing that.”

Along with other noted liberal economists like Paul Krugman and Joseph Stiglitz, Mr. DeLong has long argued for more stimulus spending in the United States and abroad to lift growth, even if deficits rise temporarily as a consequence.

While that notion may have its adherents in the White House and among many American and European academics, in Europe there is hardly a policy maker to be found who is making the argument that governments need to spend more, not less.

This is particularly true in Britain, where a combination of collapsing tax revenues and government spending to prop up banks and support the unemployed during the financial crisis has contributed to a budget deficit equal to 11 percent of G.D.P., second highest in Europe after Ireland.

“Keynsians are regarded here as heterodox, not orthodox,” said Andrew Lilico, an economist at the London-based research institute Policy Exchange, which has close intellectual ties to the Conservative Party. “And it goes back to one thing: we have this internal fear of losing control of our deficits and having foreigners telling us what to do. There is also a sense that deficits of this scale are morally lax.”

I'm sure if Keynes read this crap he'd be horrified. The VI's are out in force giving out as much misinformation as possible and bastardizing his theories to justify their own lunatic aspirations to print as much free money as possible.

Keynes argued for balanced budgets so I think he'd be onboard with the idea of deficits being morally lax.

Still at least we've got a academics of the highest quality highlighting that people like Krugman are in fact idiots.

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Perhaps they think the final collapse of nearly 30 years of massive Keynesian spending on defence is the new reality? Both Thatcher and Regan were keen on pumping billions of taxpayers' money into pointless stuff painted khaki. Thatcher was too thick to even understand the game and spend our money propping up the yanks' economy. I think that's why the yanks are "pissed" (as they say) about the defence cuts. Lockheed Martin shares Mr President?

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"This is particularly true in Britain, where a combination of collapsing tax revenues and government spending to prop up banks and support the unemployed during the financial crisis has contributed to a budget deficit equal to 11 percent of G.D.P., second highest in Europe after Ireland."

....interesting Ireland and ourselves were the biggest property rampers and property investors in Eorope during the 'good times'....with many of the Irish investors 'investing' in the UK ....and in turn our Banks going crazy in Ireland as well as the UK....the data doesn't lie..... :rolleyes:

Edited by South Lorne

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"This is particularly true in Britain, where a combination of collapsing tax revenues and government spending to prop up banks and support the unemployed during the financial crisis has contributed to a budget deficit equal to 11 percent of G.D.P., second highest in Europe after Ireland."

....interesting Ireland and ourselves were the biggest property rampers and property investors in Eorope during the 'good times'....with many of the Irish investors 'investing' in the UK ....and in turn our Banks going crazy in Ireland as well as the UK....the data doesn't lie..... :rolleyes:

Shhh! It's true, but you shouldn't say it.

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.....even if deficits rise temporarily as a consequence.

The US is well behind the UK in economic policy.

The UK had it's scorched earth "temporary" deficit rise in the years just before Gordo left.

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Perhaps they think the final collapse of nearly 30 years of massive Keynesian spending on defence is the new reality? Both Thatcher and Regan were keen on pumping billions of taxpayers' money into pointless stuff painted khaki. Thatcher was too thick to even understand the game and spend our money propping up the yanks' economy. I think that's why the yanks are "pissed" (as they say) about the defence cuts. Lockheed Martin shares Mr President?

Keynesianism ended in the 80s. The Reagan/Thatcher paradigm was supply side, which amounted to cut taxes and put everything on the never-never, cross fingers and and hope the economy will keep growing forever, which has brought us to our present situation.

While Keynesianism in practice was misguided, supply side voodoo thinking is outright dangerous and should be binned forever along with Marxism as an economic system.

Edited by Britney's Piers

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  • 144 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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