Quote:
Originally Posted by ChinoCoug
The problem with Keynesian fiscal policy is that you're supposed to increase spending and cut taxes during recessions, and do the reverse during times of plenty. Politicians don't have the willpower to do the latter, resulting in huge deficits.
Unlike politicians, the Fed has the resolve to raise rates when they're supposed to and cut them when they're supposed to.
However, during the Great Recession we already maxed out on monetary policy. Interest rates were at 0%. We had quantitative easing what, three times?
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And Europe introduced negative interest rates, which didn't fare to well.
The Keynesian fiscal philosophy has lots of operational problems. First, the multiplier has never been proven. It is not based on human behavior, which is what Adam Smith premised his predictions on.
The amount and timing of spending is never timely. Government is not a finely tuned machine and as a result the whole concept of Keynesian manipulation of the economy is a fantasy..