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#Keynesian Economics
liberalsarecool · 13 days
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Government stimulus works.
Democratic policies work.
Republican supply side economics, their tax cuts, and their trickle down are all MASASIVE FAILURES. We have the proof.
Never forget, all the Democratic recovery plans and policies had zero Republican support and they all saved America. Not only that, Republicans predicted the recovery plans would not work.
Three strikes! Republicans caused the economic crisis, Republicans predicted the stimulus would not work, then they voted against the stimulus.
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i-am-dulaman · 1 year
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Okay I'm riled up about this rn so time for a history of economics lesson (rant) from me, a stranger on the internet
I'm a communist, I hate capitlism, so lemme just put that out there. But capitlism had its moments. Even marx had some praise for parts of capitlism.
And by far the most successful form of capitlism was Keynesian economics, as evident by the enormous increase in living standards in those countries which adopted it between the 1930s and 1970s.
What's Keynesian economics? The idea that capitlism can't survive on its own, and must be supported by government spending at the poorest ends of society and taxes at the richest ends of society (essentially the opposite of trickle down economics) as well as strong regulations on certain industries like banking.
It basically started in 1936 with President Roosevelt who was a personal friend of John Keynes (who the theory is named after).
Roosevelt implemented Keynesian economics to great effect; he raised the top tax rate to 94% (he actually wanted a 100% tax rate on the highest incomes, essentially creating a maximum wage, but the senate negotiated down to 94%) and similarly high corporate tax rates, he created the first ever minimum wage, created the first ever unemployment benefit, created social security in America, pension funds, and increased public spending on things like public utilities and infrastructure, national parks, etc. Which created about 15 million public sector jobs.
This ended the great depression and eventually lead to America winning world War 2, after which many countries followed suit in implementing similar policies, including UK, Australia, and NZ (apologies for the anglosphere-centric list here but they're the countries I'm personally most familiar with so bare with me)
Over the next 40 years these countries had unprecedented growth in living standards and incomes, and either decreasing or stable wealth inequality, and housing prices increasing in line with inflation. Virtually every household bought a car and a TV, rates of higher education increased dramatically, america put a man on the moon, and so on.
Then it all abruptly ended in the 80s and the answer is plain and obvious. 1979 thatcher became UK prime minister. 1981 reagan became US president. 1983 the wage accords were signed in aus. 1984 was the start of rogernomics in NZ (Someone link that Twitter thread of the guy who posts graphs of economic trends and points out where reagan became president)
(Also worth noting those last two in NZ and Aus were both implemented by 'left' leaning governments, but they are both heavily associated with right wing policies.)
This marked the beginning of trickle down economics: tax cuts, privatization of publicly owned assets, reduction in public spending, and deregulation of the finance sector. The top tax rates are down to the low 30s in most of these countries, down from the 80s/90s it was prior. Now THATS a tax cut.
And what happened next?
Wages stagnated. Housing prices skyrocketed. Bankers got away with gambling on the economy. Public infrastruce and utilies degraded. And wealth inequality now exceeds France in 1791.
I don't know how anyone can deny the evidence if they see it, but there's so much propaganda and false information that a lot of people just don't see the evidence.
Literally all the evidence supports going back to Keynesian economics but now that the rich have accumulated so much wealth it's virtually impossible to democratically dethrone them when they have most of the politicians on both the right and the left in their pocket.
Unfortunately it was the great depression and ww2 that gave politicians the political power to implement these policies the first time around. Some thought the 2008 crash would spur movement back towards Keynesianism (which it actually did in Iceland, congrats to them), I hoped covid would force governments to now, but nope.
All these recent crises' seem to have just pushed politics further and further right, with more austerity and tax cuts.
I don't really have a message or statement to end on other than shits fucked yo.
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madame-helen · 2 months
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Economic statistics should be taken critically as the shaky constructions they are, but they do tell you something. Industrial policy has made its worldwide comeback within an equally worldwide exhaustion of the global economic system, the slow-motion expiration of the US-based configuration of capitalism inaugurated at the close of the Second World War. On the surface, Bidenomics seems to represent a decisive break with neoliberal dogma, and so it is in some respects; but more fundamentally, it is smoothly continuous with the deeper trend, starting in the 1940s, of fading growth prospects and rising state involvement in the private economy. If anything, it is an intensification of this trend. Its official adoption represents the belated recognition by “policymakers” that still greater state action is needed to sustain the already meager growth rates of the national economy, crushed beneath the dead weight of an expiring system.
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trutown-the-bard · 2 years
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troelsenrandall · 1 year
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U S Fiscal Policy: An Introduction To Our Fiscal Policy 2020
It is enacted by central banks and comes about via open market operations, reserve necessities, and setting rates of interest. The U.S. Federal Reserve employs expansionary policies each time it lowers the benchmark federal funds fee or low cost price, decreases required reserves for banks or buys Treasury bonds on the open market. Quantitative Easing, or QE, is another form of expansionary monetary policy. When the Fed lowers its low cost price, it also means that the rates of interest shall be low, and the worth of money may also be much less. The strategies of an expansionary monetary policy increase the availability of money. A lot of free cash may cause a lower in the worth of the currency, and may also trigger inflation.
When authorities expenditures exceed government tax revenues in a given year, the federal government is working a budget deficit for that 12 months.
Ultimately, choices about whether to make use of tax or spending mechanisms to implement macroeconomic policy is, partially, a political decision quite than a purely financial one.
Taken together, this additionally signifies that they cannot at all times control the money provide.
Our analysis of financial policy confirmed that developments in the bond market can affect funding and internet exports.
Each year, the financial system produces at potential GDP with solely a small inflationary increase in the value degree.
Data on the economy which are more correct and extra speedily available ought to improve the use of fiscal policy by reducing the size of the recognition lag.
The concept of money neutrality is usually interpreted as meaning that money can not affect the true economy in the lengthy term. The overarching goal of each monetary and monetary policy is often the creation of an economic environment the place progress is secure and positive and inflation is stable and low. Crucially, the goal is due to this fact to steer the underlying economy so that it does not experience economic booms which might be adopted by prolonged periods of low or negative development and high levels of unemployment. While fiscal coverage usually does have the effect of stimulating the economy, policy and stimulus are two different things.Stimulus is using both fiscal or monetary coverage to stimulate the economic system.
Expansionary And Contractionary Fiscal Policy
Expenditures for well being and education really “crowded in” non-public sector investment. These expenditures, Mr. Wang argued, represented increases in human capital. Such will increase complement returns on private sector funding and subsequently enhance it. The most necessary thing you can do is get educated about what it means, after which communicate along with your local, state and federal representatives. Sign the pledge to let local representatives know that you are involved about the nation’s fiscal future, or get entangled by learning about how you can make a distinction in your personal community. monopolistic competition graph -19 pandemic has pushed the worldwide financial system into the worst recession since World War II, with economists predicting that the global economic system will shrink by 5.2% this 12 months.
Monetary And Fiscal Coverage
For instance, a choice on the part of households to eat more and to keep away from wasting less can result in a rise in employment, investment, and ultimately profits. Equally, the funding decisions made by companies can have an necessary impression on the true financial system and on company earnings. But individual corporations can hardly ever have an result on giant economies on their own; the choices of a single family concerning consumption may have a negligible influence on the wider financial system. And the consequences of quirks within the timing of revenues and outlays, such as the receipt of funds from Desert Storm allies that arrived within the fiscal years following the warfare itself. Notable on the determine are the fiscal stimulus of the Vietnam War, the Kemp-Roth tax cuts of the early 1980s, and the program of tax cuts enacted under George W. Bush. Suppose the government reduces authorities spending to scale back the finances deficit.
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One lesson the Japanese case illustrates is that prolonged departures from introduced inflation targets could prove difficult to reverse. The Japanese government announced unprecedented efforts at fiscal growth, which resulted in solely minimal implications for inflation expectations. Figure 2 displays our estimates of BEI, adjusted BEI, expected inflation, and the inflation threat premium over a 10-year horizon through the past decade, including the COVID-19 period.
Utilizing Fiscal Policy To Fight Recession, Unemployment, And Inflation
The supply-side economics principle advocates for decrease company taxes and not decrease revenue taxes to grow the economic system. Tax cuts in the corporate sector go away businesses and corporations with more cash to invest and hire new workers. In case the corporate has sufficient staff, then it might possibly use the additional cash to buy stocks, bonds, or buy new corporations.
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omegaphilosophia · 10 days
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Theories of the Philosophy of Macroeconomics
The philosophy of macroeconomics deals with the study of large-scale economic phenomena, such as aggregate output, employment, inflation, and economic growth. It seeks to understand the principles, assumptions, and implications of overall economic activity and the interactions between different sectors of the economy. Some key theories in the philosophy of macroeconomics include:
Classical Economics: Classical economics emphasizes the long-run equilibrium of the economy, where prices and wages adjust to ensure full employment and resource utilization. It stresses the importance of free markets, minimal government intervention, and the self-regulating nature of the economy.
Keynesian Economics: Keynesian economics, developed by John Maynard Keynes, focuses on short-run fluctuations in economic activity and the role of aggregate demand in determining output and employment. It advocates for government intervention through fiscal policy (such as government spending and taxation) and monetary policy (such as interest rate adjustments) to stabilize the economy and address unemployment during recessions.
Monetarism: Monetarism, associated with economists like Milton Friedman, emphasizes the role of monetary policy in influencing aggregate demand and economic outcomes. It argues that changes in the money supply directly impact inflation and economic growth, advocating for stable and predictable growth in the money supply to maintain price stability and promote long-term economic growth.
New Classical Economics: New classical economics incorporates microeconomic foundations into macroeconomic models and emphasizes the rational expectations hypothesis. It posits that individuals form expectations about future economic variables based on all available information, leading to self-correcting market outcomes and limited effectiveness of government policies.
New Keynesian Economics: New Keynesian economics builds on Keynesian principles but incorporates microeconomic foundations and imperfect competition into macroeconomic models. It emphasizes the role of nominal rigidities, such as sticky prices and wages, in explaining short-run fluctuations in economic activity and advocates for countercyclical policies to stabilize the economy.
Real Business Cycle Theory: Real business cycle theory attributes fluctuations in economic activity to exogenous shocks to productivity and technology. It argues that changes in real factors, such as productivity shocks, drive business cycles, while monetary and fiscal policy have limited effects on real economic outcomes.
Post-Keynesian Economics: Post-Keynesian economics extends Keynesian principles by emphasizing the role of uncertainty, financial instability, and institutional factors in shaping economic behavior. It critiques mainstream macroeconomic models for their simplifying assumptions and advocates for a more heterodox approach to macroeconomic analysis.
Modern Monetary Theory (MMT): Modern Monetary Theory challenges traditional views on fiscal policy and government finance, arguing that countries with sovereign currencies can issue fiat money to finance government spending without facing solvency constraints. It emphasizes the role of fiscal policy in achieving full employment and price stability, advocating for policies that prioritize job creation and public investment.
These theories and approaches in the philosophy of macroeconomics provide frameworks for understanding the determinants of aggregate economic activity, the role of government policy, and the dynamics of economic fluctuations and growth.
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economistas · 1 month
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Escuela de Keynes
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ross-hori · 3 months
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There I am listening to In Our Time on the BBC. Heavy weight discussion on Keynes' The Economic Consequences of the Peace. It's a book written in about 2 months in 1919 that warned the post Great War settlement wouldn't last. Some argue this tome fed the conditions for the rise of Nazism, others that Keynes sowed the seeds that undermined Woodrow Wilson - then US President.
An important contribution to economic theory and international affairs.
Lord Melvyn Bragg chairs (as he has done for over 2 decades) with 2 professors from Oxford and a third from the London School of Economics.
As this intense 50-odd minute discussion winds down, Mike Cox from the LSE, can heard..
"Do you mind if I take a photograph?"
And we all know that's academic speak for "selfie".
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mandrocles · 5 months
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Preference for liquidity is important
J.M. Keynes wrote many interesting things in his book "The general theory" which were ignored or distorted by many other economists, and perhaps the most interesting is the concept of liquidity preference, which properly understood has quite important aspects.
The reason to me seems that the role of many economist is to praise those owning much capital, and one way is to claim that those owners are virtuous: by not spending their income or wealth, by abstaining from consumption, they provide savings to finance investment, and interest and profit are their reward, so the more reward they get the more they will provide savings to finance more investments.
But J.M. Keynes pointed out that unless it is physically hoarded somehow the money that people claim to "save" is always actually spent to buy some sort of investment: even just leaving them in the bank means investing those funds in a loan to the bank.
Therefore investors always spend their non-consumed money to purchase some kind of investment, and what matters a lot to them is its effect on the liquidity of their portfolio: they will prefer more liquid investments if their portfolio is already more illiquid than they wish, that is if they reckon that future investment purchases will yield more than present or past (already invested) opportunities.
So owners of much money don't virtuously sacrifice their consumption to save to finance enterprise, but rather switch from less liquid (and usually longer term) investment purchases for more liquid (and usually shorter term) ones.
Then there are two types of investment activities:
To buy assets low to sell them high, that is to speculate.
To buy inputs to production to produce and sell the outputs, that is to finance enterprise.
In general to finance production is less liquid than flipping assets, as production takes time and also often requires scale.
Therefore when the preference for liquidity increases far from financing enterprise "savers" switch massively to financing speculation. Such as the enormous government-supported speculation on housing rents and prices in the UK and the USA (and several other countries) where the vast majority (90-95%) of financing goes to mortgages (and trading stocks on margin).
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ma1up891186 · 6 months
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KEYNESIAN ECONOMICS
The central tenet of this school of thought is that government intervention can stabilize the economy.
Circa 1930. John Maynard Keynes (British Economist) spearheaded this movement.
THE REVOLUTIONARY IDEA
Inadequate demand leads to prolonged periods of high unemployment. An economies output of goods and services is the sum of consumption, investment, government purchases and net exports. There are three tenets: 1. Aggregate demand is influenced by public and private economic decisions. Keynesian economics supports a mixed economy guided mainly by the private sector but partly operated by the government. 2. Prices, and especially wages, respond slowly to changes in supply and demand 3. Changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run effect on real output and employment, not on prices. Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending—consumption, investment, or government expenditures—cause output to change. If government spending increases, for example, and all other spending components remain constant, then output will increase.
These are the findings of Keynes' books The general Theory of Employment, Interest and Money (1936), and Treatise on Money.
A key quote from his works was surrounding the argument that governments should solve problems in the short run rather than wait for market forces to fix things over the long run, because "In the long run we are all dead."
Post 1970's, many advanced economies suffered stagflation, a term many of my peers will be familiar with (in the years 2022-23, we have experienced one of the worst examples of this phenomenon thanks to the Russian-Ukraine war, cost of living crisis, mild market collapse following the event of NFT's and digital currency like bitcoin.) Keynesian economics had no response for stagflation, which gave an opportunity for Monetarism to gain popularity, as they doubted that governments had the fiscal responsibility, policy or ability to be able to regulate the business cycle.
"If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. Keynes wrote, ‘Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slave of some defunct economist.’ In 2008, no defunct economist is more prominent than Keynes himself." Gregory Mankiw, (Harvard) New York Times, 2008
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madame-helen · 4 months
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reptheodorable · 10 months
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Why the Federal Reserve Isn't Ready for a Pause Yet
So much has been going on in the financial world lately. We’re seeing talks of the US debt ceiling, the Federal Reserve (the Fed) wrestling with a rate hike pause, and multiple regional banks seem to be failing and being bought up by the biggest banks in the nation. Amidst all of this, we randomly started to see reports about how two Fed officials have said the Fed should not pause rate hikes…
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corporategeniegroup · 11 months
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