Re Thread: Is more debt worth Keynesian policy?
Unless a country has previously held on to budget surpluses to cultivate a savings account, it will not be possible to pursue Keynesian policy in a recession (increasing government spending) without increasing debt in the near term.
[emphasis here and as follows= added]
I agree totally with the above (in so far that your definition of 'Keynesian policy' is correct).
The debate is whether government spending can actually create growth, and whether any increase in taxes collected from this growth are greater than the future taxes that will be necessary to pay off the debt.
And one more question- Why does the government need to spend more money than it already is spending? Some countries are already spending large quantities of money, and have been doing so continuously, yet they have entered into a recession. Perhaps the problem was that they spent too much money during the good times? In which case, is spending even more money during the bad times really the appropriate remedy?
Think of the relationship between the govt and the electorate as that of parent and child. It would be difficult for a parent to tell a child whom he once gave free reign upon the use of a credit card to suddenly stop spending (especially where the parent were a gangster/ robber- whose income was what he had robbed off others)- no child would understand why his allowances were suddenly cut... except a reality check where the parent is caught and jailed- thus proving to the child that the unlimited wealth experienced was illusory in the first place.
Borrowing $$$ (via sovereign bonds) isn't harmless insofar as the inflation it often entails harms more severely the lower classes than the upper ones insofar that the majority of wealth for upper classes is to a certain extent inflation resistant (gold, property, collectables (wine, watches, art), stock equity etc assets) as opposed to the poor who are renters of property and trapped in poverty due to corrupt government policies such as quantitative easing funded by either borrowing or $ printing.
On a practical point, spending $$$ to bail out banks would be a necessary short term practicality since the impenetrable legal wrangling consequent of major banks going bankrupt would be just too destabilizing upon society- as many loose their life savings and with that- massive mayhem and rebellion against the government. Secondarily- too revealing of government mismanagement of the economy with severe social unrest/ major civil unrest a genuine possibility.
IMHO: the real solution to this:
- A promise NOT to print any more money along with progressive taxes on society (income, property etc, etc)
- Haircut on government debt to reduce it quickly (about 50% so that pensioners only lose half their savings along with 50% of their faith in the government of their day).
- Progressive taxes on all society so that everyone can have an equal chance of become 'rich' at birth even if it means that today's 'rich' standards of a fleet of cars and a harem of girls might become quite unattainable by future standards but a society where the poverty alleviation efforts are not fraudulent but real.
- A reduction on unnecessary govt $$$ spending to what is necessary to maintain the optimum progress of humanity without too much emphasis on GDP. GDP shouldn't be a religion, especially where other mainstream religions are already developed and exist, each contributing massively to human morality and decorum (except in the context of religious representations being misrepresented to mislead communities (e.g. towards hatred, polarization and forms of financial corruption)). Leaders must set the example towards poverty alleviation and environmental sustainability by either donating most of their salaries/ property towards poverty alleviation or else being focused and creative at economical ways to provide for universal education and assistance to the rural poor (better farming methods, educational resources e.g. internet/ other forms of communication etc, better access to justice against contamination/ confiscation of farmland), so that cities do not become overpopulated, congested and polluted, so that food supply is maintained in so far that CO2 linked sea levels rising [link] do not inundate/ destroy existing arable farmland and current carbon resources are used prudently (see peak oil).
The consequence of uncontrolled quantitative easing is inflation which is a compound tax upon those who hold a nation's bonds/ currency- the majority of whom being the middle classes and the poor-- it is no point robbing the poor to help the poor when the rich just look on, cheer and on occasion, even collect fees for managing this scam. Once inflation wields its ugly face, and all faith in currency is gone- the economy will topple- and everyone will be the worse off for it- it will be either WWIII or a smothering civil war- there will be no peace and everyone will fear each other.
Government CANNOT return to the gold standard of currency exchange since its partial abandonment in the 1930s [link] and its total abandonment in 15Aug1971 [see: Bretton Woods system] (someone said that 40% of all gold in the world is now in the private hands of Indians in India)- thus, the ONLY way to regain people's trust in the government's management of the economy (besides the N Korean way of total tyranny [YouTube: Escaping tyranny in North Korea]) in the absence of the gold standard is for governments to set a clear and transparent dateline to STOP the illicit printing of currency (or by proxy the raising of currency through issuance of government bonds) and for the wholesale improvement of society through poverty reducing schemes such as universal education/ literacy paid for via progressive taxation schemes (income)/ consumption taxes / vice/ luxury consumption taxation schemes (tobacco/ alcohol/ luxury) and reduction of spending on less necessary areas such as fuel subsidies etc. Cash transfers (raised by suspending fuel subsidies/ other unnecessary govt spending/ raised VAT/ property taxes) to the poor will alleviate the immediate price inflation consequent to the reduction of fuel subsidies and increased VAT.
The economy will float only when people trust governments not to rob the poor to help the rich and then poor, but to impose proper taxes towards funding policies that unite and improve society both morally as well as economically.
Some picts for illustration, etc:
[pict source: Criminal Cartel Moves Forward With Printing $500 Billion In Funny Money]
[pict source: Dear Ben, Please Print Us More Money]
[Source: Hyperinflation In Zimbabwe]