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The Impact of Keynesian Economics

Keynesian Economics has ruined the world economy. More properly, political abuse of Keynesian Economics has ruined the world economy.

Had Keynes lived longer, would he have altered his economic theory? Clearly, Keynes was a Statist. He was brilliant and had an oversized ego. Would that have made it impossible for him to adjust his views? One would like to believe he would have recognized flaws in his theory and attempt to correct them.

A more interesting issue is whether governments would have listened. His theory provided government justification for powers never intended. Access to power is more important than the ability to understand or use it properly. Power has a value unto itself, at least for those gaining it. Had Keynes lived and modified his theory, would it have been possible to put the genie back in the bottle?

Cooperation from those who pretended to be the genie was unlikely. Today, overwhelming evidence suggests that government policies harm more than they help. However, there is no movement to recognize this condition or to remedy it. Sadly, power gained is rarely relinquished.

Daniel Lacalle summarizes the problem:

The evidence from the last thirty years is clear. Keynesian policies leave a massive trail of debt, weaker growth and falling real wages. Furthermore, once we look at each so-called stimulus plan, reality shows that the so-called multiplier effect of government spending is virtually inexistent and has long-term negative implications for the health of the economy. Stimulus plans have bloated government size, which in turn requires more dollars from the real economy to finance its activity.

The world is trapped in a vicious cycle of exploding debt that is necessary to avoid government insolvency and to pretend that economies are still growing. The game cannot continue much longer, ending in either hyperinflation, depression or both! Hyperinflation is always extinguished by Depression.

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