What’s bugging me?
What’s bugging me is the consensus view that prolonged fiscal and monetary stimulus is necessary to ensure sustainable economic growth. The protagonists of prolonged fiscal stimulus deploy the argument that the economy is a twin-piston engine. Rising government dissaving is the result of falling private demand and thus of rising private saving. If the private piston of growth goes down, the public-sector piston of growth must go up. The marginal savings surplus in the private sector must be matched by the marginal decreases in savings by the public sector. If not, the economy will lapse into depression because of an excess of savings and a dearth of demand.
This is Keynesian economics. But as with all great macro theories, I have my doubts. The current...
