Keynes argued that economies in deep recession can suffer from 'liquidity traps' where falling confidence leads to contracting credit, leading to lower profits, leading to falling confidence in a downward spiral. Thus, in his model, government needed to borrow aggressively to 'prime the (empty private sector) pump' so that it could get pumping again. Well today we have the spectacle of a government that has submerged the pump under so much 'primer' that the private sector pumpers can't even swim down to start pumping. As the government borrows trillions the private sector retrenches, generating record cash flows that it then primly sits on. So we have the paradox of hysterical pump priming that is doing nothing but dropping dead money on corporate balance sheets. The more reckless the spending and regulating, the more frightened businesses get and the less risks they are willing to take. Sweet.
Keynes would never have endorsed this neo-fascist tomfoolery but his name is being taken in heretical vain by clouds of self serving political lawyers who evidently can't think past their next score. Where it will all end, God only knows. We are in economic terra incognito here. And our captain is a proven, battle tested veteran of exactly.......zero campaigns, leading a hard bitten crew of........academics and career bureaucrats.
Kevin Williamson has more here where he describes crossing swords with the merry midget mascot of the new Statist dawn: Robert Reich. Enjoy.
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