Shared publicly  - 
The problem with Keynesian macroeconomics is that people keep getting it wrong. You're supposed to cut spending when times are good, and possibly raise taxes in the bargain, in order to run a surplus. This allows you to either pay down debts run up during the last recession, during which you were supposed to run a deficit in order to keep the economy from imploding, or sock away the money into a rainy-day fund for the next recession.

What's being done in many parts of Europe, and what the Republicans want to do in the US, is the same crap Herbert Hoover tried doing. Is there a Greek equivalent of "Hooverville"?
Brenda Holloway's profile photoAlexei McDonald's profile photoChristine Paluch's profile photoMatthew Graybosch's profile photo
I think the real problem (worldwide) is that everyone assumes/believes/wants to walk away from their debt, BK it, or get a bailout. And a surplus and cutting spending is the last thing BANKSTERS want us to do. They are depending on us to be good little indebted consumers.
+Matthew Graybosch You are exactly correct, but there is some interesting wrinkles in greece, especially with the fact they have a non-soveriegn currency.
This has been Obama's plan from the beginning -- spend out of the recession. And it seems to be working.
You've got a point, +Christine Paluch. Of course, given how China buys US government debt, can the US dollar be considered a sovereign currency?
+Catherine Maguire, the problem is that it's too short, and probably a gross oversimplification of Keynes. If a schmuck like me could explain Keynesian macroeconomics, then what good is Paul Krugman?
The problem is that when times are good, politicians will not take the opportunity to cut spending, preferring to squander the nations wealth on tax cuts or on grands projets. Keynes barely gets a look in these days.
+Matthew Graybosch It is still considered a soveriegn currency, even with the % that China holds. For the record Japan holds more US debt than China. What china holds is actually a considerably small portion of the debt, most of it is actually held by US institutions. Largely because if the US needed to it can execute a strategic default. Also the US controls its own money supply. There are far more tools in the toolkit when you have a soveriegn currency, and it really does not matter who is holding the debt. In fact the debt levels a country can handle are often far greater with a soveriegn currency.
Also with regards to Debt-to-GDP ratios, the US is on the low end. Much of the "debt crisis" is manufactured, and problematic because focusing on debt issues during times of economic weakness is problematic. The problem is most people have a household understanding of economics, and macro-economics, especially with regards to soveriegn debt and monetary policy, share very little if anything with household economics.
Add a comment...