European Keynesianism

Europe’s investors are hoping for some Keynesian stimulus—or what passes for Keynesian stimulus—in the coming year to continue 2019 boomlet in stocks.

Getting stocks to propel higher however, may require faster growth. Some see that slug of faster economic activity coming from a possible government ramp up in stimulus spending.
“Whichever way you slice it, there is a much greater burden on governments to do more” said Anik Sen, Global Head of Equities at PineBridge Investments.

That’s not stimulus; that’s investors addicted to government spending.  Not even Keynes (to stimulate this horse once again) said higher spending was stimulative. He held that it was the spike in spending that did that, following which spending needed to go back to its original level and the debt resulting from the spike soon repaid.

Which brings me to the second item in this European Keynesian nonsense.

During the European sovereign-debt crisis in the early part of the last decade, governments in the region adopted austerity budgets to rein in spending and calm bond markets. Many investors now say such frugality has been counterproductive….

Again, no. It’s not austerity to lower government spending and thereby get government to stop competing with private enterprises for resources, which is inflationary, and to get government to stop competing with the private economy for borrowable funds, which applies upward pressure on interest rates (for all that governments fix rates by arbitrary fiat), which is also inflationary.

Leave a Reply

Your email address will not be published. Required fields are marked *