Keynes and Hayek, the Great Debate (Part 3): Nicholas Wapshott

[xchrom]

http://www.bloomberg.com/news/2011-10-10/keynes-and-hayek-s-great-debate-part-3-commentary-by-nicholas-wapshott.html

By the early 1940s, the Keynesian Revolution in America was in full swing. Fast-moving events in Germany obliged Franklin D. Roosevelt to spend on the vast scale that John Maynard Keynes prescribed. Despite the president’s assurances during the 1940 presidential campaign -- “I have said this before, but I shall say it again and again and again: Your boys are not going to be sent into foreign wars” -- he ordered a gargantuan rearmament program. In 1940, the annual defense expenditure was $2.2 billion; the following year it reached a sizzling $13.7 billion.

“If expenditure on armaments really does cure unemployment, a grand experiment has begun,” Keynes declared in 1939. “We may learn a trick or two which will come in useful when the day of peace comes.”

The multiplier effect of so much public money being pumped into the American economy caused gross domestic product to jump by about $25 billion, with arms and other defense spending accounting for 46 percent of the increase. Even so, employment wasn’t restored to the pre-Roosevelt recession level until 1941, the year America was attacked by the Japanese at Pearl Harbor. “We saw the war as a justification of the Keynesian theory, the Keynesian doctrine, and the Keynesian recommendation,” John Kenneth Galbraith recalled.

[OHdem10]

1. Our armanents are not all manufactured here.

Get in a war with say China. We have to say "will you
sell us some bullets so we can shoot you." Of course
I am somewhat exaggerating but it is close to fact.

In World War II the big companies, i.e. Ford, had allegiance
to this country and agreed to change their factories to
manufacture equipment for war. This put Americans to work.


War no longer works. GWB started 2 wars and we still
had job losss. The War Theory no longer works in
a Globalized Economy. Our Wars boost other countries
economies. Poor Management of Globalization and Trade/

We therefore must Use Keyenne' Theory in form of Stimulus.

We were too cautious and the Blue Dogs, DLC were so concerned
with Deficits(Herbert Hoover Model), they would not approve
a Large enough Deficit. When Bernanke and Geithner recommended
the second round of Stimulus, the Republicans nixed it and
the Democrats did not fight for it. We are now teetering
on a double dip and the Republicans refuse to budge.

When the Priviate Sector cannot or is too fearful to act,
the Government must act or we all go down. It is that
simple. If neither acts --in time, the country crashes.
Cuts means you have more and more people out of work.
Lose Revenue coming into the Treasury. Money does
not circulate through the economy and wow--Depression