Macroeconomics Lesson- any takers to respond in economic terms?

He made a lot of decent arguments, but I'll sum up my objections in a few points.

  1. Keynesianism works well in theory, but deficit financing only works if governments have the discipline to build up a surplus in times of propserity. Aside from a few years in the Clinton administration (no thanks to fiscal policy... they got super lucky with the advent of the Internet and the dot com craze), governments don't do this. So this argument is BS. In my state of Arizona, we built up a "rainy day fund" that both Janet Napolitano and Jan Brewer burned through on useless stuff before the 2008 crisis. It's like putting kids in charge of looking after the cookie jar.

  2. Yes, monetizing the debt is one way to reduce it. But printing money also has the consequence of destroying savings as well. That's bad especially because it eliminates any incentive to save, which is what people naturally want to do to smooth out their levels of consumption over time. The only kind of inflation which will neutralize the level of debt the U.S. has accrued is hyperinflation. Yes, deflation is bad too. But the FED can't even target inflation properly.

  3. Yes, the economy would be doing worse off in 2011 without the bailouts and without quantitative easing. But I'd wager that the market correction would make it such that the economy would be better now without the debt externalized onto the American populace. We've traded 2-3 years of Great Depression-esque crisis for 10-20 years of Japan-like stagnation. Hope it's worth it.

  4. "Banks get hurt by inflation" -- LOL. A banker would have to be a complete retard not to protect himself from interest rate shocks. Banks can have floating-rate securities, TIPS, short-term bonds convertible to stocks, FX options, callable loans, and so forth. Poor people and retirees living on a fixed income can't do these things. They get fucked by inflation.

  5. Protip: study economics instead of sociology next time. Also, try reading someone outside of the (arguably heterodox) Keynesian school of thought.

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