For a good read on why this Keynesian push toward consumption is misguided, check out this 2005 article[1]. The counterargument against consumption as the driver of the economy states that saving and investment actually leads to growth. The thesis of the linked article is that a huge amount of business investment is hidden from GDP numbers since it falls under "net investment," with two very large sums (business income & business investment) netting out to a small number. When we ignore the huge amount of business investment and focus only on the net, we miss its importance.
Negative interest rates are simply the latest contortion of the Keynesians that will fail to produce the desired results yet again.
I know I'm just a lowly programmer and engineer who shouldn't opine about economics very much, but I observe simply this: The "stimulus" didn't work. I find arguments about how it wasn't big enough to be null, because it isn't clear that we could have afforded much more and if the only way this stimulus works is to spend more than is possible, that is just a way of saying "it doesn't work" that saves some face but doesn't change anything about the practicality.
It's been 8 years now we've been on this policy. Nobody 8 years ago would have predicted what happened. From a scientific perspective, what you do with theories that fail to correctly predict future occurrences is simple.
But our elites really like what quasi-Keynesianism tells them, so the rest of us can continue to live impoverished lives for their benefit.
"Internet economics" and the discussion is full of fringe theories that refer to mises.org. For them every mainstream economist is Keynesian. Even if they belong to Chicago school.
A couple trillion dollars was used to buy up securities that are realistically worth $0 in pretty much every timeframe for 100 cents on the dollar, cleaning up bank balance sheets. This allowed them to continue to speculate on all sorts of things, like housing, commodities, etc, looking for returns (some of it probably saw its way to silicon valley too). It was passed on as easy money to corporations, who mostly used it to do stock buy backs that pretty much do nothing for "the economy" while lifting the stock market.
As for employment, if you actually look at the numbers, its people over 55 who can't afford to retire doing service jobs. The participation rate is trash and young people are fucked.
> A couple trillion dollars was used to buy up securities that are realistically worth $0 in pretty much every timeframe for 100 cents on the dollar, cleaning up bank balance sheets.
I have no idea what you're referring to, but if it's TARP then that's totally false. The government made a profit on the bailout.
The vast majority of the securities which the government bought up had intrinsic values higher than what the fear-driven market was pricing them at.
I don't think anyone thinks the assets bought in QE were worth $0. The Fed's impact was entirely at the margin (increasing the supply of investable dollars).
If the assets bought under QE were sold for 50 cents on the dollar (for example), even the most bearish investors would be lining up to buy in droves. Of course, that applies to investors with actual money behind their beliefs rather than random internet commentators who can pull valuations out of nowhere.
For me, the question of whether it worked is scientific. Did the people who proposed the stimulus correctly predict the future results of it?
No. Nobody predicted our current economy, and the prediction's accurancy get even worse if we're about to slide into another recession in the next six months.
Of course you can argue that what we did was better than some hypothetical. That's so easy that it's not even an argument, which is why I don't consider it. What I observe is that the economy did not react as expected, we have not recovered anywhere near as much as predicted, interest rates are still being held low and we're talking about them going negative (again, I recall no predictions that such measures would be necessary seven+ years later), and a wide variety of indicators that were supposed to turn positive never have, or just barely have, shortly before what is very likely a recession.
The theories aren't working. Their predictions don't come true. Given that the theories don't work, it is scientifically foolish to then use those theories to themselves predict what couldhave shouldhave happened if some other course of action was taken, since the theories are already visibly nonfunctional. It is circular logic to use the broken theories to predict that the broken theories told us the right thing to do. This probably goes a long ways towards explaining why economics is still the "dismal science". (Though, to be sort of fair, economics does not have a lock on that error.) I don't have to have a better theory to say that; I need only have predictions in my hand and their failure to come true.
Yes, it worked. The stock market is back up, and employment numbers "look good" (I mean a lot of that is workers getting discouraged, but still, the fed has achieved its mandate).
But how long will the stock market still be up, and why is it that over the course of those years the rich have gotten richer and the poor have gotten poorer? Don't suppose it had anything to do with directly redistributing money upwards?
look at real median personal income - it's still way down. During recessions, households tend to consolidate for savings purposes... If your argument depends on "people are struggling and aggregating to survive at the lowest levels of maslow's hierarchy" then fine.
The stimulus did exactly what it was supposed to do: prevent a prolonged recession and return the economy to growth.
> Nobody 8 years ago would have predicted what happened.
If you had taken a poll of Keynesian economists on the likely impact of the policies (a modest fiscal stimulus together with expansionary monetary policy), I'm pretty sure most of them would have predicted exactly what we got: a mild recovery coupled with strong asset growth.
This idiotic notion that stimulus didn't work is a myth promoted by Republicans. If the stimulus didn't work, we'd have suffered through a long recession and would have high unemployment to this day. You don't even have to look far to find evidence of this: European countries forced into austerity have had precisely the kind of anemic economic and labor market growth that Keynesian economics predicted.
> I know I'm just a lowly programmer and engineer who shouldn't opine about economics very much, but I observe simply this: The "stimulus" didn't work.
That's not an observation, that's a conclusion that requires a prior conclusion on a hypothetical that requires substantial economic analysis to have any credibility on: to wit, what the economy would have done without the stimulus.
My read is that the monetary stimulus by the Fed did exactly the prevention of imminent disaster that it was supposed to do. It didn't do the kind of improvements that take fiscal policy to do -- because it wasn't fiscal policy -- which isn't a difference of degree of magnitude, but kind.
> I find arguments about how it wasn't big enough to be null, because it isn't clear that we could have afforded much more
The only arguments I've seen about insufficient quantity of stimulus have been about the government (not Fed) fiscal stimulus of 2009 (ARRA and related bills). Given the low price of government borrowing, its quite obvious that we could have spent a lot more in (and since) 2009 on fiscal stimulus; the reason we didn't is political, not available-resources driven.
But that's a whole different thing than the Feds monetary stimulus.
> It's been 8 years now we've been on this policy.
What policy, exactly? Most of the Feds particularly intense monetary stimulus finished several years ago and has been in winding-down/settlement for the last few years, ditto with fiscal stimulus under ARRA. And 8 years ago (early 2008) was before the crisis and stimulus responses; if you are talking about the stimulus -- both monetary and fiscal -- adopted in response to the 2008/9 crisis, it started less than 8 years ago, and the intense policy ended several years ago, so in no sense have we been on a common stimulus policy for eight years.
> Nobody 8 years ago would have predicted what happened.
Both Austrians and Keynesians (among others) predicted that the actual stimulus that was engaged in by the Fed and government would fail to achieve what people wanted from stimulus (for, naturally, radically different reasons). To say that no one predicted the failure of the stimulus that was adopted is, simply, incorrect.
The reason the "stimulus" didn't work is that it costs more to the economy to produce the money that was spent to "stimulate" it than the economic benefits of that spending could produce.
And yes, 8 years ago people did predict what happened, exactly, namely look at the archives of http://mises.org and you will find articles predicting this result.
The problem is, it doesn't fit the political desires.
If you really want to stimulate the economy, by getting more money being spent, simply cut taxes and cut inflation. (Which means cutting government spending). You cut monetary inflation and taxation and individuals and businesses will have more money at the end of the day to spend on things.
Unfortunately, cutting government spending doesn't fit the "lets promise people free health care and education to get elected" agenda.
The Bush "stimulus" didn't work either. We had a housing bubble, but that wasn't exactly a net positive for the economy.
The problems is the "Science" of economics has been compromised to the point where people aren't even aware of the predictions that this would fail (you weren't for instance).... because what passes for economics is more akin to rationalizations for political policies, rather than a science. (outside of places like the Chicago and Austrian schools.)
Negative interest rates are simply the latest contortion of the Keynesians that will fail to produce the desired results yet again.
[1] https://mises.org/library/standing-keynesian-gdp-its-head-sa...