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Sunday, November 23, 2008

Are we all Keynesians now?

It's the return of the shortsighted "In the long run we're all dead" (Keynes in Monetary Reform) kind of thinking that dominated political thinking ever since the Great Depression but ended in the stagflationary seventies and eighties. Apparently Obama has a plan to create 2.5 million new jobs by investing in infrastructure and green technology. Wow, another grand plan by a statist to help the ailing private sector! What next, tax hikes and more union power? It seems that Obama is learning all the wrong lessons from the disastrous New Deal.

As several economist, in a letter to the British Telegraph, warned: "It is misguided for the Government to believe that it knows how much specific sectors of the economy need to shrink and which will shrink 'too rapidly' in a recession... Thus the Government cannot know how to use an expansion in expenditure that would not risk seriously misallocating resources."

And what to do once the current crisis is over? How long is it going to take to bring down all the regulations, debts and obstacles to sound economic growth initiated during this phase of shortsightedness?

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