The more I read Steve Kates's work, the more I learn. Key elements of an excellent article by him, written in 2002, are provided below.
That Alan Greenspan thinks of the General Theory as his font of economic knowledge only adds to the depressing quality of this article. There it said that “the Fed Chairman has been known to rise from his chair midconversation and read aloud relevant passages from that 65-year-old book for visitors.” It is anyway quite clear from the actions he takes that Greenspan does think this way, but it is only one more indication of just how deeply ingrained Keynesian theory has unfortunately become.
And we have an example of such Keynesian expenditure policy before us, if anyone would care to look. Japan has suffered under the effects of Keynesian demand stimulation for almost a decade now. The effect has been to take the relatively mild slowdown experienced internationally at the beginning of the 1990s and turn it into an ongoing, ever-deepening recession that shows not the slightest sign of retreat.
To find that the head of the Federal Reserve in the United States is a devotee of Keynes should be a further example of how poorly based monetary policy is. That we are now in serious risk of a global recession is largely related to the decisions of the Fed over the past two years. Other central banks throughout the developed world have followed the same processes, which have led to the same sorry outcome.
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