Quote:
Originally Posted by mynameisjim
First of all, the reason companies aren't hiring people is because they don't need any new employees. The reason they don't need any new employees is because overall demand for goods and services is down because everyone is broke.
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Say's Law contradicts this.
Quote:
Originally Posted by mynameisjim
That's why the only answer to jump start the economy is huge, nationwide construction project(s). Bridges, school repair, high speed internet, etc. Many different people can work in construction projects and once that money starts getting into their pockets, they'll start spending and as demand inches up for various goods and services, companies will start hiring again.
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1940-1945: The biggest gov spending we've seen. Yet private sector consumption went down. During the second world war private sector consumption was even lower than during the worst years of the great depression.
1946: Gov cuts spending. The Keynesians warned that millions of people would become unemployed. Yet the US economy has never seen bigger growth than in 1946.
The Keynesian answer to what you described as an economy that needs to be jump started: cause inflation. put new money into the economy.
The Keynesian answer to an economy that's about to overheat (reach full employment... and not enough people to fill all positions... extreme inflation): cool down the economy by deflating the money supply: take money out of the economy.
Enter the 1970s. stagflation... a situation with both high unemployment (the classic Keynesian response would be: put new money into the economy) and high inflation (the classic Keynesian response would be: take money out of the economy). Hmmm, can't do both
The situation that presented itself in the 1970s could simply not exist according to Keynesian theory. Yet it did. Keynesianism was intellectually bankrupt and even the neo-Keynesians and the later New Keynesians acknowledge this.
What we have now is not a matter of underconsumption or overproduction, it's a matter of mal-investment.