降落伞装鸡蛋:Truth and trap Keynesian

                                                             Truth and trap Keynesian


Celebrate the era after the advent of the second millennium when no one expected to meet the human is a huge financial crisis.

How is this going? What is the blame?

Frightened by, people have dug out the old theories and predictions have long been forgotten, trying to prove the wisdom of mankind has not been degraded to a hopelessly. Marx's "Das Kapital" hot, Hayek's "Road to Serfdom" out of stock - different theories sought after by different people. Among the most popular is Keynesian.

Study of Keynesian economics, not difficult to find the key assumptions of this theory is the "animal spirits." The so-called "animal spirits" refers to the economic entity can be irrational. For example, under the influence of purely psychological factors, consumers and businesses suddenly pessimistic about the future loss of confidence, consumption and investment will decline, lack of effective demand of society, economy be thrown into a recession.

Followed the contemporary Keynesian "animal spirits" of the tradition of accusing the "new liberalism" is the initiator of the financial turmoil. They believe in the "animal spirits" driven by profit-driven Wall Street greed, excessive financial innovation, while the Government has lax regulation, not its rational "human spirit" Wall Street impulse constraint, allowing the development of asset bubbles, and finally stuffed into a disaster.

They also claimed that, after the bubble burst, is a "human spirit" of the Federal Reserve played a pillar of strength to the extraordinary intervention in the market turn the tide, thus avoiding the collapse of the financial system to avoid "Great Depression" repeated.

Unfortunately, it is not. On the contrary, the financial crisis the Fed can not shirk its responsibility. Recalling the beginning of this century, the Federal Reserve started in 2001 monetary policy, the federal benchmark interest rate fell to its lowest level after the war up to that time, and maintain low interest rate of more than two years old. U.S. real estate market, so there is a clear bubble, and in 2007 reached its peak. At the same time, from 2004 onwards, the Federal Reserve into raising interest rates, lending rates as the benchmark interest rate has been rising. High interest rates increase the cost of loan repayment, the most vulnerable sub-prime mortgage market, the first warning signs, late and default rates rise caused by an inferior race-based bond prices.

The Fed's actions prove that, compared to the individual "animal spirit", the government's "animal spirits" more harm to the economy. With the Government's "animal spirit" than the individual non-rational impulse is local, constrained by other market participants; In addition, individuals must also bear the consequences of their decision-making mistakes, facing a "hard budget constraint." At the same time, the central bank in determining monetary policy, neither the checks and balances, there is no need for the policy consequences, namely, "soft budget constraint", decision-makers of the "animal spirits" as the monetary policy spread to every corner of the economy, the formation of systemic risk.

In fact, Friedman in his famous book "A Monetary History of the United States" (with co-Schwartz), the Federal Reserve has long been convincingly proven wrong monetary policy has led to the 1930s 'Great Depression' of important reasons.

Unfortunately, there are signs that the current leadership of the Bernanke Fed is repeating the mistakes of the former Chairman. In the past, the risk of system crashes, the fantasy with the additional money to stimulate the U.S. economic recovery, when interest rates has been unable to lower and lower, the Fed really try to pick up the Japanese not working in "a wide number of loose," continue to invest money. This practice, as Japan's situation in the enterprise and the family's financial restructuring has not been completed, the lack of investment opportunities in the real economy, the excess liquidity to create more money in addition to the asset bubble, no other effect.

Keynesian "government for the public" what if the same can not withstand scrutiny. According to orthodox Keynesian view, the recession, tax cuts and increased government spending to stimulate demand, the fiscal deficit and government debt thus increased; when the economy to boom, the reverse operation of fiscal policy, government tax increases and spending cuts , finance will be a surplus. Boom of the surplus to offset deficits during the Depression, a complete economic cycle, to achieve budget balance. Keynesians also believe that government can and can size up the situation, with a forward-looking use of macroeconomic policy, reverse operation, to ensure the smooth functioning of the economy.

However, the reality is that the Greek government bankruptcy, a number of European countries into a debt quagmire. In theory it sounds perfect, why in practice, governments are drowning in debt and with little surplus?

This is because the Government's self-motivation. In the eyes of politicians, their official position today is much more important than the future of the country. In these countries, tax cuts and increased government spending such as welfare, subsidies and investment benefits of voters, politicians who vote this way contribute to groan. Taxes and lower expenditure is not defeating, even if the economic situation improved, and no one is willing to offend the long-term budget balance and the voters.

If you want to use monetary policy to level the peaks and troughs of economic cycles, the central bank also has superhuman intelligence and skill. As the micro-economic adjustment will take time, the implementation of monetary policy to play a role in the existence of time lag, the central bank must first predict the economy running at the right point in time, with the right intensity and the right tools to manipulate monetary policy, can only receive the desired results. If the point in time, effort and tools appear on even small errors, the result of regulation and the mind may be very different, even counterproductive.