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The Paradoxical Insanity of More Stimulus   June 13th, 2011
Stimulus is the problem, not the solution       

 
QUICK OBSERVATIONS

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Short and sweet...

Larry Summers--stimulus spender extraordinaire--is out there spewing some priceless quotes.

Larry Summers, formerly one of the top economic advisors to President Obama, is advocating more government stimulus to jumpstart the struggling U.S. economy.

In opinion pieces Monday in the Washington Post and Financial Times, Summers, who was the first director of the National Economic Council under Obama, says that the United States is at risk of falling into a "Lost Decade" of prolonged weak economic growth and high unemployment unless more action is taken in the near term.


More stimulus? Uhm, how to phrase the response... NO!

And we're at risk of falling into a Japan-like "Lost Decade" unless we repeat the exact same things that Japan did and which didn't help them avoid a lost decade?

Summers wrote that demand is likely to stay weak without the government taking steps to spur spending. He said the U.S. could have fallen into a double-dip recession already if not for the tax cuts and payroll tax holiday passed at the end of last year.


Actually, we're most likely already in a double-dip recession despite temporary tax cuts, tax holidays, and massive government spending and monetary stimulus for the last several years.

"The central irony of financial crisis is that while it is caused by too much confidence, borrowing and lending, and spending, it is resolved only by increases in confidence, borrowing and lending, and spending," he wrote in both columns.


That's not irony, Mr. Summers. That's either a paradox or insanity.
    Paradox: A paradox is a seemingly true statement or group of statements that lead to a contradiction or a situation which seems to defy logic or intuition.

    Insanity: Doing the same thing over and over again and expecting different results.

Keynesian economics doesn't work. And when you point that out to someone who believes it, all they can really say is that there wasn't enough spending, or that we didn't spend long enough. The defense of Keynesian failure is always to argue for more of it.

If it doesn't work the first time, the second time, the third time, or the fourth time... maybe it's time to try something else? I'd hate to think we're insane.

Final observation: I thought this was just a "bump" in Recovery Road? Does a bump really require stimulus? Or maybe this is the Keynesian way of saying, "Uhm, oops, the economy's still in trouble and none of our ideas worked... but we can't say that 17 months away from a presidential election."

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