Here is the latest in idiotic advice on how to deal with the economic consequences of the Corona V: Scott Morrison ‘must ramp up stimulus to $60bn’. I keep thinking that there must eventually be an end to Keynesian stupidity and ignorance but it seems endless.
Here is what is happening. There is a major structural dislocation going on, some of which will be temporary and some of which will be permanent. The problem is NOT A LACK OF DEMAND. If you think it is, you are as economically clueless as it is possible to be. The problem is that some firms and industries are being clobbered by an unanticipated fall off in sales because, for example, if you are in the business of providing ocean cruises, there are going to be a lot fewer sales, and nothing in relation to increased demand will sell you a single additional ticket.
Some people are going to lose their jobs, either temporarily or permanently. There will be enormous uncertainty all across the economy. The only value a government might provide is to assist in the ADJUSTMENT PROCESS. Most assistance must be on THE SUPPLY SIDE, although there might be some value in assisting those who are being displaced from their jobs with a bit of income replacement.
Keynesians are a one-trick pony. The advice might have been useful in the 1930s when not only did unemployment rise to unprecedented levels but at the same time the price level was falling. It wouldn’t have worked then either, since what they did do was cut public spending and balance the budgets everywhere but in the US. And everywhere but in the US there was an almost instantaneous upturn. The Great Depression reached its trough in 1933, and then the General Theory was published in 1936.
If you are an economic advisor and you cannot tell the difference between a structural problem and demand deficiency then you are an incompetent. Please try to address the actual problem, and not some phantom issue that has not only never allowed an economy to emerge from recession but if applied now in these circumstance will only make things worse.