Bill Gross on Escape From a Debt Crisis

It has not been easy to find a candid observation of the condition of many economies around the world, and the debt problems that are now strangling us, that has any glimmer of optimism. But optimism is beginning to shine through the rare crack in a pragmatist's armor. Here is a link to Bill Gross' recent Outlook where he writes on the possibility of Keynesian policy successfully replacing the loss of widely available private sector credit. IMHO, Bill Gross can be the essential pragmatist. There is a risk he may also feel the need to be political or simply self serving, so I take his words with a little caution.

Keynesiasm Is not Popular With Everyone

Keynesiasm is taking a hit in the article Caroline Baum wrote on Bloomberg yesterday, "Obama’s Pyramid Schemes Would Make Keynes Happy". She writes about her belief that government created jobs are temporary jobs that do not add permanent jobs into the economy. Complete reliance on government policies is a Keynesian prescription, and she is not in agreement. Read her short article for more depth of the argument that is about why we use Keynes' theory when there are others.

Keynesian Economics - a Simple Description

Now I want to look into Keynesian economic theory since it has had the most influence in shaping the plan for dealing with the great recession in the US and the UK. Keynesian economics is highlighted by its emphasis on measuring, monitoring and policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. It discounts the possibility that the private sector will make decisions that support the greater good of the economy. The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936. Richard Posner has written a good summary of the book in the New Republic. His article is titled "How I Became a Keynesian" and it is recommended for inquiring minds seeking more knowledge of the man whose economic theory is leading us somewhere, fast.

Monetarism, a Simple Description

Monetarism is an economic theory that is relatively new. It is a theory that sprung up in the 1970's as a new way to fight inflation. It is widely attributed to Milton Friedman who modified Keynesian theory into something different, Monetary theory. There are several popular economic beliefs that can be identified with monetarism. One is the belief that excess money is the definition of inflation.