We like to think of our age as one of enlightenment. In fact, we let ourselves be guided by myths in large measure, and use the power of the state to corrupt the sciences until they pander to our mythological preferences, as evidenced amongst others by the Great Global Warming Swindle or the Keynesian promises of magic. As for the latter, David Stockman has this story of Keynesian Japan:
What happened to Japan’s huge savings surplus? The government borrowed it! And wasted it on massive Keynesian stimulus projects that kept the LDP in power for decades but produced bridges and highways to nowhere that will be of no use to Japan’s retirement colony as it ages.
And the adverse demographic tide is indeed powerful as shown by the curve below on Japan’s working age population [see the source]. In a few short years what was a working age population that peaked at 88 million has dropped to 79 million; and it will plunge to below 50 million persons in the next two decades.
What the Keynesian witch-doctors who advised Japan to bury itself in fiscal stimulation since its financial crisis of 1989-1990 did not explain was how this inexorably shrinking population could possibly shoulder the tax burden needed to carry Japan’s massive public debt.
Yet there is no other way out of the Keynesian debt trap in which Japan is no[w] impaled. As the current account, also shown below [see source], continues to worsen, the need to import capital to fund the gap will drive interest rates sharply higher. The burden on Japan’s remaining taxpayers will become crushing.
So the graph below should be pasted on every US Congressman’s forehead. When the debt spiral goes to[o] far—it becomes a devastating financial trap. And it cannot ultimately be solved with money printing because if carried to an extreme—even for the so-called reserve currency—it will destroy the monetary system entirely.
Make sure to read the entire article at the source.
Steve Kates, my favourite economist absolutely nails it:
Economies are driven forward by increases in value adding supply and by absolutely nothing else. Others can tax, steal or otherwise appropriate the productivity of others and squander what they get. But this will NEVER lead to a recovery, not ever. So we have kept rates low and watched as nothing has happened. [...] And it’s not just consumer spending but all unproductive spending that is a draw down on productivity. Consumer demand is, of course, the reason for bothering with any production at all. But if we are thinking about growth and employment, consumer and government demand has nothing to contribute, nothing whatsoever. Nor does mis-directed investment spending. Nor do low interest rates.
And another high dose of wisdom from Steve Kates:
However you look at it, this is the core issue of Keynesian economic theory and the policy that comes with it. If it is your conclusion that increases in non-value-adding public spending can contribute to growth and employment you are a Keynesian. If that is not your conclusion, that you think it will make things worse, then you are not. There is nothing else to it. At a minimum 95% of all economists practising today accept the Keynesian premise. At a maximum there may be 5% of the profession who do not. Even with the dismal and disastrous effects of the stimulus everywhere to be seen, either the stimulus was insufficient or it saved us from far worse are the standard answers. That we are now living out the consequences of a major and fundamental error in policy is virtually stated nowhere. The debate over Keynesian economic theory has not even begun never mind having been brought to an end.