One of the cornerstones of Keynesian theory, is that during an economic downturn, the government should “prime the pump”, inject capital into the market to keep people employed until the natural demand cycle returns. Measuring demand is a tricky business, all sorts of numbers get tossed around and the validity of those numbers is hotly debated. The debates tend to distract and confuse, more than enlighten.
When the government borrows from the taxpayers, and corporations borrow from the government, the conditions are set for the consumer to borrow from corporations. The problem here is that any one consumer can only borrow a finite amount. Once the consumers reach their peak, the corporations have nowhere else to go to make loans. There is a lot of talk about banks “needing to loan”, but very little on consumers’ willingness for further borrowing.
Under Keynesianism, the government borrows even more to make up the shortfall from consumers. This means that although you’re paying off your credit cards and paying your mortgage, your overall debt is still increasing.
Our government debt is mostly financed by other governments. The biggest financier of US debt is the communist Chinese Central Bank. Financing our debt represents a nice revenue stream for them, and they in turn practice their own version of Keynesianism. This report (starts at 1:14 in) shows what they are doing with their profits.
It’s a long commute, but at least we’ll always have a home.
