Crown Capital Eco Management: Want to Fix the Economy? Spend More Money
Posted in the Business News Forum
Since: Oct 12
#1 Feb 4, 2013
The economy operates on a simple principle: When people spend money, the economy grows. That means the goal of economic policy should be to maintain a level of spending that keeps the economy growing and minimizes the unavoidable peaks and valleys of the business cycle. This canít be done without government intervention, mainly because free market capitalism tends to be too erratic (spending can fall sharply) and crisis prone.(See: Lehman Brothers 2008). Dramatic fluctuations in the markets, typically result in anemic business investment which leads to higher unemployment, slower growth and weaker demand. This problem was largely solved by British economist John Maynard Keynes. Keynes understood that when private sector spending dropped off, public sector (government) spending had to increase or output would shrink, unemployment would rise, and the economy would begin to sputter.
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