I won’t get into the gory details of economics, lest you skip reading these newsletters altogether. But consider please, the possibility that Keynes was wrong.

There are several widely followed schools of thought / philosophies in the field of economics (called the dismal science was good reason).  John Maynard Keynes is arguably the best known economist and is named for an economic philosophy (Keynesian economics) that -among many things - claims that during recessions and depressions, government should step in and spend because no one else is. 

An oversimplified analogy of this may be likened to priming a pump. You have to make an initial effort to get a pump going by priming it (say adding water) with whatever liquid you are pumping. Once the pump action catches sufficiently, you no longer need to add water to keep it going. It takes over on its own and grows stronger – pulling more water until it reaches peak performance, then self-maintains at full power. Without the pump priming, the motor burns out if left on its own, and nothing is accomplished. Hence the pump priming is seen as necessary and a good investment

You can see the obvious attraction of Keynesian economics to politicians. It gives them license to spend and political cover for doing so. Our current Federal Reserve Board Chairman - Ben Bernanke – is widely known for his study of the Great Depression. He is a died-in-the-wool Keynesian. As such, he will keep short term interest rates close to zero until organic economic growth takes root on its own. But Bernanke -and for that matter – Greenspan are far from infallible. Neither saw the credit expansion of 2000 – 2007 as a bubble reminiscent of a mini Japanese scenario. Yet, here we are. Their monetary policy caused the stock and property bubbles to inflate and persist.

What if Keynesian economics is ultimately proven to be useless or wrong? If that’s true, then we will have spent Trillions of dollars that belong to our children and grandchildren in propping-up / preserving a standard of living that was ultimately proven to be unjustifiable (or even unworthy).

Something to chew on.