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Is It Time For Another World War? (In 2 Charts)

Monday, October 24, 2016 12:18
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(Before It's News)

With relative debt-loads for the advanced economies at their highest since World War II as the following IMF chart reveals,

… And investment at its weakest since World War II…

 The calls for Keynesian fiscal stimulus are growing ever louder (with many mainstream economists having argued that the New Deal’s error was spending too little on recovery, and that World War II ended the Great Depression precisely because it led to truly enormous deficit spending).

Of course, the problem is a current public that is increasingly aware of the nation's debt-load and deficits… so, what is needed is a so-called “good deficit” – or a good enough excuse, or nationally supported excuse, to spend, spend, spend.

As a reminder, on the eve of the last great war, Keynes himself delivered the following chilling address on the BBC, talking about the “grand experiment” of curing unemployment through war expenditure:

 

Carmen Elena Dorobat (of The Mises Institute) notes that two years later to the day, in a lecture delivered shortly after his arrival in the U.S., Mises described what the great experiment really looked like:

We are witnesses to the most frightful and phenomenal occurrence in human history: the decay of Western civilization.

London, one of the centers of this civilization… is almost completely destroyed. The buildings of the Parliament of Westminster are in ruins; the House of Commons holds its assemblies in the catacombs. […] 

The theater of war is spreading, and the day seems not distant when peace will have lost its last refuge. It is a moral and material collapse without precedent.

Are we really set to revisit this Keynesian Endgame once again?

A similar situation had occurred in the US in the 1930’s.

What solved the question? War! Because World War II had occurred during the 1940’s and that became the solution for the United States. So, let’s look at the entrepreneurs in Japan. They are stuck with the deflationary mindset.

They have to switch their mindset and should start making capital investments. We are looking for the trigger.

So is that the cunning plan of the elites?… unleash WW3, tear up the global debt, spend, spend, spend on war –  mass employment achieved to invest/rebuild after the devastation? Problem solved, right?

And no, this is sadly not a rhetorical joke. Recall what Japan's Finance Minister said back in March with Paul Krugman next to him:

(Minister of Finance Aso)

During the 1930’s, I remember that in the United States likewise there was a situation of deflation. And the New Deal policies have been introduced by then President Roosevelt. As a result, it worked out very nicely, but the largest issue associated with it is that for a long period of time entrepreneurs and managers of companies did not go to make a capital investment by receiving the loan. It had continued up until the late 1930’s and that is the situation occurring in Japan too. The record high earnings have been generated by the Japanese companies but they would not spend in the capital investment. There are lots of earnings at hand on the part of the corporate in Japan. It should be used for wage hike or dividend payment or the capital investment, but they are not doing that. They are just holding onto their cash and deposits. Reserved earnings have kept going up.

A similar situation had occurred in the US in the 1930’s. 

What solved the question? War! Because World War II had occurred during the 1940’s and that became the solution for the United States. So, let’s look at the entrepreneurs in Japan. They are stuck with the deflationary mindset.

(Prof. Krugman)

The important point about the war from the macroeconomic point of view is that it was a very large fiscal stimulus. That fact that it was a war is very unfortunate. It was simply something that led to a fiscal stimulus that would not otherwise have happened.

In fact, the story in the 1930’s was that the New Deal, Roosevelt backed off the fiscal stimulus in 1937, because then, as now, there were many calls for balancing the budget. That was a terrible mistake. It caused the major second recession.

Yes, obviously we are looking for ways to achieve something like that without war.

But if we can't find any…

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