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IPFS News Link • Economy - Economics USA

Stimulus Spending Won't Stop the Economic Fallout from the Coronavirus

• https://fee.org, Daniel J. Mitchell

The coronavirus is a genuine threat to prosperity, at least in the short run, in large part because it is causing a contraction in global trade.

The silver lining to that dark cloud is that President Trump may learn that trade is actually good rather than bad.

But dark clouds also can have dark linings, at least when the crowd in Washington decides it's time for another dose of Keynesian economics.

Fiscal Keynesianism – the government borrows money from credit markets and politicians then redistribute the funds in hopes that recipients will spend more.

Monetary Keynesianism – the government creates more money in hopes that lower interest rates will stimulate borrowing and recipients will spend more.

Critics warn, correctly, that Keynesian policies are misguided. More spending is a consequence of economic growth, not the trigger for economic growth.

But the "bad penny" of Keynesian economics keeps reappearing because it gives politicians an excuse to buy votes.

The Wall Street Journal opined about the risks of more Keynesian monetary stimulus.


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