i assumed you would make the necessary assumptions to understand what i said, it seems however that you have not and you have thus but me in a terrible position, one of dominance, i dont like to fuck kids.
the stimulus was not big enough, it didnt off set the decline it merely slowed them down and halted them in certain industries (automotive for example). So saying the stimulus did not work is disingenuous and down playing the role keynes had in the economic recovery after war, and the great depression.\\=
And how do you know that the stimulus was not big enough? How do you know that it worked and that without it, things would have been worse?
Because if you examine it theoretically; the idea of fiscal stimulus makes no sense. All that it amounts to is taking water from one end of the pool and pouring it into the other end. Every dollar the government borrows in order to deficit spend is a dollar that is not in the private economy. Moreover, even the Keynesians would say that in the long run, prices would fall in order to accommodate full employment and output. Yet four-five years later now, and the economy is hobbling along barely recovering and unemployment is still above 8% - despite the fact that Obama's economic team predicted that unemployment would not exceed 8% if the stimulus were passed. Hardly anyone would argue that the majority of prices in an economy stay "sticky" for four years at a time. If anything, just allowing prices to fall and businesses to fail would have returned us to full employment and output at a quicker rate.
Furthermore, when you look at the historical record, it seems to go against what you're saying. The Great Depression truly lasted till 1945, when the war ended, government spending was slashed, the economy was deregulated, taxes were cut, and there was a budget surplus. Keynesians predicted a massive depression after WWII, yet the private economy boomed. It seemed like all throughout the Great Depression, policymakers tried fiscal stimuli yet repeatedly failed. Likewise, if you look at the experience of Japan and its "lost decade," it seems like multiple fiscal stimuli failed. And this seems to pair up perfectly with the current economy which is sluggish at best "despite" a fiscal stimulus that was at least 7% of GDP, if not more when you accurately include all automatic stabilizers. And then of course, there also was multiple extensive and aggressive monetary stimuli which apparently didn't work.
Compare that to an episode like the Depression of 1920-21: there was a bank panic, there was no monetary stimulus, the money supply shrunk significantly, unemployment initially skyrocketed, the initial decline in output was greater than the initial decline in output in 1929-30, the price level fell by 50%, the government slashed spending and cut taxes while running a budget surplus, and guess what? The economy quickly returned to full employment and output despite the fact that the initial downturn was more severe than that of the Great Depression and despite the fact that the government did everything "wrong" by allowing the money supply to shrink, cutting spending, and running budget surpluses.
Doesn't this perhaps prove that the Keynesians were wrong while the classical economists (e.g. Say, Ricardo, Mill, etc.) were right?
