07/02/2008 2:16:41 pm
In European Voice. In the latest edition of European Voice, published on the web today, I have an op-ed about the current revival of the ideas of Keynes and its harmful impact:

"The idea that the state could and should run the business cycle seems almost unquestioned these days. But the stagflation of the 1970s demonstrated how very hard it is to predict exactly how economies develop, and that it is even more difficult to influence them. ...

Even if governments could know when, how, and how much to stimulate, the positive effects of stimulation - if there are any - in an open economy will to a large extent be exported. Economic research also shows that any residual positive effects will be offset by the need to raise taxes in the future to pay off the debts. ...

The current financial turbulence started in the US housing market, specifically the subprime sector.
Very loose monetary policies certainly contributed to a housing bubble and very high lending in the US ? and in other countries. ...

Financial problems as a consequence of too much cheap money will not be solved by policies that provide even more cheap money and the European Central Bank would be well-advised to keep cool. ...

No temporary stimulus can compensate for the harm done by excessive taxes, public spending, regulations and public monopolies. The risk is that attempts to achieve growth and jobs through such quick fixes will distract attention from ? even derail ? necessary long-term reforms."

Read the entire article here (registration needed) - >