An item that receives little attention is that Keynesian deficit spending and quantitative easing [QE] were both economic theories developed during a period of very low public and private debt. Deploying the theories, simultaneously, in an environment of high public and high private debt within an advanced economy was first tried in the early 2000’s in Japan. The result? Economic malaise.
Fast forward to February 2012 in an advanced economy of the US. What results can one find of simultaneously deploying Keynesian deficit spending and QE in an environment of high public and high private debt?
(1) an 8.5% u3 measurement of unemployment with an army of discouraged workers,
(2) falling home prices which continue to fall,
(3) high public debt morphing into hyper-debt,
(4) a trailing annual GDP growth rate of 1.7%. (1) (2) (3) (4)
The missing element is growth. More importantly growth was attempted by simultaneously deploying Keynesian deficit spending and QE in an environment of high public and high private debt. One can quickly conclude that growth does not occur [Japan and the US now as prime examples] by simultaneously deploying Keynesian deficit spending and QE in an environment of high public and high private debt. The result merely being economic malaise with debt morphing into hyper-debt.
Notes:
(1)
http://www.bls.gov/news.release/empsit.nr0.htm
(2) http://www.propertycommunity.com/forum/north-america-real-estate/21772-nationwide-prices-still-falling-us-analysts-predict-further-decline.html
(3)http://www.denverpost.com/breakingnews/ci_19858627?source=rss
(4) http://articles.businessinsider.com/2012-01-27/markets/30669494_1_gdp-report-private-inventory-investment-real-gdp
