A stimulating notion

http://www.economist.com/finance/displaystory.cfm?story_id=10697166

This article presents an argument of whether Keyne’s theory is effective. The Monetary Policy seems to have been quite popular for a while due to the rising budget deficits for countries that have adopted to Keyne’s theory. However, after several years, Keyne’s theory is back in the spotlight. George Bush declared that there will be tax rebates and temporary investment incentives—a concoction which he has whipped up by using the fiscal policy. Spain and Britain are already following Bush’s lead by becoming keynesian. However, others such as the president of the European Central bank, the IMF’s former chief economist and several others seem to refute the theory. Evidence was then given. An example are the fiscal deficits of both US and Britain. On the other hand, evidence was given that the fiscal policies worked when it is put into place properly and at the right time. And also, recent studies have shown that the fiscal policy is giving positive effects to America’s economy since 2001. In the end, it seems like Keyne’s theory does give positive feedback and more countries are now adopting to it. The article ends by using one of Keyne’s lines, “ the government could boost demand by digging holes.”

This article presents some evidence on the effectiveness of Keyne’s theory. The article mentions using taxation cuts and increase of spending to stimulate the economy. Also, other ways were presented. These include introducing a project for building infrastructure and temporary investment incentives. Just like the depression in the 1930’s, Keyne’s theory has taught the western government to take action. As you can see, several governments have adopted this theory. Also, several other developing countries are also converting into Keynesians. With Bush’s tax rebates, studies show that people are spending more and putting it back into the economy which has shown positive effects.

I believe that Bush did a good job on implementing that stimulus. In addition, I believe that after instilling that stimulus, providing long-term benefits would be even better.