Financial Stimulus is Often a Failure

                     

Interest rates normally adjust to supply and demand forces and thereby adjust economic events. However, whenever the government imposes stimulus proposals to raise credit and lift the economy, the system is disturbed and thus distorted.

                       

This unbalances the economy and does the exact opposite of what has been intended. It’s a lesson politicians wantonly overlook to suit their election goals.

                       

Ludwig von Mises wrote fully about the phenomenon in the 1920s but the economist in fashion during the 1930s recession was, unfortunately, John Maynard Keynes. He became the political icon of that recovery movement.

           

The Keynes government pump-priming thesis used prolonged stimuli that actually deepened, and helped induce the Great Depression. This was confirmed by the then Treasury Secretary. Henry Morgenthau. Nevertheless, it is the premise of failed current policy. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)