Adam Smith: savings are delayed or guaranteed future demand, entrepreneurial projects take time to deliver, therefore societies with high savings rates give investors greater confidence to finance such projects. Savings and investment is therefore key to sustainable and rising economic prosperity.
Keynes in the 1930s concluded the opposite: the "animal spirits" of capitalists could be reignited and prosperity restored by forcing savers to spend and by stimulating aggregate demand through government spending, with the byproduct of the latter - inflation - leading to the desired effect on savers.
The fact such a prescription in the long run impoverishes savers, largely the middle-class, and leaves government the only source of future demand perhaps explains Keynes's palliative: "In the long run we are all dead". But if said 'animal spirits' prove elusive the ultimate outcome of such a policy would be a society and market entirely subordinated to the 'state'. This feature was common to both National Socialism and Communism.
With some modification from monetarism (inflation through monetary rather fiscal policy) the ideological drift of central bankers and the economics profession is Keynesian.
Keynes in the 1930s concluded the opposite: the "animal spirits" of capitalists could be reignited and prosperity restored by forcing savers to spend and by stimulating aggregate demand through government spending, with the byproduct of the latter - inflation - leading to the desired effect on savers.
The fact such a prescription in the long run impoverishes savers, largely the middle-class, and leaves government the only source of future demand perhaps explains Keynes's palliative: "In the long run we are all dead". But if said 'animal spirits' prove elusive the ultimate outcome of such a policy would be a society and market entirely subordinated to the 'state'. This feature was common to both National Socialism and Communism.
With some modification from monetarism (inflation through monetary rather fiscal policy) the ideological drift of central bankers and the economics profession is Keynesian.
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