[PEN-L:154] In Response to Jim Devine's Question

[michael perelman <michael@xxxxxxxxxxxxxxxxx>]

Jim asked if I could elaborate on what I meant about the contradictions within
Keynesian economic policy.  I am pressed for time, but I can lay out a very
rough outline.

Increasing government spending or the money supply relieves business, to some
extent, the pressures of competition.  Competition is supposedly what makes
business efficient.  The absence of competition allowance inefficiencies to
accumulate and fictitious capital to multiply.

The Japanese bubble economy is a perfect, albeit extreme, example of this
phenomenon. As the money supply was pumped up, business invested; investments
prospered, creating an irrational exuberance that seemed to be validated
because of the high-level of demand.

--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael@xxxxxxxxxxxxxxxxx