Monday, December 2, 2013

Fiscal Keynesianism

The great disagreement over whether budget deficits and debt have more benefits or costs shows that there is a great level of uncertainty in the theories of economics. Also, it's important to note that much of the uncertainty deals with macroeconomics.  My assumption before the reading was that macroeconomic indicators are directly affected by budget deficits and debt whilst microeconomic indicators are not affected indirectly, but I believe my assumption isn't correct after the reading. Also, I often believed that the budget deficit shouldn't exist to stop debt from rising, but the usefulness of a surplus or a balanced budget doesn't seem to yield as many benefits as expected. Thus, even I have trouble understanding whether there must be a deficit, so great disagreement among economists makes much more sense when weighing the costs and benefits of fiscal Keynesianism. It is an important point that the United States is exclusive among powerful nations with the ability to pursue fiscal Keynesianism and not worry too much about how the mounting debts will be paid in the future. Please note that the European Union seems to follow suit, but not with as much success as in America. I say that because many new members of the EU don't see the promised economic convergences towards richer nations in the Union that were promised with so many austerity measures, unequal power distribution and regulations favoring richer nations, and high levels of unemployment.

With so many fiscal policies failing in the European Union that have even lead to the United Kingdom to ask to secede I believe austerity measures aren't always the best solution to the debt caused by budget deficits. I believe it's important to remember that not all countries pay debt in the full amount with much debt forgiveness practiced throughout history and even in the present. The creditors giving money to the United States are not interested in the economy performing below capacity and want consumption to continue because it directly affects the many creditors' prosperity, so it's unclear when the debt will be paid or whether it will even be paid without any forgiveness because it would seriously undermine the businesses associated with the creditors. As a result, I somewhat favor fiscal Keynesianism, but this post is largely an opinion and there is much room for me to err when much of this conclusion is based on the situation in the EU and my understanding of it.

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