“…we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand.”
J.M Keynes, “The Great Slump of 1930”
“…if we consistently act on the optimistic hypothesis, this hypothesis will tend to be realised; whilst by acting on the pessimistic hypothesis we can keep ourselves for ever in the pit of want.”
J.M Keynes, “Essays in Persuasion”
The differing approaches being taken to the economic problems arising from the financial crisis of 2008, and the debates between those favoring greater stimulus and those advocating austerity, show that Keynes’ words are as true today as they were 80 years ago. Britain is slashing government spending while the Federal Reserve Board is about to embark on another round of unconventional stimuli via asset purchases. Both policies have engendered vigorous debate about their effectiveness and their consequences, and the advocates and their opposites are equally adamant that they are right.
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