THE SPINE OCTOBER 19, 2008
John Maynard Keynes wrote many books, including The Economic Consequences of the Peace and The Economic Consequences of Mr. Churchill. Neither of these has much relevance to our present predicament.Members of the younger generations may not have heard of Keynes until the last few weeks. But no one who reads a serious newspaper or a serious magazine (or maybe even looks at the web) can fail to have encountered his face. He had enormous stature, 6'6" and many pivotal positions. He was out of fashion for the last quarter century. But now, as Ed Crooks wrote in the weekend Financial Times, he is "a prophet reborn."
Which is what almost everyone is now saying. But even before everyone was saying, as they are now, that Keynes was right, governments were going into paroxysms of spending that put them into deficits, as they did for the last eight years in the U.S. He was also against too much saving, which certainly was not what the American people were doing. Why, it was almost unpatriotic to save. George Bush's most practical urging to the population after 9/11 was to "go spend."In any case, does the government have money to spend? In any case, the people surely don't.So I can't quite get the Keynesian solution.And I can't really take sides here...and that's because, well, I myself am mystified.But I did read Jim Grant's long essay of a distinctly non-Keynsian temper is Saturday's Wall Street Journal. It is called "The Confidence Game," in which the editor of Grant's Interest Rate Observer observes that "destroying confidence is what governments do best." On the other hand, he believes that "the bear market is a value restoration project -- Wall Street will be going on sale -- if the government will let it.