CIA_Presentation_Zindar_July 2020

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Demo Lecture _ John Maynard Keynes

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A Brief Review of an Economic Giant: John Maynard Keynes by John M Zindar, MA, MBA :

A Brief Review of an Economic Giant: John Maynard Keynes by John M Zindar, MA, MBA “In the long run we are all dead” John Maynard Keyes (b. 1883; d. 1946) “We are all Keynesians now” Richard Nixon, 37 th President of the United States (b. 1923; d. 1994)

The Brilliant Vision of Capitalism:

The Brilliant Vision of Capitalism Adam Smith (b. 1723; d. 1790)– the “Godfather” of Free Market Economics: The Wealth of Nations (1776) Freedom for individuals to transact in any marketplace Freedom from government appointed/allowed monopolies. The Case of Cadbury Chocolate: It is really (really) subpar chocolate for good historical reasons (!) The Importance of Competition The Importance of Innovation The Importance of Education Especially for poor children! The Importance of Limited Government

The Unfulfilled Vision of Capitalism:

The Unfulfilled Vision of Capitalism “I think it would be a good idea, I hope to see it some day” Mahatma Gandhi, father of independent India (b. 1869; d 1948) Answering a BBC reporter when asked what he thought about Western civilization. The same can be said for free-market capitalism

Capitalism has Serious Built-In Problems:

Capitalism has Serious Built-In Problems FREE MARKET FAILURES Inequalities Externalities Monopolies The business cycle (booms and crashes are inevitable)

Alternative Systems are Popular when Free Markets Fail:

Alternative Systems are Popular when Free Markets Fail Marxism Fascism Authoritarian Capitalism (Khaki, State, etc.)

Keynes didn’t want to Destroy Capitalism :

Keynes didn’t want to Destroy Capitalism He wanted to SAVE IT. His response to the Crash of 1929 and the Great Depression: “The General Theory of Employment, Interest and Money” (1936)

Before Keynes: “let them eat cake”:

Before Keynes: “let them eat cake” When markets crashed (as they always do) the capitalist response was basically: “eventually supply and demand will find equilibrium, so don’t worry about it” (the Darwinian attitude getting rid of the “losers”) Keynes’ startling response: “Yes, and eventually we are all dead”

The Essential Role of Government During a Crash:

The Essential Role of Government During a Crash When nobody is hiring When nobody is spending When nobody is investing When nobody is producing There is a Liquidity Crisis that only government can address by stimulating the stagnant economy - ( multiplier effect) with a mix of fiscal and monetary policy ALSO: Things to be done during Busts AND Booms (Revolutionary thought – but blasphemy for hard-core capitalists)

Keynes’ Government Toolbox :

Keynes’ Government Toolbox MACROECONOMIC POLICY DURING A BUST DURING A BOOM FISCAL POLICY (Treasury Dept) Taxes LOWER RAISE Government Spending INCREASE DECREASE MONETARY POLICY (Federal Reserve) Interest Rates LOWER RAISE Capital Reserve Requirements LOWER RAISE Open Market Operations BUY BONDS SELL BONDS

The BIG BUT……Political Problems:

The BIG BUT……Political Problems The Budget Deficit The Mix of Fiscal and Monetary Measures The Scale of Stimulus

What is going on right now?:

What is going on right now? The Trump Boom And The Trump Bust

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