The short term and populist politics our politicians are used to practise is delaying the end the global crisis. They are not the only factor of the solution, but their fear to face the real problems of the economic system is causing so much pain in our societies. At the moment, the only big action they have taken is to increase the public expenditure as it is an easy and popular policy. «Don’t mention the reform of the financial, labour or tax systems. You could lose the next elections». As a result, business and citizens are in the middle of an anxious situation. Everybody thinks we are in front of a long and hot year and so many believe we are going to live another Black September, at least in economic terms.

The mistake of fueling the economy with public monetary resources is showing his real face. It does not stimulate the system. On the contrary, the only thing which is increasing is public debt, a bill we will paying for years. Economists from the Heritage Foundation have released a report on the matter. They point out that Keynesian policies Governments are implementing all over the world are ineffective and are another new proof of the perils of growing public budgets, as it happened in the 1960s and 1970s. The key findings of the paper Keynesian Fiscal Stimulus Policies Stimulate Debt-Not the Economy are:

  • «The federal government has poured extraordinary amounts of fiscal stimulus into the economy two years running, yet unemployment continues to rise with the national debt. This recent experience with Keynesian deficits is fully consistent with past episodes at home and abroad».
  • «This is no longer an experiment in economic policy. The results are in: Keynesian stimulus does not work».
  • «Keynesian stimulus fails because government must borrow money to finance deficit spending. That borrowing reduces the savings available for domestic investment, or increases the savings imported from abroad along with a similar increase in the net imports of goods and services».
  • «Total demand is unaffected, so total output is unaffected».
  • «The counterargument that borrowing to finance Keynesian stimulus soaks up and cycles “idle” savings back into productive use is invalid for an economy supported by a modern financial system».

The report examines monetary policies different governments have applied in the last forty years and argues that all the time emerge the same result. Economy does not recover because of the public spending. Public debt becomes the main obstacle to return to a healthy economic environment. The sad conclusion of the paper is that officials do not want to learn from the past. Today they are taking the wrong decisions and tomorrow will do the same. As the author, J.D. Foster, writes

«Bad policy ideas rarely go away forever. Circumstances change, memories fade, political fashions come and go. The current global experiments with Keynesian fiscal stimulus will fail as they have failed before. Unfortunately, the price of learning this lesson yet again is an unnecessarily prolonged recession, a weaker recovery, and millions more lost jobs—and, of course, the massive increases in public debt».