The folks over at The Economist have produced a short nifty clip on EU enlargement which is worth checking out. Simplicity is the name of the game and summarising 60 years of EU economic, political and legal effort is no mean feat.
If you need to know about only two men on the planet earth at this moment – these are the two. John Maynard Keynes and Friedrich Hayek are two greater economic thinkers of the 20th century. More interestingly, their views are polar opposites in economic theory…
So what are these two guys talking about?
Keynes adopts a ‘Top Down’ liberal approach. According to Keynes “in the long run, we’re all dead” – so we can’t wait on market forces to gradually turn the economy around. Government spending (stimulus packages) can create employment and growth in the economy in a recession/’bust’. Booms usually mean that interest rates are low when a bust hits (because booms usually slow before a bust…so authorities try to keep boom going by lowering interest rates). The rates are then kept artificially lower by an expansion of cheap credit/easy money. Lowering them further won’t stir enough activity to keep demand up (Liquidity trap). Some demand might come from savings, so people shouldn’t hoard money away, they need to spend it!