It makes Jeremiah crazy to hear America described as a “consumer economy.” What is this supposed to mean? Is the “producer economy” somewhere else? We should thank them for all this cool stuff.
People who say “consumer economy” call themselves Keynesians, and they have the best imaginable fiscal policy. All we have to do is spend more! On credit! Policy makers who talk like this are mostly crooks, who think you are dumb enough to keep voting for a gravy train which is now plainly off the rails.
The problem Sir John presented in the General Theory was, “what if aggregate demand is too low to support full employment?” Since one man’s purchase is another man’s revenue, reduced consumption can hurt the jobs market. Consumption, production, and employment go round in a circle. If it’s a circle, though, how can aggregate demand be less than income? It’s because people are putting money in the bank, making productive investments, and storing their capacity for future consumption. That’s why we have added the electrical symbol for a capacitor.
Keynes described the problem of too much saving – hardly the problem we have today. In this case, fiscal and monetary stimulus could be used to jump start the economy – inflation, to prise money out of the banks, and government spending to create jobs.
This is why people think, “the debt doesn’t matter because we owe it to ourselves.” Once upon a time, our economy was a closed system, and the national debt was held by American banks. Keynes never imagined that we would be in debt 100% of GDP, still spending, and still without jobs.
This brings us to our second electrical symbol, the one for “ground.” No amount of stimulus is going to create jobs, if the money is used to buy foreign goods – at least, not jobs in America.
See also: Essay on Protectionism