John Maynard Keynes wrote `The General theory of Employment, Interest and Money’ in 1936 (when debt level was around 150% of the GDP, almost double of present level). I have tried to read this book many times but have failed mainly due to sleep, lack of understanding and boredom, but I have tried to read the easy parts of it , helped not it small parts by the good introduction written for this work by Paul Krugman. In Paul’s words, the conclusions of The General Theory might be expressed as four bullet points:
- Economies can and often do suffer from an overall lack of demand, which leads to involuntary unemployment
- The economy’s automatic tendency to correct shortfalls in demand, if it exists at all, operates slowly and painfully
- Government policies to increase demand, by contrast, can reduce unemployment quickly
- Sometimes increasing the money supply won’t be enough to persuade the private sector to spend more, and government spending must step into the breach
Last one of these points was most amazing to me – Government as Spender of last resort!