So we’re stuck in a liquidity trap and there’s no way out. And we can’t get to full employment, no matter how low we drive interest rates. We may even have to jump down that rabbit hole of negative interest rates. Oh my! But wait – we’ve got Sir John Maynard Keynes’ magnum opus of modern economics, The General Theory of Employment, Interest and Money. And even better, there’s Nobel Prize winning economist Paul Krugman with his own take on Sir John’s theories to get us out of this mess! Krugman and Keynes; whew, what a relief! We need fiscal spending! But maybe that hoped-for infrastructure spending was unnecessary after all?
Thesis: Infrastructure Spending was Unnecessary
The state of the economy in January, 2017 proves that infrastructure spending was unnecessary to escape the Great Recession. It is not, per se, necessary to get out of a recession and create full employment. A liquidity trap, as defined by Mr. Krugman, can be escaped without a heavy dose of infrastructure spending. Large infrastructure spending programs are not a universal salve in all economic crises. Krugman and Keynes were wrong.
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