Blogs & Comment

Massive stimulus needed?

We are on the eve of an era of massive government deficits in pursuit of a Keynesian-style stimulus to boost jobs and businesses. Do we really need such a humongous jolt?
When Keynes published his prescriptions in The General Theory of Employment, Interest, and Money, there were breadlines around the block, legions of hobos riding the rails, shanty villages on the outskirts of the town, Bennett buggies in dustbowls, and so on. U.S. GDP had fallen by nearly 50%, 10,000 banks had failed with no deposit insurance, the U.S. money supply had shrank by a third, and unemployment had climbed to 25%.
We are nowhere near that point. Massive fiscal stimulus of the kind now in the works should perhaps be held in reserve for when the situation is trulydire. Until then, policymakers would best direct their attention and energies to thawing out the credit freeze. And given the monumental stimulus unfolding in the U.S., China, and elsewhere, Canadians are bound to be lifted into recoverywithout a domestic stimulus package anyway — just like they were over the past six years.