19 December 2008
	101 Keynesian economics By Desné Masie

What is Keynesian economics? Macroeconomic theories based on the views of the late British economist John Maynard Keynes, developed in his 1935 General Theory of Employment, Interest & Money. Keynesians do not see recessions (and depressions) as cyclical, but as economic maladies, remedied by state intervention in free markets, such as lowering interest rates and taxes, and increasing public spending, to stimulate economic growth. This has the effect of replacing private debt (negative saving) with public debt, so increasing aggregate demand (spending). Keynes said: "The growth of capital depends not at all on a low propensity to consume but is, on the contrary, held back by it." His ideas were popular during the Great Depression and were almost official in global post-war economic policy, but fell out of favour in the 1960s. What is neo-Keynesianism? The credit crisis has made the idea of state intervention palatable as there are few other options to fend off deflation. This is evident in the UK government's £500bn bank recapitalisation scheme and in the US$750bn Troubled Asset Relief Program, which allows the Bank of England and the US treasury to extend loans and buy toxic assets from troubled financial institutions in an effort to stimulate liquidity. Source: Concise Encyclopedia of Economics, Keynes's General Theory, Wikipedia