While driving home, my car radio was tuned into a Business radio station. They were discussing Barack Obama’s American Recovery and Reinvestment plan. Obama proposed his plans in this online address. His goals sound noble; e.g. investing in better roads, sustainable energy, and giving workers a tax cut. Supposedly, the stock markets reacted positively on this news.

It got me thinking about all these that these countries around the world are building up. They are employing Keynes’s strategy of investing in an economy in a downward cycle, so spending is stimulated and price levels and income remain more or less unaffected.

But Keynes proposed a balanced view. He focused on downward cycles as well as upward, or better on economics. Keynesian is about stabilization policy as much. It’s therefore interesting to note how the world always turns to Keynes in a downward spiral but has trouble tightening the budget on an upward one. When all goes well, we turn to laissez-faire capitalism and when we’re in trouble Keynes needs to bail us out.

I worry how much the US and other countries are going overboard with their stimulus packages.  Paul Kedrosky is warning for this on his blog as well: “A theme I keep harping on is that so many developed countries around being the world being Keynesians at once -– enacting massive  bond-finance stimulus programs -– doesn’t come with inflation as the only possible consequences.”