basic keynes

Basic Keynes and MMT

Keynes disagreed with 19th century 'classical' economics that had failed

He said firms would not invest in a recession because demand was too weak. Businesses cut investments rather than take advantage of lower wages and costs. He said once a recession sets in the gloom will make things worse.

He proposed the government should stimulate consumer spending. Consumer spending would create demand known as aggregate demand.

He argued the government borrow to stimulate demand. When governments spend more than they receive in tax it's called deficit spending and most governments do this.

The aim is to spend, (or invest) stimulate demand, stabilize the economy and bring it out of recession.

Modern Monetary Theory (MMT)

MMT argues governments with a fiat currency and central bank can always repay deficit spending.

(Tories have been levelling down Britain since 1689)