Lord Keynes, welcome, sir. It's a pleasure. The pleasure's all mine.
Your agenda. That won't be necessary. I am the agenda.
Tell them I've arrived. And then tell them I've arrived. And your name is?
Hayek. F. A. Hayek. Good evening. Freddie. Yeah?
Keynes. Hey listen, party at the Fed. All right. 20 minutes. Lobby.
John Maynard Keynes. Oh. F.A. Hayek. Yeah.
We're opposed. We oppose each other philosophically. you need when the economy's off track.
Depression, recession, now your question's in session. Have a seat and I'll school you in one simple lesson. Boom! 1929, the big crash. We didn't bounce back, economy's in the trash.
Persistent unemployment, the result of sticky wages. Waiting for recovery? That's outrageous.
I had a real plan, any fool can understand. The advice real simple, boost aggregate demand. CIG, all together gets to Y. Keep that total growing, watch the economy. We've been going back and forth for a century I want to steer markets I want them set free There's a booming bus cycle And good reason to fear it Play low interest rates It's the animal spirit You see it's all about spending Hear the register cha-ching Circular flow, the dough is everything So if that flow is getting low Doesn't matter the reason We need more government spending Now it's stimulus season So forget about saving Get it straight out of your head Like I said in the long run We're all dead Savings is destruction This is the end That's the paradox of thrift.
Don't keep money in your pocket or that growth will never live. Because business is driven by the animal spirits. The bull and the bear.
And there's reasons to fear its effects on capital investment, income, and growth. That's why the state should build a gap with stimulus. Both the monetary and the fiscal.
They're equally correct. Public works, digging ditches, war has the same effect. Even a broken window helps the glass man have some wealth.
The multiplier driving higher the economy's health. And if the central bank's interest rate policy tanks a liquidity. I'll begin in broad strokes just like my friend Keynes His theory conceals the mechanics to change That simple equation, too much aggregation Ignores human action and motivation Yet it continues as a justification For bailouts, payoffs, by polls with machinations You provide them with cover to sell us a free lunch Then all that we're left with is debt and a bunch If you're living high on that cheap credit hog Don't look for a cure from the hair of the dog Real savings come first if you If you want to invest, the market coordinates time with interest. Your focus on spending is pushing on thread. In the long run, my friend, it's your theory that's dead.
So sorry there, buddy, if that sounds like infective. Prepare to get schooled in my Austrian perspective. We've been going back and forth for a century.
I want to steer markets. I want them set free. There's a boom and bust cycle and good reason to fear it. Play low interest rates. It's the animal spirit.
The place you should study isn't the bust. It's the boom. That should make you feel leery That's the thrust of my theory The capital structure is key Malinvestments wreck the economy The boom gets started with an expansion of credit The Fed sets rates low Are you starting to get it? That new money is confused for real ownable funds But it's just inflation that's driving the ones Who invest in new projects like housing construction The boom plants the seeds for its future destruction The savings aren't real, consumption's up too And the grasping for resources reveals there's too few So the boom turns to bust as the interest rates rise Where the cost of production price signals relies The boom was a binge, that's a matter of fact Now it's devalued capital that makes up the slack Whether it's the late 20s or 2005 Booming bad investments seems like they'd thrive You must save to invest, don't use the printing press Or a bust will surely follow, an economy depressed Your so-called stimulus will make things worse Just more of the same, more incentives perverse And that credit crunch ain't a little liquidity trap, just a broke banking system.
I'm done, that's a wrap. We've been going back and forth for a century. I want to steer markets.
I want them set free. There's a boom and bust cycle and good reason to fear it. Play low interest rates. Nah, it's the animal spirits.
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men who believe themselves to be the best.
to be quite exempt from any intellectual influence are usually the slaves of some defunct economist. The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.