Guest Post by Martin Armstrong
John Maynard Keynes in his 1936 book, ‘The General Theory of Employment, Interest and Money,” argued aggregate demand was too volatile to be stable and would lead to inflation or recessions. His theory honed in on spending as a means of price control. Low aggregate demand, Keynes argues, would lead to high unemployment and stagflation. Government could intervene through fiscal policies to increase aggregate demand, as an example, increased government spending could tame inflation. Interest rates, according to Keynes, could also be modified to encourage spending and stimulate demand. So why are these theories failing miserably today?
