Two Economists: Keynes (propaganda) Vs. Hayek (truth)

Lord Keynes! Welcome sir, it's a pleasure Pleasure's all mine Your agenda That won't be necessary, I am the agenda... Tell them I've arrived And them tell them I've arrived And your name is? Hayek F.A. Hayek with an H Freddie Yes? It's Keynes Hey listen, party at the Fed Already? 20 minutes Lobby John Maynard Keynes F.A. Hayek Yeah, we're opposed We oppose each other philosophically In the same studio... We've been going back and forth for a century I want to steer markets I want them set free There's a boom & bust cycle and good reason to fear it Blame low interest rates! No, it's the "animal spirits" John Maynard Keynes wrote the book on modern Macro the man 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! C + I + G all together gets to Y keep that total growing, watch the economy fly We've been going back and forth for a century I want to steer markets I want them set free There's a boom & bust cycle and good reason to fear it Blame low interest rates! No, it's the "animal spirits" 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've said in the long run... we're all dead! Savings is destruction, that's the "paradox of thrift" don't keep money in your pocket or that growth will never lift 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 & growth that’s why the State should fill the 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 trap", that new money's stuck in the banks! deficits could be the cure, you've been looking for let the spending soar, now that you know the score My General Theory's made quite an impression I've transformed the Econ profession You know me, modesty, still I'm taking a vow... so say it loud and say it proud: "We're all Keynesians now!" We've been going back and forth for a century I want to steer markets I want them set free There's a boom & bust cycle and good reason to fear it I've made my case Freddie H. Listen up, can you hear it? I'll begin in broad strokes, just like my friend Keynes His theory conceals the mechanics of change That simple equation, too much aggregation ignores Human Action, and motivation And yet it continues as a justification for bailouts and payoffs by "pols" with machinations You provide them with cover to sell us a free lunch... then all that we're left with is DEBT & a bunch! If you're living high on that cheap credit hog... don't look for cure from the hair of the dog Real savings come first 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 invective 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 & bust cycle and good reason to fear it Blame low interest rates! --Nah! It's the "animal spirits"! 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, you starting to get it? That new money is confused for real, loanable 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 For the costs of production, price signals were lies! 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 1920's or 2005... booming bad investments seems like they 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 no "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 & bust cycle and good reasons to fear it Blame low interest rates! No, it's the "animal spirits"... [ Subtitles by JLA ]