The Upside-down World of John Maynard Keynes - Mark Thornton - Mises Institute

The Upside-down World of John Maynard Keynes - Mark Thornton - Mises Institute: "he could not understand why people would invest resources in risky adventures that helped keep the economy growing at full employment. He therefore substituted 'animal spirits' for the profit motive. These spirits allow entrepreneurs to proceed with a naive confidence and to set aside concerns over losses. Similarly, the failure to invest was also a psychological problem that he dubbed the 'liquidity trap.' This trap occurs when investors seek liquidity in cash and when monetary policy — in terms of cutting interest rates — no longer produces an increase in investment."

"This slew of interventions has been disorderly. Many interventions, like the takeover of AIG, were total surprises, causing volatility in stock markets. Moreover, these interventions have been extremely large and wide ranging in scope. Measured in dollar terms, the money "allocated" totals over $12 trillion by one account."

" hoarding is actually a good thing because it helps facilitate the process of deflation and deflation helps bring about recovery. If people reduce consumption (demand) then prices fall, particularly in the early stages of production. As all types of resources and goods are becoming cheaper, including labor, the purchasing power of every hoarded dollar increases. All the prices that were bid up during the boom — particularly land, capital, and various asset classes — are thus reset at lower levels. Debt is liquidated and savings are restored and the prospects for a return to prosperity emerge, first among producers and then by consumers. Therefore hoarding speeds up deflation and deflation speeds up the correction process."