Sunday, January 9, 2011

"Boosting" Aggregate Demand

Keynesians believe that Aggregate Demand can be boosted by government action. The simple fact is that this is wrong. People ALWAYS demand more than they have. Human demand is INFINITE. The limiting factor to their demand as it applies to their ability to fulfill that demand is the actual amount of wealth in existence.

Since demand cannot be increased, and the limit to how people's actions show their demand for things being the amount of wealth they think they have, the only way to boost people's actions toward fulfilling their demands is to distort their perception of how much wealth they actually have, and thus, how much they can afford.

In other words, by definition, the only way a Keynesian can "boost aggregate demand" is to force the economy into instability and unsustainability by deceiving the people into thinking they can afford more than they actually can.

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