Keynesian economics seems to be the hottest thing since sliced bread right now even though it’s best-before date is long gone. In Sweden, along with almost all other “Capitalist” countries in the world, this current trend is taking over the hearts (and brains and judgments?) of politicians and policy makers. Even the Swedish Liberal-Conservative *sigh* party Moderaterna has lost their ways (it’s, however, nothing new in the world of politics) and the newest example of that is Sten Nordin, a Conservative spokesman who nowadays want us to spend our asses out of the financial meltdown.
We heard it before … New Deal, building roads, Adolf Hitler, the autobahn, Social Democracy, US Liberalism … yada yada… but shouldn’t we KNOW better this time?
I don’t want to get into this in to much detail, but, in short, the problem is that excessive expansion of the money supply is inherently inflationary. A good example that is commonly used is the global crisis of the 1930s. This was a result of a massive contraction of the money supply, which in turn lead to stagflation (skyrocketing inflation and rising unemployment rates). When the governments of the 1930s responded with even more spending to improve their economies, the situation got even worse.
In short, there is a risk that executives and other policy-makers reach for more state involvement during a crisis and increase the spending of state revenues.
But, alas, some of us never learn …