In my last article, I pointed out some flaws in the Keynesian circular flow of income. In summary, Keynesians are incorrect to discourage savings and to encourage government spending, and their attitudes towards imports and exports can only be termed “mercantile.” The conclusions of the Keynesians logically follow from their representation of the economy as a circular flow and economic growth as increased spending on aggregate production.
I promised that in my next article I would explain why credit expansion doesn’t relieve us of the task of saving, but is instead behind our present economic malaise. As I alluded to A-level economics last time, I shall do so this time, too. Everyone, get your pens and paper at the ready.