There are three schools of thought about the economy.
The first involves the Keynesian view that the economy works best when you have the resources to spend. This is the view that the government should be spending to boost the economy. This also doesn’t work in isolation though. If the government starts spending (or printing money) at a rate that’s too high, then other people will start spending too and suddenly things get very bad.
This theory is the Keynesian school. The second theory is the classical school. This theory is that the economy works best when everyone has money. This is essentially the idea that the government will spend or print money to keep the economy from crashing and everybody will be happier. This theory also doesnt work in isolation though. If the government starts spending or printing money at a rate thats too high, then other people will spend too and suddenly things get very bad.
Keynes was a proponent of a monetary policy that would cause people to have more money than they needed. The idea is that people would be more likely to spend money instead of saving it for future needs. At this time, the Keynesian school says that the best way to help the economy is to increase the money supply. This is the school that wants to increase the money supply through taxation or spending.
One of the most famous economists of our time, John Maynard Keynes, was a pretty big supporter of spending and taxing. He actually wrote about the need to increase the money supply when he was working on his bestseller The General Theory of Employment, Interest and Money.
Keynes was a pretty big fan of the idea of the money supply. He published an essay called “The Economic Consequences of a Deflationary Phase of Economic Change”, which is probably the most famous economic essay of all time. In it, Keynes lays out the idea that a sharp economic downturn will cause deflation. In other words, the money supply will drop, and the prices of goods and services will drop as well. As a result, unemployment will increase.
It’s not a stretch to say that Keynes was right about this. We have, in fact, seen deflation and recessions occur before. But as economist Thomas Sowell points out, people have a hard time seeing the connection between a recession and a decrease in the money supply. When economists talk about a collapse in the money supply, they’re talking about a fall in the dollar versus the other currencies. If a recession happens, they’re talking about a collapse in the value of the dollar.
The problem with the idea of a collapse in the value of the dollar is that it only works if the collapse takes place in the US. If a collapse occurs in the rest of the world, it will be seen as a worldwide economic collapse, and thus will not be seen as a “collapse” by the economists who use this term.
The problem here being that the US is the only country that is using the term collapse in the sense of a real economic collapse. It is also the only country that uses the term collapse in the sense of a financial collapse. The rest of the world uses the terms collapse in the sense of a real economic collapse, but only where the collapse affects the US.
