Here is Ken Worsely on Japanese spending-
GDP up on government spending
Despite the 0.9% rise in GDP over the April-June quarter, there remain some skeptics worried about how strongly Japan will be able to recover from multiple quarters of negative growth. The Nikkei published an article yesterday entitled “Jobs Weakness Could Slam Brakes On GDP Growth, Economists Fear“. The Nikkei puts it simply: “For Japan, the biggest challenge is whether the stimulus measures can create sufficient private-sector demand to trigger a self-sustaining economic recovery.” Of course, this is impossible, as stimulus measures are temporary and mainly serve to increase national debt. ...more
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I am a keynesian by heart, hence I place a lot of emphasis on government spending.
On the question of debt -
Yes, govt spending will increase the govt debt, but not necessarily the debt/GDP ratio. In the medium term the benefits of the govt spending will increase the GDP, as Ken has correctly pointed out. Hence, a case of increase in numerator and denominator
Temporary energy injections?
1970s was a time when monetarists had completely dumped Keynesian explanations and theories about recession. However, fortunately people today have realised how keynesian policies are necessary along with monetary policies. Almost every country has designed and implemented a govt spending program. I am not suggesting that govt spending is self sufficient for a quick recovery, I am just trying to suggest that govt spending could lead to sustainable recovery if effectively supplemented with monetary expansion policies (assuming that there is no structural problem in the economy)
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