Benn Steil is director of international economics at the Council on Foreign Relations. Benn Steil is also the only living man who thinks that French crank Jacques Rueff--who blamed the Great Depression on a sudden strengthening of labor union power at the start of the 1930s--"demolished" the "foundations" of Keynesian economics:
Keynes and the triumph of hope over economics: One of these good economists was Bastiat’s fellow Frenchman Jacques Rueff, who in a 1947 journal article attacking "The Fallacies of Lord Keynes’s General Theory" pointed out that governments “have a choice between only two solutions: to allow the apparatus of production to adapt itself to... the will of the consumers... or to adapt the desires of consumers by authoritative regulation...” Nobel Prize-winner Paul Krugman, who calls today “The Keynesian Moment”, justifies such a trillion dollar investment programme on precisely the Keynesian foundations that Rueff demolished – the claim that money “would otherwise be sitting idle”. When Mr Krugman buys his stimulus bonds, I am curious where the “idle” money will come from. Will he sell stocks? Bonds? Withdraw funds from the banking system? If it is not to come from a cash box, it is not idle...
But that's what recessions are: times when money that in normal times greases the circular flow of economic activity instead sits idle. You can see this on graphs of monetary velocity: when recessions hit the velocity of circulation collapses as money sits idle--and adding the fourth quarter of 2008 and the forecast velocity for the first quarter of 2009 onto the Economagic velocity graph shows us just how fast the amount of idle balances are piling up right now--the idle balances that Rueff and Steil claim cannot exist.
I had not noticed that the Council on Foreign Relations was such a strong source of wingnut welfare. Let us collectively beg CFR President Richard Haass: rather than have his think tank continue its descent into disinformation and irrelevance, please hire a real economist instead.