The Keynesian view is that if the economy isn’t growing fast enough, you’re in a liquidity trap and the private economy won’t spend, the government should spend and there’s your liquidity. From there, you’ll get some growth.
Keynesians have this idea that the more money you borrow, the better, because if the government borrows money they spend it. And when they spend it, they put it in your pocket or my pocket and that’s the money that stimulates the economy.
That’s true right up until the point where everybody changes their mind. The one thing that central bankers do not understand is the importance of confidence. Confidence can be lost and when that happens things can change overnight.
- Source, Seeking Alpha
