Keynes Is Dead, Long Live Reaganomics 2.0

In 2011, we're emerging from a decade of global "value destruction and reallocation," or what economist Joseph Schumpeter called "creative destruction." The bursting dot-com bubble was followed by the housing bubble. Consumers and financial institutions used unprecedented financial leverage, justified by irrational assumptions, to inflate that bubble until it, too, burst. Then, in the wake of the 2008 "financial panic," a policy based on Keynesian fiscal stimulus required the government to take on additional debt even as consumers and financial institutions deleveraged.....