become a fact of life, and these debts make the market for government bonds a key factor in the market for loans. Many people believe that increases in government debt will lead to still higher real interest rates and frustrate the hope of increased production. This has brought about an increasing consensus that fiscal policy is no longer possible. Right or wrong, that means monetary policy is the only game in town. One only has to look at the impact that the Federal Reserve Board can have upon the stock market both here in America and overseas to know how important that monetary policy is today. And, indeed, it is monetary policy that makes the headlines. The central banks, including the American Federal Reserve in particular, behave as though they believed in the Complete Keynesian Model -- and it seems certain that they really do believe in it. They manage the interest rates from day to day. It is always with held breath that the stock exchanges wait for a decision of the Fed. We can ask ourselves the question about why, in economics, bad news is good news. Why does every report of increased production lead to a drop in the stock market, for example? It was not always that way, only after the general acceptance of the Keynesian views that this kind of event became commonplace. The answer is that good news may cause the Federal Reserve governors to worry that inflation will increase, and to react to the worry by increasing interest rates. This, too, will pass. But monetary policy is the main tool of macroeconomic management today and for that reason Keynesian Theory is key to understanding the way our economy works and developments in our economy.The Rise of Supply Side EconomicsThe central concept of supply-side economics is that tax cuts cause economic growth. Tax cuts allow entrepreneurs to invest their tax savings, which creates higher productivity, jobs and profits. This, ironically, allows the entrepreneur and his new wo...
