Keynesianism as Crisis Management Strategy Essay

Keynesianism as Crisis Management Strategy - Essay Example He went to India for work, after completing his graduation. He earned fellowship of King's college due to his work on dissertation. In the year 1908 he returned back to Cambridge from India by quiting his civil service job. After leaving the job Keynes joined the Treasury (Davidson, 2007). His first published book was "The Economic Consequences of the Peace" in which he abundantly criticized the wars and forecasted about the German revenge. That particular book became the best selling book of its time and made Keynes world famous (Davidson, 2007). Keynes known work was "The General Theory of Employment, Interest and Money" which was published in the year 1936, in which he elaborated about the employment and the causes of underestimated or overestimated the interest rates and its impact on the economy, which eventually became the yardstick for the future economic thoughts. Due to his great work he was awarded as the 'Most Influential Economist' of Britain which motivated him to join the country's treasury again in 1942. He played a decisive role during the world war which always secures his name as a great economist (Samuelson, 2002). Keynes put forward the main causes of depression in order to tackle with the hazards and symptoms of the depression. Keynes introduced the theory of liquidity preference framework, which is known as "Keynesian Liquidity Preference Framework", which defines the people's intentions and desire to hold the money in cash or in redeemable assets. According to Keynes, income can be categorized into three broad terms which are defined in his liquidity preference framework. Cash to Cash Precautionary Speculative Keynes defines the concept of high money supply and high savings, and related his topic with the unemployment rate and increasing economy of the country. As per him, money must not be hoarded and it must be rolled over which eventually induces the investment graph of the country to rise (Begg, 1998). He intimated that no doubt that the high supply of money condenses the unemployment rate but on the contrary it will hike the inflation rate up to an optimal level, let say if every American becomes a millionaire after a number of printing of treasury in Federal Reserve Bank (FED), then there will be no servant or worker left to do biddings which urges the nation to hire people from outside the country on high salaries and wages which ultimately influences the inflation rate to rise. So, persistently sending the money can be the remedy to overcome these circumstances, which is known as the best cure of recession. Keynes said that if a "Liquidity Gap" occurs in the economy of the country then the country badly plunges. A liquidity gap occurs when the people of the country are reluctant to invest and willing to hoard the money rather than spending, which is mainly due to the consumers loss of confidence on the economy probably due to the stock market crash or the prevailing situation in the country. Hurricane and other natural disasters can be a cause which hampered between the consumer spending and savings. The concept of