>>KEYNES: The pleasure's all mine. >>CLERK: Your agenda--

>>KEYNES: That won't be necessary. I am the agenda. >>CLERK: [laughs]

>>KEYNES: Tell them I've arrived-- >>HAYEK: And then tell them I've arrived.

>>CLERK: And, your name is?

>>HAYEK: Hayek. F.A. Hayek. With an "H".

>>KEYNES: Freddy. (yeah) Keynes. Hey, listen, party at the Fed.

>>HAYEK: Already? >>KEYNES: Twenty minutes. Lobby.

John Maynard Keynes. F.A. Hayek.

>>KEYNES: Yeah, we're opposed >>HAYEK: We oppose each other philosophically

>>KEYNES: In the same studio

We've been going back and forth for a century

>>KEYNES: I want to steer markets

>>HAYEK: I want them set free

There's a boom and bust cycle, and good reason to fear it

>>HAYEK: Blame low interest rates >>KEYNES: No... it's the animal spirits

John Maynard Keynes wrote the book on modern macro The man you need when the economy's off track

Depression, recession, Now your question's in session

Have a seat and I'll school you in one simple lesson

Boom! 1929: the big crash, We didn't bounce back, economy's in the trash

Persistent unemployment, the result of sticky wages, Waiting for recovery? (Seriously?) That's outrageous

I had a real plan any fool can understand, The advice real simple: boost aggregate demand!

C, I, G, altogether gets to Y, Keep that total growing, watch the economy fly

We've been going back and forth for a century

>>KEYNES: I want to steer markets

>>HAYEK: I want them set free

There's a boom and bust cycle, and good reason to fear it.

>>HAYEK: Blame low interest rates >>KEYNES: No... it's the animal spirits

You see it's all about spending, Hear the register cha-ching

Circular flow, The dough is everything

So if that flow is getting low, It doesn't matter the reason

We need more government spending, Now it's stimulus season

So forget about saving, Get it straight out of your head

Like I said, "In the long run, we're all dead"

Savings is destruction, that's the paradox of thrift, Don't keep money in your pocket or that growth will never lift, because

Business is driven by the animal spirits, The bull and the bear and there's reasons to fear

It's effects on capital investment, income, and growth That's why the state should fill the gap, with stimulus both

The monetary and the fiscal, they're equally correct Public works, digging ditches, war has the same effect

Even a broken window helps the glass man have some wealth The multiplier driving higher the economy’s health

And if the Central Bank’s interest rate policy tanks A liquidity trap, that new money’s stuck in the banks!

Deficits could be the cure, you been looking for Let the spending soar, now that you know the score

My General Theory’s made quite an impression [a revolution] I transformed the econ profession

You know me, modesty, still I’m taking a bow Say it loud, say it proud, we’re all Keynesians now

We’ve been goin’ back and forth for a century

>>KEYNES: I want to steer markets,

>>HAYEK: I want them set free

There’s a boom and bust cycle and good reason to fear it

>>KEYNES: I made my case, Freddie H Listen up , Can you hear it?

>>HAYEK: I’ll begin in broad strokes, just like my friend Keynes His theory conceals the mechanics of change

That simple equation, too much aggregation Ignores human action and motivation

And yet it continues as a justification For bailouts and payoffs by pols with machinations

You provide them with cover to sell us a free lunch Then all that we’re left with is debt, and a bunch

If you’re living high on that cheap credit hog Don’t look for cure from the hair of the dog

Real savings come first if you want to invest The market coordinates time with interest

Your focus on spending is pushing on thread In the long run, my friend, it’s your theory that’s dead

So sorry there, buddy, if that sounds like invective Prepare to get schooled in my Austrian perspective

We’ve been going back and forth for a century

>>KEYNES: I want to steer markets, >>HAYEK: I want them set free

There’s a boom and bust cycle and good reason to fear it

>>HAYEK: Blame low interest rates. >>KEYNES: No… it’s the animal spirits

The place you should study isn’t the bust It’s the boom that should make you feel leery, that’s the thrust

Of my theory, the capital structure is key. Malinvestments wreck the economy

The boom gets started with an expansion of credit The Fed sets rates low, are you starting to get it?

That new money is confused for real loanable funds But it’s just inflation that’s driving the ones

Who invest in new projects like housing construction The boom plants the seeds for its future destruction

The savings aren’t real, consumption’s up too And the grasping for resources reveals there’s too few

So the boom turns to bust as the interest rates rise With the costs of production, price signals were lies

The boom was a binge that’s a matter of fact Now its devalued capital that makes up the slack.

Whether it’s the late twenties or two thousand and five Booming bad investments, seems like they’d thrive

You must save to invest, don’t use the printing press Or a bust will surely follow, an economy depressed

Your so-called “stimulus” will make things even worse It’s just more of the same, more incentives perversed

And that credit crunch ain’t a liquidity trap Just a broke banking system, I’m done, that’s a wrap.

We’ve been goin’ back and forth for a century

>>KEYNES: I want to steer markets, >>HAYEK: I want them set free

There’s a boom and bust cycle and good reason to fear it

>>HAYEK: Blame low interest rates. >>KEYNES: No it’s the animal spirits