Economics

Pride comes before a fall.  Many nations today may not believe there economic status after the successful recent past when almost all the economists walked shoulders high over a growing economies.  The so called success leads the economists to the golden era.  In the 2008, the IMF had already reported good economic times which did not take long. It had indicated that all financial debt were cleared and there was a good economic recovery criteria in place in which they hoped to generate a more lucrative business in the stock markets.  However, it may be true to say that this is likely to have been a little practical but more theoretical approach of economic analysis (Case, 5).  Nevertheless, this is not the first time when a global economic depression is being reported.  The greatest economic depression was experience in 1929-1933.

The Keynesian Economics is a collection of a number of well designed economic theories that are meant to elaborate on the determining factors of economic output and employment. The set of theories are based on a series of researches by John Keynes.  The economic theories are based on him because his ideas were founded in 1936 after the great depression of 1920s.

Economist had over time thought that economic recession as a self-correcting within the capitalist private economies.  The policy makers as well as economists had always argued that an off set of market surplus would be created automatically, that is, if the supply of goods and services was in excess, then there would be an automatic fall in wages and prices thus the balance would be maintained in the market.  However, according to the research by Keynes, the employment market is influenced by many factors other than just the fall and rise of prices of commodities or the surplus supply (Farmer, 2009).  John viewed the employment market in different perspective.

His idea was that the variations in the employment sector and output are determined by the changes in the demand.  He further explained that it is probable to trap the economy to remain fairly constant over time, with the private investment and consumption remaining very low even with falling prices. According to his research, Keynes argued the management strategies used in some business institutions plays a major role in the destruction of economic structures especially if the stakeholders maintained a pessimistic approach to business management practices.  The resultant product of the pessimistic approaches is the reduction of investment coupled with less consumption of the related goods and services.  In this case, most individuals would only like to keep their possessions in liquid form which discourages long term ventures (Erick, 2009).  Keynes discovery brought forth the development of macroeconomics as a new branch of economics.

Keynes reinforced the governments role in the development of economics and the control of the recession that had been deeply set at his time.  He argued that the government was responsible for the economic growth and it therefore needed to take an active role in the intervention of economic recession by laying down appropriate fiscal policies and monetary controls that will enable it to have control over business cycle. According to him, the government ought to spend in investment projects to counter the low investment by the private sector so as to encourage steady demand profile thus keeping the production.  The post war economic depression was recovered through policies like those in which the government takes the initiative to invest when the private firms are not willing to invest.
Taking a brief overview of the great international depression and economic recession of the period between 1929 and 1933 in which majority of the banks went bankrupt, farms were no longer productive and most people lost their jobs. Almost all the production industries fell victims of the circumstances and would no longer generate as much income as they had before.  Majority of them closed while the surviving ones were limping with bruises from the crashed economies (Krugman, 2009).  For example, in the  case of the United States of America and Germany, it was recorded that the economic production was badly severed with output dropping by about half the Normal production while the labor force dropping by about 25 to 33.   Unemployment was high and early retirement and retrenchment was the norm.

The great depression aggravated more research on economics and discoveries on the solution to the problem thus John Keynes was provoked to write his research and encourage the governments to get involved in the economic recover unlike in the past when it was thought that it is by the least governments involvement that economies grow.  This idea was then washed out by his invention and macro financial firms started to spring up thus stabilizing the economy.  Agricultural production which was in excess thus overflowing the market consumption rate was also significant and there was need for government intervention in it.

The recent economic depression that started in the 2007 has resulted to lose of more than 1,256,000 jobs in duration of three months from September to November 2007.  The worlds economies have been going down the drain.  This is the worst economic depression since the 1930s.  The western economies have been working on Keynes principles although there was no clear explanation for the relationship between inflation that coincidentally meets unemployment economically (Gerding, 43).  The current depression has led to the loss of over 40 of the stock market in the U.S. which has occurred in the three months as mentioned above.

According to the research by Keynes, psychology takes a major role in the market behavior.  The U.S economy has operated on the principles of classical economic markets in which the determination of stock prices depends on fundamentals of economics.  The effect of psychology in the economic structure is related to the investment patterns of individuals or private firms.  Spending habits if families make them either invest in permanent assets or they may fail to invest depending on their future speculations of the worth of their investment.  If the families then decide not to spend in permanent assets, then there is decline in the employment sector and less commodity consumption thus a low demand.

It is argued that the depression in 2007 to 2009 should only be curtailed through the involvement of governments in the investment projects which is possible through the central bank and the World Bank.  The central bank could participate in the sale and purchase of securities in the open market arena.  Blocks of shares can be sold and bought at the open market to encourage people to create the interest in investment. The media involvement in the advertisement of the stock market can uplift the interest for private investors to make more purchases.  The stock market is in most times a resultant effect of the policy development and implementation within the nation (Swagel, 7).  The free market policy guides the development of market economies because it determines on who the competitive participant in the market is.  This is essential in the creation of competition and interest in the stock market.  
The global economic depression by the 2008 was already pronounced so as to be documented by a number of scholars as one similar to the great depression of the late 1920s and early 1930s.   The U.S economists by 2009 February argued that the financial status of the nation could not support the investment plans as discussed by K

However, the peoples bank of India did not neglect the use of Keynes idea in economic development as per the report by Zhou Xiaochuan, which was entitled as Reform the International Monetary system. Within his speech, the governor argued that it was important to embrace the idea of Keynes and invest in the stock market.  He sent his pleas to the World Bank and the IMF to step forward and encourage investors through making investments so as to uplift the withered economy (Gerding, 47)  Most people did not embrace the idea though.

Nevertheless, following Dr. Zhous ideas on IMF investment plans, it was agreed that the IMF set aside some finances to be distributed globally towards the encouragement of investment so as to lift the economy from such a great depression.  Fortunately, the agreement in April 2009 at the G20 London summit asked the IMF to allocate 250 billion for the stimulus plans.  The result of this is expected to step up the economics status by far.  Even though there was more investment towards the global recovery according to the IMF and the OECD reports, it was rather unexpected that the recession was still taking off slowly and that there was great need to encourage better recovery measures (Swagel, 13). The recovery measure taken though expected to take longer towards the economic recovery, some banks already sensed danger of an incoming inflation that is likely to create more difficulties towards the creation of a stable economy.  The central bank of Europe for example reflects a future high inflation rate if the stimulus on global economies continues (Case, 16)  Economist are also reluctant on borrowing Keynes idea thinking that it government spending will not help to recover the economy.
In conclusion, up to today, the great economist and advisers of economists are torn between takings up the role up on the government to revive the dead economy or to look for more alternatives for the problem.  The United States of America is confused on the best decision to take and has just been forced to be at a standstill and reluctant to take more economic recovery measures. In other words, the society is very skeptical about private investments yet it is the private sector that over time held the economies of the world.  There is therefore a great need to mobilize individual investors so as to assist in the economic recovery because it seems that the government may not work it out singly and succeed.  Economists now need to open the eyes wide and come up with the possible solution to this depression economy before it runs out of control.