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HOTEL CLERK: Lord Keynes! Welcome, sir. It's a pleasure.

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

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

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

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CLERK: And, your name is?

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

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

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HAYEK: Already? KEYNES: Twenty minutes. Lobby.

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John Maynard Keynes. F.A. Hayek.

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

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KEYNES: In the same studio

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We've been going back and forth for a century

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KEYNES: I want to steer markets

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HAYEK: I want them set free

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

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

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

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Depression, recession, Now your question's in session

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

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

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

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

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

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We've been going back and forth for a century

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

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

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

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

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Circular flow, The dough is everything

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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KEYNES: I want to steer markets,

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HAYEK: I want them set free

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

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

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

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

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

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

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

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

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

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

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We've been going back and forth for a century

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

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

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

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

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

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

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

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

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The savings aren't real, consumption's up too And the grasping for resources reveals there's too few
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So the boom turns to bust as the interest rates rise With the costs of production, price signals were lies

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

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

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

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

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

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

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

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

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