Kenyes required an unjustified demand slump

There has been a secret change in stimulus theory since the crash of 2008.  The claim among Keynesians is that any demand slump can be partially corrected by government fiscal expansion.

Just a reminder, Keynes required a demand slump that was basically hysterical in nature, something Congress might be able to solve.  We do not suffer a psychological demand slump, we suffer a real resource constraint.

Consider this view taken by the Bank of England (HT Scott Sumner):

Judging by this week’s report, the central bank is in no mood to tighten policy and takes the view that the rise in inflation will eventually be doused by spare capacity.

No, there will be relative balance in capacity, under a resource constraint. Say's law still holds (as per the Keynesian formulation of Say's Law), but with longer integration limits. Machines in England are not idle, they are being depreciated over longer intervals as their economy deleverages. Inventory cycles have lengthened, the economy simplified and more resource management handled inside the firm or household rather than the market.

Brian Caplan hints at the problem when he posts about the senile Walrasian.