The article rejects Keynes’s multiplier logic, arguing that increased spending merely reshuffles existing goods rather than expanding their quantity, and that monetary expansion enriches early recipients of new money at the expense of later ones.

It contends that saving is not a drag but the source of capital-goods investment, which expands future consumer-goods production, whereas government spending financed by taxation or money creation merely transfers wealth from producers to non-producers.

Drawing on Mises, the author concludes that artificial demand boosts deplete savings and impoverish the economy, since production must precede consumption and nothing can be created from nothing.

According to John Maynard Keynes, 

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course by tendering for leases of the note-bearing territory), there need be no more unemployment and with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course by tendering for leases of the note-bearing territory), there need be no more unemployment and with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.

This means that government spending on digging up the buried notes will generate an increase in the real income in the economy by a multiple of the increase in government spending. The rationale behind this is Keynes’s view that spending by one person becomes the income of another.

Let us say that, out of an additional dollar received, individuals spend $0.90 and save $0.10. Now, let us also assume that consumers have increased their expenditure by $100 million. As a result of this increase, retailers’ revenue increased by $100 million. Retailers, in response to the increase in their income, also consume 90 percent of the $100 million (i.e., they increase expenditure on goods by $90 million). The recipients of the $90 million spend 90 percent of the $90 million (i.e., $81 million). Then the recipients of the $81 million spend 90 percent of this sum, which is $72.9 million, and so it continues.

At each stage........

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