I will now conclude where I began when I presented my alternative test to complement Hayek’s, and my conclusion is that monetary and fiscal stimuli fail because they do not attack the underlying problem. The underlying problem is the rigidity of the economy; that is, excessive regulation, high taxes, unbridled public spending, and the resulting demoralization of entrepreneurs. An economy can emerge from a crisis and a recession only if the entrepreneurial class is motivated. I am not talking about Keynes’s “animal spirits,” which make us manic depressive. We entrepreneurs have been harassed and demoralized by force. As long as the authorities continue making regulations, raising taxes, and giving money away, the easiest thing to do is to hold onto our money and let others do the investing, those who want to (and there are very few of them, if any). Furthermore, easy money blocks the implementation of any free-market reform and makes it politically impossible. So, the only way our economies can escape Japanization – structural stagnation and low inflation – is blocked. And what is our only escape from this problem, toward which we are dangerously sliding in the Eurozone? Our escape is our great challenge for the coming years: the challenge facing France (which seems to have no escape), the challenge facing Italy, and the great challenge facing Spain as well. It is true that France has a very wealthy economy and a large amount of accumulated capital, as Japan does, but this tends to conceal the problems. The stubborn facts and results are clear: lethargy and the failure of any reform-oriented policy. What is the only way out of this vicious circle we are dangerously entering? Well, that is clear: We must normalize monetary policy as soon as possible and create a framework that forces governments to implement the painful structural-reform measures our economies need. The current ultra-lax monetary policy benefits only a few: spendthrift governments and holders of fixed-income securities, hedge funds, and speculators, to the great detriment of most citizens, particularly savers. Also, this policy has created a bubble in fixed-income markets that dwarfs the real-estate bubble generated by the last Great Recession.

Once we normalize monetary policy, governments will be obliged to control their spending, introduce austerity policies, and encourage the necessary liberalizing reforms, which were suspended or postponed at the wrong time and which we desperately need today to recover our sustainable prosperity.