Keynes said that cooling down a too hot economy should be accomplished by raising taxes

In a highly progress tax system, not sure how well that would work. The people paying taxes have more income and wealth and have a lower marginal propensity to spend. So, taking some of their income away may not result in much demand destruction. It certainly would help pay down the debt though. The problem with using rates is that it hits the lower and middle class portion of society, but they are the ones that have a higher marginal propensity to spend their incomes. My point was that the economies of the world have been using massive debt expansion to live beyond our means for decades (sti…  Read moremulus). Stopping the debt expansion and ending that stimulus will result in a drop in economic activity. That is Not a recession, it is returning to the reality living within your means. We just got so hooked on stimulus for 40 years that we started to believe we have right to constant and permanent stimulus - even though it is just literally stealing from the future and will have to be paid back.