Peter Hume (continued),
Roosevelt commented at his 1993 Inauguration, "“In our progress towards a resumption of work we require two safe guards against a return to the evils of the old order; there must be a strict supervision of all banking credits and investments; there must be an end to speculation with other people’s money and there must be provision for an adequate but sound money.”

Re;And the creation of net wealth from nothing would start to be bad at what point?
Ans; Who claimed that net wealth can be created from nothing? Net wealth can be created by employing people who would otherwise become unemployed. Surely it is obvious that shifting funds from the payment of benefits to paying people to be employed in producing assets for the community makes sense. That activity ceases to be worthwhile when full employment resumes and inflation to looms.
In January 2007 I wrote to a newspaper;
"If present economic policies continue we are heading for a cliff. The USA is printing money to pay for its fuel needs.
Scheming scoundrels are then using the bank balances of the suppliers of essential materials to the US to purchase real assets like agricultural land, or even Qantas, and thus, with the help of the extortionate pay of senior executives, causing asset value inflation. In his Boyer Lectures our past Governor of the Reserve Bank drew attention to the problem of asset value inflation but I felt that even he fails to see that there is little difference between consumer goods inflation and asset inflation. Either have the effect of reducing the living standard of those at the lower end of the pay scale.
The Australian Government has a fetish about avoiding government debt. Such debt has two main purposes; firstly to provide essential infrastructure and such essential services as winning a war and secondly to absorb surplus funds in private hands and thereby reduce capital asset inflation. Our supposedly well educated treasurer has the policy of “let her rip.” Sooner or later that policy leads to going over a cliff.

Your analysis begins and ends with the prerogatives of government. There's no reason why that should be the point of departure.

Obviously we live in a democracy. By ‘divine right of kings’ I mean only that the Keynesian approach assumes that the sovereign power can take as much of the property and livelihoods of its subjects as it wants, and spend it on whatever or whomever it feels like. Anything it does is presumed to be for the greater good. It can create any economic reality it wants. It can create net benefits by mere redistributions. Its price-rigging, confiscations and redistributions have no part in causing the problems it is trying to fix with more of the same.

Obviously a distinction between inflation and inflationary shock of five percent is arbitrary. We are back to the assumption that government is omnicompetent, omniscient, and all-good.

You say it is better for government to spend money on infrastructure projects than to pay unemployment benefits. Surely even better would be for government not to stop people being gainfully employed at the market rate in the first place?

If it’s true that government has a general competence to manage the economy:
a) Why didn’t it work? At all relevant times the government regulated the supply of money and credit, the banks, the credit unions, superannuation, the financial advice industry, the stock market, the corporations, employment, occupational licensing, the land, the water, the air, the trees, the pastures, the national parks, the Aborigines, the farmers, the graziers, the cattle, the sheep, the mines, the manufactures, tertiary industry, everone’s income, capital gains, fringe benefits, social security, etc. etc. etc.

Yet for some mysterious reason, we just keep getting these major dislocations between supply and demand. It must be that bloody market again! What is the solution?: more regulation of course!

b) In that case, what is the cut-off point at which full socialism becomes non-viable?

c) How could your approach ever be falsified? How could one know it is not an article of faith?

Peter Hume,
Yes we do live in a democracy, certainly not a perfect one but it has similar aims to the aims stated for the USA, "Government by the people for the people." The aim is that the people be sovereign.

Australians expect the people who represent us to pass laws to protect the weak from the power of the strong. That is why we have minimum wage laws etc. You appear to favour open slather for the strong. That is not for me.

Many economic thinker believe that Keynes saved capitalism from its own inherent faults, faults which you are obviously unaware of.

You need to read and digest both of Adam Smith's well known works. Smith was firstly a moral philosopher and wrote "The Theory of Moral Sentiments". After reading his work, read John Ralston Saul's several works. I live in hope.

If it’s true that government has a general competence to manage the economy:
a) Why didn’t it work?
b) If the answer is not enough government regulation, then what is the cut-off point at which full socialism becomes non-viable?
c) How could your approach ever be falsified? How could one know it is not an article of faith?

Peter Hume,
Re; the three questions you asked,
If it’s true that government has a general competence to manage the economy:
a) Why didn’t it work?
Ans; In combating the effect of the GFC on Australia the efforts of the government DID work. The stimulus package allowed a looming major surge in unemployment to be avoided.

b) If the answer is not enough government regulation, then what is the cut-off point at which full socialism becomes non-viable?
Ans; Lack of control over the money supply in one country, the USA , which unfortunately for the world is the currency of international trade, led to a false market which like a similar false market, the Dutch tulip boom collapsed under the weight of its own stupidity. I have answered the rest of this matter earlier. Citizens want protection form the excesses of unfettered market manipulators.

c) How could your approach ever be falsified? How could one know it is not an article of faith?
Ans; You may think economics is an exact science like physics where there has never been one successful experimental result to falsify Einstein's Relativity. Economics makes no claim to being an exact science so falsification is not an issue. As some comments by others have stated earlier, while Keynesian Theory was applied prior to the first oil shock it worked. After that shock much of the theory was abandoned.

You can if you wish have the last word but so far your arguments have make little sense to me and, I suspect, many others.

The reason it doesn’t make sense to you is because you’re using a double standard. You recognize that the actions of private agents may produce profit or loss, positive or negative economic outcomes. (In fact it’s a *double* double standard, because you also think of profit as an immoral quantity: it’s ‘exploitative’. So the private sector can either produce profit, which is immoral, or loss, which is a waste.)

On the other hand when it comes to the actions of government agents, all its action result in good, and there are no net costs. The fact that government gets its money by taking it from someone else, thus depriving society of the alternative possible benefit, is never taken into account.

If a private person A said to another private person B “Give me as much money as I demand or I will bash you or lock you in a cage”, you would not claim that that creates a net economic benefit.

But substitute the government for person A, and you think that such an action could “keep us out of recession” i.e. it creates a net economic benefit. And the ethical element is disregarded. Unlike private persons, the government can do no wrong.

It is true that economics is not a science in the sense that physics is a science. But that doesn’t mean that the rules of physics and their logical consequences don’t apply to human action. It doesn’t mean we can make something out of nothing by taking goods from A and giving them to B, which is all that Keynesianism boils down to.

Because of Keynesians’ unshakeable faith in this unfalsifiable and illogical belief, it never occurs to them that, since we cannot really make something out of nothing, the interventions of government cause economic and social disharmony, and are the biggest single cause of unemployment and poverty.

It is you who believe in the unrestrained power of the stronger over the weaker.

Any policy intended to improve economic conditions should first consider and eliminate any prior governmental action causing or exacerbating the problem.