Alan says "As is so often the case the best government policy is to stand back and allow market forces to correct the imbalances that are in place." That supposes that markets inherently work toward balance but Steve Keen argues that when markets are unstable they lurch further and further to instability. Alan Moran's prescription will lead to debt deflation, Steve Keen's advice is a debt moratorium. We shall see.

Alan finishes with "governments which have persuaded themselves that it is they who have caused the previous levels of prosperity and therefore will be blamed for inaction." Too true, and which ever is in power when a recession looms will be punished by the electorate.

Good old Alan Moran. In his defence of the 'free market', he's like an unreconstructed Marxist forever defending the purity of Communism.

Alan, mate, we got into this mess in the first place precisely BECAUSE governments stood back and let 'market forces' run free.

Capitalism only works if there are agreed rules and laws. And those laws have to be enforced.

Sooner or later, you and the rest of your hairy-chested mates in the libertarian lobby are going to have to accept your time of manipulating the policy debate to your own ends is over.

Now get back to the back of the bus.

Mr Denmore,

You are quite wrong. It was government social engineering, Central Bank's meddling and the inaction of regulatory bodies that were the root causes the current meltdown.

Alan is correct the solution is not the current craze of spending on comsumption and infrustructure or in bailing out failing business, for if as is now likely, this recession is prolonged the larder eventually becomes bare.

Governments would be better off concentrating on and targeting spending and subsidising creative and solid businesses in those activities that are directly involved in the creation of wealth.

What's your solution?

Keith,

You are joking aren't you? So it was the dastardly government "social engineers" who forced the Dr Frankensteins at investment banks to package up dud mortgages into securities which were then flogged to the public by commission-paid financial advisers acting on bogus ratings from credit agencies paid by the product engineers?

So it was the government "social engineers" who forced poor company directors to accept hugely inflated compensation packages to leverage up their balance sheets and take massive risks in pursuit of short-term returns?

So it was the government "social engineers" who encouraged mafia-like securities wizards to build elaborate Ponzi schemes and fleece retirees across the world of their life savings?

Let me spell it out for you. This crisis was caused by an ABSENCE of proper regulation, by a blind faith in market forces, by a naive belief that greed would act in the service of the wider good, by a disenfranchisement of the public by shadowy self-interested forces and by an almost religious zealotry that put society at the service of "the economy".

The wonder is how quickly the free marketers turn into socialists when their fortunes are lost.

By the way, you need to get your own story straight. On the one hand, you complain about government interference. On the other, you say governments should be "subsidising creative and solid businesses". I never knew libertarians were in the business of picking winners.

As to my solutions. The answer is what governments and central banks are now doing - pump priming and cutting interest rates.

The consequences of following Alan Moran's advice - of just standing back and letting creative destruction take its course - can be seen in what happened during the Asian crisis. The IMF told Indonesia to follow the Washington consensus - cut spending, raise interest rates and let market forces rip. The country nearly imploded and would have done so, had it not been for the pragmatic intervention by our own Reserve Bank, who argued for a less doctrinaire approach.

Perhaps we should let the meltdown occur.

And then when we all totally shocked and awed into submission by the thus universal ensuing global catastrophe, we can then accept the Shock Doctrine therapy courtesy of the benighted Chicago boyz---of which the author is a fully paid up true believer.

Whether interventions such as $6bn to an over-capacity car industry which for decades could be viable with at most two suppliers and $10bn in "welfare" payments will alleviate the downturn is moot; but Alan is surely right to see longer-term problems arising from the mode of dealing with the crisis. Surely even emergency action could have been taken in such a way as to improve the structure of the economy, e.g. by measures which tackled the welfare-to-work transition, promoted entrepreneurism and productivity and increased incentives for future saving and wealth creation. Treasury didn't have to invent anything, just draw on work already done in such areas. There's never a good time for "knee-jerk" reactions such as we've seen, always a good time to lay better foundations for the future. The Howard Government wasted many such opportunities, more "me-tooism" from Rudd, although his role model appears to be the desperately bad Peter Beattie rather than Howard.

Having had our super savaged, my wife and I have put our welfare handouts in a secure high-interest account rather than, as requested, splurging them on unnecessary current consumption.