Rudd's massive spending does nothing to improve the long-term structure, productivity and prosperity of Australia. It is not clear what, if any, short-term benefits it will bring. It is clear that it will lead to higher taxes and interest rates in the longer term, with negative impacts on incomes and employment. I suspect that a cost-benefit analysis of the impact would be very negative.

If the government feels obliged to spend for short-term reasons, it should do so in ways which address long-term issues, e.g. the welfare-to-work transition, productivity-enhancing infrastructure, incentives to start new businesses and to innovate. It's rare for government's to commit such vast sums of money in one hit, I think we will look back and see a wasted opportunity.

I have no idea about economics - but this article makes eminent sense to me. Intuitively, I feel we shouldn't spend what we don't have. This is how I've always lived as an individual and maybe how the nation as a whole should react to the crisis (the crisis was the bubble). We should let the correction happen and not try to postpone it by a 42 billion dollor stimulus package. Taking the medicine now will ultimately be less painful.
Creating a massive deficit is like gambling - it might work and we might be able to go back to our ways of over consumption - but more likely it will fail and we and future generations will have to pay for it, that is, pay it off or wait for hyper inflation to reduce it in 'real' terms.

"If the government feels obliged to spend for short-term reasons, it should do so in ways which address long-term issues..."

Spending on infrastructure is less wasteful than spending on handouts that go on overseas holidays and heroin, because at least you've got a road or a bridge to show for it.

But it is important to understand that *even if* the government spends money on infrastructure, it is still actively making society poorer than if it didn't take the money in the first place. To understand it, it's not enough to look at the visible benefit. You have to look at the invisible cost as well, otherwise we're just chasing an illusion.

The only reason government spending is "necessary" for public works is because such schemes do not cover their costs. If they did, private capital would fund them in order to make a profit. The crazy thing is, the only reason government is doing it is because it makes a loss, if that makes sense, which it doesn't.

With private projects, the owner directly confront the benefits against the costs.using the tool of profit and loss. But the whole point of getting the government to do it, is because profit is thought to be something evil and anti-social. The only reason government projects seem to be beneficial, is because the benefits are visible and apparent, the costs are hidden in the general tax account. All that is happening is that more productive activities are being ground down to build up less productive activities, making us as a society worse off, not better off. It's nothing but an illusion.

Government wealth creating is in principle no different from breaking windows on the one hand, and on the other boasting about the wealth you're creating by giving the glazier a job to fix it.

According to the Keynesian logic the government is advocating, the recent bushfires are economically a good thing because of the economic 'stimulus' of all the jobs they create.

But destroying wealth makes us poorer, not richer… durr.

Keynesian theory is wrong, and it's as simple as that.

Perhaps it is time to also cast adrift, not only Keynes, but some of the other latter day economists in favour of John F Nash and see where his "Games Theory" has application to our present turmoil. I am after all reminded of a comment made by my economics lecturer some twenty years ago that in the subject of economics, the questions may be the same, but the answers are invariably different.

David

Foyle speaks sense Keynes is the only way forward Nationalisation cease all privatisation direct Labour work force to build roads schools hospitals etc. Nationalise all Hospitals, Schools, Minerals, Big three Banks expand the Australian Post Office as a National Bank.

The only uncharted territory we endure is in our own minds. We have all the examples and case study material we need between Africa, Darfur, America, Europe as well as our historical knowledge. What is missing is our humanity.

The fault is not so much a question of yes or no to the contributions of ohn Maynard Keynes as much as who we are.

Before we can't honestly change what's impacting our lives, it is probable that we need to change something at work.

Have a listen to this;
http://www.ndbroadcasting.org/program.php?id=3275

It takes All if we mean to improve the lot, else we do more loose change on what we've got.

http://www.miacat.com/
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