Something a little different and interesting. However, whether or not we can take too much notice of someones whose sole, admitted qualification is "pamphleteer" is something to think about.

You replace one form of quackery for another.
We need a government to *govern* the economy, that is to control excesses and to invest in areas that private interests will not or cannot do so.
The previous government did not govern the financial system, allowed it to play with the money supply, and so generated a "bubble" of profits and spending. Now we pay. They simply failed to govern.
Government spending *can* provide benefits: Roads, rail, water, sewage, power and education are all things that *only* government can do well. Of course the government should use the markets when building: competitive and *transparent* tendering ensures real competition.
I agree that giving taxpayers money as cash is a poor way to fix the economy. I am assuming that this is more a wealth redistribute after Howard's decade of generational theft.
To assume that all government spending is like taking blood from the leg and injecting into the arm is just a tad simplistic.
I guess "pamphleteer"s don't quite get the education they think they have.

I will certainly be interested in the observations of people better qualified than I on economic matters. But I find the arguments a little too self-conscious to be entirely credible.

His reliance on Keynes as the visible spanner in the works of economic theory looks just a touch too convenient. After all, much of the "biggest orgy of spending in the entire history of the world" that the author refers to, was on borrowed money, which was in turn secured by nothing more than a salesman's hot air. Was this contemplated in Keynsian theory?

I may be way off the mark, but this also looks somewhat suspect:

"...when the government injects money into the economy, it gets the money by taking it from the economy. This makes no more sense than drawing blood from a man’s leg and injecting it into his arm to “stimulate” his health"

The logic here is that we are dealing with a zero-sum game.

But we are not talking about "real" money here, any more than the "real" money that caused the crisis in the first place.

As I understand it, the hole that appeared in the world economy was caused by the creation of money (via borrowing) that was not backed by sufficient assets. This money was then spent, on plasma TVs and SUVs. The recognition that there was more money borrowed than was able to be paid back, caused the spiral effect of lower asset values, lower borrowing power, lower spending etc.

Again, as far as I can tell, governments around the world are trying to reverse this process from the bottom up, by borrowing even more money, and giving it to people to spend. That's presumably the Keynsian "pump-priming" that the writer sneers at.

What I failed to discern from the article was any sense that there is an alternative, just waiting in the wings, if only governments realized how stupid they are being.

It's not pretty, I will agree. Borrowing more in order to solve a problem caused by borrowing also doesn't appear terribly logical.

But "quackery"?

Not proven, I'd suggest.

>>Thus according to Keynesian theory we can increase society’s wealth by burning down our houses, because this will create “jobs” to re-build them.<<

Isn't this what the measure of GDP does already? It values activity whether it is of benefit or not. The real problem here is a lack of efficiency in terms of how resources are used (to build houses or whatever else).

>>We as a society can generate wealth out of thin air just by printing paper. We can all get richer by taking money from productive people and pay it to make a loss digging holes and fill them in again.<<

I agree with this argument where the productivity referred to is well directed and giving a benefit to the nation and society. But what about the situation where people are working hard for the sake of working hard, or just to make the boss rich, say? In this case, I'd say an eventual shake-out is warranted in order to give someone else a chance who might be able to do a better job.

Pouring taxpayers' money into the banks is not likely to produce a solution to the current problems, and spending our way out of trouble only implies more debt, the cause of it all. HOWEVER, this piece is just too simplistic and ideological to know where to begin. Some of the many weaknesses have already been pointed out.

'The government-funded economists who directed all those presumptively clever central banks'

Here, the author is apparently trying to blame government for 'directing', not just allowing, the banks and Wall street to create this massive bubble of what are now (oxymoronically) called 'toxic assets'. Yet the gist of his piece is for government to get out of the way and let the banks get on with it! Had the incompetent US government behaved as a good government ought to, protecting something like true values in the economy, perhaps this situation would not have developed.

'Prime Minister Rudd and President Obama have never run so much as a corner shop in their lives.'

Completely irrelevant, but I'd ask JJ if he has ever run a corner shop himself. Maggie Thatcher is the one for you, JJ, she really did have a corner shop background and mentality. What a disaster that was; Britain produces virtually nothing these days, except, apparently, 'wealth' out of thin air! And I don't exculpate Major, Blair and Brown for their roles, either.

As for reducing taxes, didn't Bush try that? Massive tax cuts for the mega-rich and just plain rich. The USA will be irredeemably bankrupt if Obama doesn't RAISE those taxes again

“Pyramid building, earthquakes, even wars may serve to increase wealth … [if politicians can't think of anything better to spend the money on]."

JJ, has it not occurred to you that JMK was being just a little bit ironic? The bit in brackets should have given it away. You advocate less government and lower taxes (as far as I can see that's the sum of your 'solution') yet such a scenario had it pertained around the world in the last twenty years might have produced an even greater cataclysm. You castigate the idea of creating wealth from thin air, but of course that is precisely what unregulated money markets and banking has done on an almost unimagined scale. The total value of the world's credit default swaps and other derivatives is over $600 TRILLION. Perhaps burning down houses is not so stupid.