Here in today’s AFR we find that Paul Krugman rant I referred to the other day. Such a stupid inane roll out of idiocies. I once thought that Keynesian economic theory would soon be rooted out of our textbooks but not so soon after all. Between the publishing industry with that backlog of a thousand macro texts sprouting Y=C+I+G, along with the apparent impossibility even for economists to work out why spending without creating net value is bad for an economy, we will just drive ourselves deeper into the bog. But whatever one might think of Krugman’s useless and damaging economics, he certainly does get around. Whether anyone else can read his stuff besides me is quite a question. I like it because it gives me a perverse pleasure to see just how ridiculously wrong what he writes is, but how does anyone else get through it? And are they any wiser at the end, as in, do they feel enlightened in any way?

Here are two examples of where large cuts to public spending and the deficit were immediately followed by a strong and prolonged upturn.

Case Study I: The end of World War II.

Case Study II: The Howard-Costello budgets in 1996 and 1997.

So this is how to understand the past four years and the problem with cuts to spending. We are in Adelaide and want to end up in Melbourne so we drive west for 1000 miles. When it finally dawns on everyone that we have been going in the wrong direction the problem is that by then you are 1000 miles further away than when you started out.

After the stimulus which began in a recession the first problem is reducing the wasteful stimulus expenditures. That will take you back to where you already were when the stimulus began. Then, if you go from there, you might actually make some progress.

But if you think that the solution to a problem caused by wasteful public spending is more wasteful public spending, then I leave you to your gurus and the nonsense economics you can pick up for a mere $3.30 from any newsagent.