Government waste is the greatest scourge every economy must face. The Chinese economy is trying to reverse the effects of its Keynesian stimulus, whose diabolical effects can no longer be denied. The projects of 2009-10 are showing up dead and the debts created cannot be repaid. Fixing what has gone wrong first requires you to understand what has gone wrong. The following “analysis” is mesmerising for its inanity:

China’s economic and financial market management credentials are drawing international criticism after a weak inflation result raised the prospect Beijing will be forced to slash interest rates to boost growth. . . .

Beijing reported at the weekend that China’s consumer price index rose by just 1.4 per cent over the year compared to the 3 per cent objective the government had put in place for the economy in order for it to achieve its annual growth target.

It’s real growth we are looking for, right? The inflation rate is just the difference between the nominal growth rate and the real growth rate. How inflation is supposed to give an economy faster real growth is the great conundrum. Perhaps they mean that higher inflation would be a sign of higher demand. But if that is the way it is being thought about, Keynesian economics has reached even lower depths than I had thought possible.

Still, that’s not all there is on the economic inanity front. There is also this: Turnbull needs community of believers for northern growth which begins as follows.

The Turnbull government has announced plans to boost growth and development across northern Australia, including the possible use of commonwealth loan guarantees for infrastructure projects.

As soon as this was hinted it was decried in certain corners as yet another example of misguided “industry assistance” — just an attempt by government to pick winners. I have been as critical as anyone about the perils of government winner-picking. It’s a fool’s errand at best, and a colossal waste of taxpayer money at worst.

If after years of pink batts and BER, never mind the NBN, doesn’t convince economists that governments have NO role in guiding our resources productively, then who will do it? There are many reasons for government spending, including some limited levels of infrastructure outlays. But grand visionary projects that absorb billions are idiocy of the highest order. They will make us poor. The Chinese have at least recognised that Keynesian-type expenditures are a menace to public finances and economic prosperity. Would Malcolm only do the same. Apparently, such expenditures on developing the North “is supported by very modern and very sound economics.” Modern it may well be. Sound, I’m afraid not. I will restrict myself to merely the first of the points made.

Australia is suffering from “secular stagnation”, a phenomenon recently popularised by former US Treasury Secretary Larry Summers.

Summers postulates, and unfortunately the evidence supports his view, that the potential rate of growth of advanced economies has fallen so that GDP growth in the 2 per cent range is the new normal. The economic speed limit of advanced economies has almost halved.

This is because there is a huge surplus of global savings chasing too few productive investment opportunities. Just think about sovereign wealth funds along with all those billionaires looking for something to do with their money.

No doubt Malcolm is thinking about nothing other than our sovereign wealth funds, so if you are worried about your financial future, this is the time to make it clear that the government is to keep its hands off our money. Loan guarantees – that is, a promise of making good every losing market bet – will bring Solydnra-like projects out of the woodwork in such vast numbers that it will make you dizzy to watch.

But to believe that there is a massive pool of saving available that no one is tapping into is the very essence of Keynes. Our problem is an absence of saving. We do not have enough. I cringe when I see such arguments, but if you start with Y=C+I+G, you have no explanation for recession and stagnation other than deficient demand caused by over-saving. And as long as you believe that, you will never understand what to do to make an economy grow.