Costello’s budget surpluses in times of greed and money flow is exactly what Friedman would have done; keep the money supply tight, and inflation will remain low. Although I was a Keynesian as an economics student, I watched how its implementation helped break stagflation - the old rule that you could never have both low inflation and low unemployment. The fact is that Costello, pushed by Howard’s pork barrel, let inflation out of the bottle, just in time for the global meltdown. It’s what you get when you mix two opposing theories together and expect magic. Sorry Davo, but it’s not so straight forward.

The global decline was due to other factors which you wouldn’t find in either camp’s manual… it was poorly managed lending which was packaged up and sold around the world based on misleading statements. Throw in Bush’s tax cuts to the rich and you have an inflated property market serviced by those who can’t afford them… they needed tax cuts, not waiting for the gracious ‘trickle-down’ from the wealthy.

I also don’t see why we are handing out grants to those who mismanaged their shareholder wealth. And the reason the markets are not reacting to Keynesian tactics is because they know the fastest way out is through a lot of pain… mortgagee sales, retrenching execs and letting companies fall. It’s just that whoever allows that will be politically crucified. And that’s why you have vultures like Turnbull and Hockey carping from the skies, hoping for a carcass to scrounge off and feed on. We are damned either way.

FDR and the New Deal didn’t bring America out of the great depression. It prolonged and deepened the depression.

FDR tried price fixing and trade barriers, and none of it helped. He tried to keep the price of farmers labor high, and it failed.

Now Bush/Obama, Paulson and Bernanke are trying to keep the prices of property and shares high. The amount of rushed legislation passed in the last year is astounding. Bernanke and Paulson are all Keynesian fools. Trust me, if you’re a fan of Keynesian ideas, you’ll be very pleased with Bernanke. None of his efforts have worked and he is running out of bullets, but he can always rely on one weapon - the printing press.

After this round of deflation, expect hyper-inflation and the end of the US dollar as the world’s reserve currency.

I hope we can avoid any more insolvent industries claiming that their dog ate their balance sheets and, if the government would just give them one more chance they would do better next time. Even more so, no more of the inane pabulum of the housing Minister seeking to pump air into a housing market which resembles no so much a balloon as the final moments of a certain famous zepellin. Those with debt must keep it; its theirs, they bought it fair and square. The Governments job is to look for future opportunities which will generate income and support spending, not prop up debt. It also mightn’t hurt if the banks dropped business lending rates before credit cards, housing loans, car loans and other forms of non-investment.

So why is Crikey whining about poor people getting some money to spend when a surplus is just grand larceny and over charging on taxes in the first place?

Re Simon; I’m not sure the RBA shares as much blame for the credit bubble as the banks and, of course, us punters. The RBA and the government failed to stop it, but the banks created the bubble and we collectively bought the mortgages. There certainly wouldn’t have been any time in the past five years where the general public would have welcomed the RBA stopping house prices rising.

And next ime your house gets robbed (which I hope it doesn’t), don’t call the police. After all, they’re paid with ‘stolen’ money.

I guess it depends on the deflation vs inflation argument, but printing money which goes on unfinanced consumption - however necessary - is not going to get anyone better off in the long term. If keeping money in the bank is akin to letting your children starve, inflation is akin to feeding them nothing but sweets. They still starve.

This is absolute nonsense, we don’t need to go into deficit, and we certainly don’t need meddling politicians to spend our government into debt so that our grandchildren will be paying it off. Why should the taxpayer be bailing out zombie industries like the car industry or banking or even childcare providers ?

Government spending is always badly targetted, the only form of economic stimulus that goes towards productive investment is a tax cut, where people’s stolen property is returned to their rightful owners. It encourages people to work harder because they are rewarded for their labor.

Instead our government opts for corporate welfare.

And another solution - we should shut down the RBA who helped fuel the biggest credit bubble in this country’s history. Bring about sound money, with no fractional reserve, redemption of specie payments and no lender of last resort.