Some years ago – I did not have sexual relations with that woman – were the famous words that seemed to redefine everything we had come to think of sexual relations between two consenting partners. Suddenly we could have sexual relations without having them. The same person has come up with a new conclusion – the US never ran “permanent structural deficits of any size before 1981”. Hmm, you mean that for 84 per cent of those years from 1930 when the US federal government ran deficits they were just cyclical events indicating deteriorating economic conditions? Maybe the former president might say a structural deficit equivalent to 3 per cent of GDP was not of “any size”. My conclusion is different – that this statement like the previous one was another case of a former US president making things up.

Let Peter Costello work his magic at IMF – mounted a case for our former Treasurer (one of the worst this country has ever had) should get the baton and head to Washington. The problem is that Costello left a destructive mess in his wake and is a budget surplus obsessive. What the IMF needs is a budget deficit-biased head.

tooth fairy delivers some sixpences to help ailing family finances – problem is that the children will run out of teeth, unlike the government who can never run out of money.

It is the Easter holidays and I am not writing as much today. But there have been some stunning examples of how mad the world has become with respect to matters economic. I present three vignettes of such madness which highlight the way in which lies and outright lies are dominating the policy agendas of governments at the expense of workers and their families. It is also raining outside and getting cooler so good weather for sitting down and writing – holiday notwithstanding.

In a blog last week – These were not Keynesian stimulus packages – I considered the trend among faux-progressives to invoke Keynes as their mentor as they advocated or were cutting back public deficits in a pro-cyclical manner. That is, they were proposing to cut back deficits just when they should be providing strong support for aggregate demand in the context of weak demand. The specific discussion was focused on a recent Australian Fabian Society essay (April 11, 2011) by the Australian Treasurer Wayne Swan – Keynesians in the recovery. There are two points I want to revisit in regard to this paper – one specific and one general. Both points demonstrate that the fiscal strategy of the Australian government is based on a false premise and that they are selling that strategy by distorting the historical evidence.

Today I catch up on a number of threads that have been in the media in the last week or so. It is all bad. The focus is on Alan Greenspan’s extraordinary intervention into the policy debate declaring the financial sector unable to be effectively regulated. I have a solution for that! But as I read the data trends every day and listen to the politicians outlining their legislative ambitions I realise that there have not been many lessons learned at all. The neo-liberals are back in charge – unshamed – when they should have been driven out of every town in every land. Their leading lights are coming out of their rat holes and are once again lecturing us on how self-regulated markets are best and how we have to tolerate the occasional crisis as part of the wealth maximisation process. It beggars belief how this all is represented as credible policy input. It is time to get angry.

The morning news headlines today (April 1, 2011) were all touting our Prime Minister’s tough talk last night while giving the Inaugural Gough Whitlam Oration. She outlined a plan to introduce harsh spending cuts in the upcoming May Federal Budget to preserve the strength of the economy. This is an economy that is barely growing and has 12.2 per cent of its available labour (at least) idle! Her speech was a frightening display of how far the public debate on macroeconomics has moved away from being based on an understanding of how things work to being driven by conservative fears about budget deficits based on a series of lies. Depressingly, which ever way one turns over here you have to conclude that the neo-liberals rule in Australia and seek to undermine our prosperity. At the same time, ironically, our prosperity is being saved by some communists .

So I guess it is time to build those very large bon-fires and burn all the mainstream macroeconomics textbooks that have poisoned the minds of millions of students for years. Mankiw, Blanchard, Barro to name a few. Burn them all. I also think it is time to delete all the computer code that supports mainstream economics models. My long-held belief that these actions would be educative and liberating have been ratified by a recent IMF conference that seems to have concluded that “the macroeconomic models that had been relied upon in the past and had informed major aspects of monetary and macro-policy had failed”. So all the supporting literature needs to be deleted. I am now advocating biblioclasm …

I am flying today so do not have that much time. But I thought I might share with you a rough rule of thumb I use when it comes to PDF reports that I read. The rule: the larger the file (scaled to page numbers) the worse the report. A large file size (in mbs) usually indicates lots of colour and fancy graphics and usually very little substance. I am sometimes wrong when I apply that rule of thumb but not often. My rule of thumb served me well when I read this report – USA Inc – published by from some self-styled “brains trust”. I have received many E-mails asking me to analyse this Report. I read it and I wish I hadn’t. It was an appalling misuse of time. But moreover it perpetuates the standard conservative lies about the capacity of the US government (and any sovereign government by implication) to pursue appropriate fiscal policy. It gives more fuel to the austerity proponents. So someone has to provide some counter to the the narrative being presented. So here it is … USA Inc – what a lie.

I suppose I had to respond to this atrocious piece of deception pedalled by the New York Times (March 5, 2011) as an “Economic View”. The article – It’s Time to Face the Fiscal Illusion – is not economics. It is a religious diatribe with strays into lies and deception. The reality is that mainstream economics has learned nothing from the crisis that has left their key intellectual propositions being exposed as vacuous nonsense. The inability of my profession to move on and embrace the challenge that an alternative theoretical structure is more relevant is sad. Instead the same old mantra based on theories that have no empirical basis are being wheeled out – the same theories that pressured policy makers to create the conditions which ended in the crisis. In relation to today’s blog we should understand that government deficits are the norm and they generally never pay back their debt (overall).