Apparently Dr. Krugman can use his Nobel prize to comment on any subject he wants, including very publicly criticizing Angela Merckel and Germany’s measured response to the global financial crisis, but no one is allowed to question his insights?

For the record it is more important for countries like Germany to maintain and expand their social safety nets, even as tax revenue from the recession fall, while asset prices fall to their true economic value, rather than spit on a hot stone, which is what fiscal stimuli are when private wealth has contracted by $50 or $60 trillion in the past 18-months.

Let asset prices fall to their true economic value, while protecting the weak and the vulnerable in society. That is the role of government. Not Keynesian policies on steroids that wreak havoc with debts and deficits, and leave behind such a debt overhang that they can only be erased through government sponsored inflation and currency devaluation or passed on to future generations of unborne taxpayers.

I took the opportunity to read your FT article and was surprised by the following quote:

“And indeed, we as a profession are making our voices heard in a way we never get the chance to do when the credit is flowing, businesses are investing and consumers buying what business wants to sell.”

From this quote, I take it you believe credit is not flowing normally, business have cut back on investment and consumers have curtailed spending. Based on this information, I think you are making Krugman and DeLong’s case that the velocity of money is slowing.

Moreover, you quote Rueff: the government’s “investment programme diverts means of production from the areas where they are more desired to less useful employments, it will reduce the standard of living”. This is your basis suggesting that Rueff “demolished” the Keynesian foundation that justifies the stimulus.

I suggest to you that there is an unprecedented capital flight to quality and risk aversion bordering on paralysis. Although the credit crisis has eased since November, another leg down will send ripples throughout the banking community that could collapse the free world. Bank failures across Europe, depression in Japan, civil unrest in China, Socialist coups throughout South America, mass starvation in Africa. The probability of these events has never been higher. Financial collapse looms near.

Perhaps now is the time for a government programme to divert means of production to the areas where they are more desired from less useful employments, in order to increase the standard of living.