Reading Stephen Shaw's long Aug. 19 letter, "Noda tempts economic disaster," one has to wonder whether Shaw has ever had a course in history or in economics.

For starters, John M. Keynes would never have recommended a consumption tax for any country enduring a severe demand slump. Moreover, Shaw's worries about "stagflation," a period of low growth marred by both high unemployment and high inflation, are equally off base. Japan has lots of people underemployed these days, but inflation is so far from any professional investors' concerns that long-term bonds are selling at historic low interest rates, despite huge increases in the money supply.

Shaw is right that banks aren't lending enough, but the real problem is that companies can't sell at home. That's where Keynes had the right prescription: more government spending, not less.

In one breath, Shaw makes the absurd statement that Keynesian policies have never worked and, in the next, closes by calling for more stimulus for small businesses. Keynes' greatest insight was that a slump was the time to increase government spending, not for savage cuts. World War II, the greatest stimulus project in history, ended the Great Depression. For an example of what not to do, witness the spectacle in Europe, where every country that has imposed severe austerity has slid even deeper into recession.

If destructive war spending could save an economy from the Great Depression, imagine what more stimulus on new technologies and infrastructure could do in peacetime. Put people back to work in good jobs first, and deficits will take care of themselves. For anyone unconvinced, read Nobel Prize-winning economist Paul Krugman's book, "End this Depression Now!"

The opinions expressed in this letter to the editor are the writer's own and do not necessarily reflect the policies of The Japan Times.

gary henscheid