Jones's major flaw is his failure to note that Lord Keynes would have disapproved of many of the policies that were justified by reciting his name. For example, Keynes would have opposed to the financing of the Vietnamese war by resorting to the printing press rather than raising taxes. Jones rightly points out the inflationary effect of that expediency. One might also point out the insane insistence of the Bush administration that it could get away with the same mistake. Jones mischaracterizes many bad policies as Kenysian, but they should not be laid at the feet of Lord Keynes.
I also think that Jones is right that the government cannot spend its way out of the emerging depression I would point to one exception, that would be spending directed toward correcting the structural defects of the national and international economy. Building windmills in Kansas, is not going to save our ass, but shifting TV manufacturing back on shore might. The problems of the American based auto manufacturers are partly a consequence of the structural problems, and it is probably better to help them survive, although a tour through bankruptcy court might be required.
Finally Jones points to the most problematic part of the spend out of depression strategy initiated by the Bush Administration, but which is about to be followed by the Obama Administration, such a policy can lead to further structural problems, and quite possibly the collapse of the dollar.
Jones quotes Professor Willem Buiter of the London School of Economics:
There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes placeWe are living in troubling and even frightening economic times.
Update: Although the Fed and the government are following policies that will be inflationary in the long run, prices are not going up, and people are acting like the money supply is drying up. This paradox is explained by the decreasing velocity of money. Economic blogger STOCK SHOTZ calls out attention to the recent reported drop of the M 1 multiplier. The money being added to the economy is not freeing up the money supply, and thus the velocity of money continues to drop, this could change rapidly as inflation sets in. People will rush out to spend money as soon as it is in hand during a period oh high inflation.