Prof. Steve Keen: I gave the talk above yesterday (26 Aug 2012) at UWS’s Open Day, as an intoduction to economics for prospective university students. Preparing it made me reflect on the great good fortune I had to be appointed to UWS.
This might evoke a “Huh?” response from the usual suspects on such issues–why be pleased about being appointed to a second-rate University (and in an out-of-the-way place like Sydney to boot)? It’s because the Economics & Finance program at UWS has been almost unique amongst economics departments around the world in deliberately pursuing a “pluralist” approach to economics.
For more, go to http://www.debtdeflation.com/blogs/?p=8089
From Zero Hedge: The Ultimate Visualization Of Australia’s Housing Bubble
Submitted by Youri Carma
The Keiser report doesn’t like Von Mises but rates this guy??! Steve Keen is a clown, he makes Krugman look good for goodness sake!
Wait is the Keiser report a government make-work scheme for incompetent economists? No that would be wall street. Maybe Keiser is there to employ the economists too dumb to get a job on wall street but too smart to become politicians. Hey its a rotten job but some-one’s got to do it.
Go Max, friend to the economically illterate
Oh and doesn’t the view that economics is not a science align with the dualism view (praxeology and the scientific method) that the Keiser report is OPPOSING on another of it’s current posts?
Max, your ideas are all over the map, time to stop; go back to what you know
Or actually read Menger and Mises
Wait is Albion Rover a complete tool who sets his lame jokes up with a question?
Give us some evidence against Steve and we might believe you, otherwise go back to fiddling the kids in the pulpit
@Albion Rover
You are an idiot!
In fact I learned more from Max Keiser’s about Wall Street than anybody else in the field.
If I would to go study economics I would, without even a shadow of a doubt whatsoever, immediately fly to Australia to study at Prof. Steve Keen’s UWS. The rest is crap! Nice weather and friendly people too.
You are a fool, you’ll die a fool is my assessment.
@Albion Rover
Anyone who spends their time trolling the comment section all the time with boring stuff like that must be an idiot.
Who would choose to spend their time doing it? Only an idiot.
Besides, breakthroughs in science or other fields of accademia come from OUTSIDE or the edges of the field because those fully entrenched in their own belief system can’t see the wood for the trees.
Even Einstein became victim to that in the end (so what chance do you have?).
I love Keen’s engineering approach. He treats his models for what they are, models.
So none of those calling me names have read Mises and Menger either.
Typical
Steve Keen’s models are worthless not just because they are based on errors from the likes of Keynes and Marx and because the whole mathematical modelling concept is flawed from the outset. We are not inanimate matter, we are human beings with dreams, desires, minds of our own.
This is why Austrian analysis is so important.
Things wrong with Steve Keen’s ideas (there are many but lets focus on just one:
The Big Give-away: He plans to hand out cash to the public on the condition that they pay down debt if they have any:
Q: Where does the money come from. A: thin air, print baby print
Q: What happens to inflation: A: Through the roof
Q: What about the assault on savers and those on a fixed income A: What we need then are price controls
Q: Won’t that cause shortages A:Well Steve is a marxist, so what do you expect?
It is all bullshit for the masses, we need some reasoned analysis not this tripe
Q: Where does the money come from. A: thin air, print baby print AR
While you would dig it out of the ground to re-store it in bank vaults?
Q: What happens to inflation: A: Through the roof AR
Not necessarily. If the banks were put out of the counterfeiting business then the government would have to print massively just to prevent 97% of the money supply from disappearing.
Economics is not a science, that’s true. But it’s far from “competing religions”; that would imply that there are multiple good idea’s, competing for ground.
Ain’t so.
Anyone knows how to balance a house-hold. It does not work different for countries or corporations. You can borrow the money for your food, or earn it. You can spend all the shit you earn right away, or save a bit of the production for later.
The fact that it cannot be modeled (due to to many variables) does not mean that hope and prayer are a valid strategy. It merely means that you cannot use your leaky abstractions to predict the future.
Unless it’s as obvious as the run-up to 2008; every blind fool who could count knew that we could not continue on that path, yet here we are, at least trying.
It does not work different for countries … some anon
Wrong! A monetarily sovereign government is an issuer of money. Can a household do that?
Begone! Join AR in the dunce corner. Don’t forget your pointy hat!
@SomeAnon
I think what Prof. Steven Keen means here with “competing religions” is that one religion always claims to be superior and ‘ the real believe’ against an other. You can observe them as ‘multiple good idea’s’ but that’s not how it’s generaly percieved. Think of the ‘long cruisade’ to name one historical example which still got stuck in peoples minds.
@not_me
And don’t forget that when a bank or institution gives you an house or a car loan, that’s money creation right there.
Steve Keen has been bringing about an awareness and relevance of the work of Hyman Misky and ponzi dynamics:
https://en.wikipedia.org/wiki/Hyman_Minsky#Understanding_Minsky.27s_financial_instability_hypothesis
Youri Cama is correct to bring his work the attention of layperson visitors to this site because what has/is happening is described by Misky
“McCulley also points out that human nature is inherently pro-cyclical, meaning, in Minsky’s words, that “from time to time, capitalist economies exhibit inflations and debt deflations which seem to have the potential to spin out of control. In such processes, the economic system’s reactions to a movement of the economy amplify the movement – inflation feeds upon inflation and debt-deflation feeds upon debt deflation.” In other words, people are momentum investors by nature, not value investors. People naturally take actions that expand the high and low points of cycles. One implication for policymakers and regulators is the implementation of counter-cyclical policies, such as contingent capital requirements for banks that increase during boom periods and are reduced during busts.”
“Q: Where does the money come from. A: thin air, print baby print
That’s where all the credit came from so yes, just type it into a computer and use it to wipe out the credit. That’s what he is suggesing. It isn’t a perfect solution, e.g. it ignores proportions, but it’s the best one I’ve heard so far.
Your other questions show that you don’t understand what money is and are confusing it with an asset which is one of the things that helped cause this whole mess
@me
So these digital 1′s and zeros, from thin air are handed out and pay off the credit. They are money and are transferred to the creditors yes? What will the creditors do with this liquid wealth?
I suggest they will want some real assets, property, metal, food, oil.
Effect: runaway hyper-stag-flation
nice one steevo, thanks for playing “who wants to be a millionaire (when a stamp costs two million”
Debt Mug Market Indicator
http://www.youtube.com/watch?v=O-qli39qUlY
So, in a “pluralist approach,” such as Steve Keen supports, there would also be no “thought police” of the type Professor Fekete would “strongly oppose?”
The attempts of “opposing religions” trying to take each other down is, it seems to me, at best, like trying to teach a pig to sing–it wastes your time and annoys the pig.
How any of this fits in with “hang the bankers,” or taking down LvMI, literally or metaphorically, is lost on me.
When you grab a giant tiger by the tail, philosophy is not your friend.
They are money and are transferred to the creditors yes? AR
No, dummy. The credit was created as it was lent and goes back to nothing as it is repaid.
Example: I deposit $100 in cash into a checking account and the bank then lends out $90. The bank has just created $90 from thin air hoping that I won’t want that $100 soon or if I do then it can either borrow money from other banks or the Fed or cover it from its own equity. Now what happens when the $90 is repaid? ans: It goes back to backing my $100 demand deposit.
So if the US Treasury hands out money it won’t cause inflation so long as that money is combined with a 100% reserve requirement on new loans.
so not-me, we start to see a few of the Keeno implications:
To avoid hyperstagflation, you are suggesting an end to fractional reserve banking and the substitution of prudent money printing from our wise overlords (Tiny-Tim Geitner). What might happen next:
1. Banks balance sheets collapse, new loans dry up, interest rates spike to the moon
2. Property prices collapse
3. Negative equity as far as the eye can see
What to do? Tiny Tim and the printing press to the rescue? All that money and what to buy? How about people? Yes if once was good do it again,
Big Giveaway II (is this sounding familiar), and BG3, until the debt matches (kinda) the reduced house prices.
But… there are more things in the economy that houses, the money leeks out and causes distortions and misallocations, unemployment, shortages and booms and busts
Never fear tiny tim is here. Move government handouts and all will be well.. until tomorrow
So here is what not-me believes, the answer to the global financial crisis is THE AWESOME ABILITY OF TIMOTHY GEITNER.You can’t make this up (unless your name is Steeeevo Keen)
What might happen next: What might happen next:
1. Banks balance sheets collapse, AR
No, dummy. The restitution checks would allow debt to the banks to be paid.
new loans dry up,
Not likely! Usurers abound and there would be plenty of new reserves for 100% reserve lending.
interest rates spike to the moon
If that became a severe problem then government could increase the amount of the restitution checks to allow more 100% reserve lending.
2. Property prices collapse
Nope. There is no reason that should happen with a constant or slightly growing money supply.
3. Negative equity as far as the eye can seeAR
No, dummy. The restitution checks would convert debt to equity – debtors would become debt-free and non-debtors would own a lot of new cash.
It’s good to know that Professor Keen confirms what Uni students have been saying for a long time about economics . Economics is the ” DIsmal Science ” .
I worked out a long time ago that preaching infinite growth in a planet with Finite resources is crazy . Speculation on the prices of Corn , Rice , Grains etc is also lunatic , there are people living with a dollar a day and starving .
The so called economic growth is killing the planet . In the Pacific Ocean there is an area as big as France full of waste transported by the Ocean Currents .
Industrial development at any cost and the doctrine of the throw away society are killing the Earth . At this rate will have to colonize Mars , so will have two planets ruined .
@nat einstine was WRONG on every thing after he defined the speed of light. it was all a pissing contest after he made the UNSUPORTED claim that nothing can go faster , when in fact gravitation is REQUIRED to by newton’s equations INability to account for planetery motion for more than 2 bodies (a 3rd will always desablise the system)
also there is (so far) NO hard vaccume maening that in fact there IS resistance to movement inside of the hielio sphere this means that over time on the billion year scales that we ase dealing with here entropy rules the day, and the planets crash in to the sun again for a difrent reason that AGAIN falsifies einstine who assumed that there was hard vaccume out there between the planets.
@not me
You don’t know what a balance sheet is – go read up on this and then you might understand my point
Assets = Equity + Liabilities.
When a bank lends, it creates certain liabilities backed by uncertain assets. Well, those assets are falling in value while the liabilities are not. That loss in value comes out of bank equity (E = A – L).
A universal bailout would protect bank equity since it would make loan repayment certain.
Now what was your point?
AR, it’s you who doesn’t understand banking else you would know that “loans create deposits” and conversely that “loan repayment destroys deposits.” I suggest you go to Steve Keen’s site and learn.
steve keen has some things right as far as they go in relation to too much debt in the system but my question remains this . the banks were always in control(20/20 hind sight makes this OBVIOUS) and so WHY did they make the loans in the first place? it was a clasic HOT money geting “mal invested” situation so WTF were they THINKING?
well LOOK around we have run out of “PLANET” to invest in at least in relation to “good”AAA type investments FORCING the banks (who OWE intrest to investors on the capital there lending wich could not itself gain income sitting in there vaults SO it HAD to be lent , no matter the lack of real solid investments that could ACULY return income to the banks to pay the investors it was that or admit they could not lend it out and hand it back to the investors.(and somthing tells me this would have screwed the econimy in its own way) steve keen is BIG on the idea that” that wich cant be repaid won’t be repaid” ……WELL what about this, if the level of investment IN TBTF execedes the GDP of the whole planet or even aproches it THAT would cause systemic failure WOULD IT NOT? and also tie in to other OVERT simptoms LIKE (@sherbert your fave) AGW (i just call it POLOUTION no need to invent a boogie man) AND peak oil and general resorce depletion. there is NOTHING left TO invest in so the cash FORCED its way in to the system the fruad coruption and the rest are just simptoms of the underlieing problem of TOO many people ten percenting a FINITE system ‘humanity’, and humans having now expanded as far as they can, again in relation to AAA quality low risk high return enviroments.
@not_me the ‘diging out of the ground thing=”productive human activity” and is the originating capital investment in a commodities value.
@ not me,
You really need to get educated in economics my friend and steeevo is not the man to do it.
Without fractional reserve banking, where would the money to lend come from? Deposits need to be on permanent reserve remember, The market for loans would dry-up and interest rates would sky-rocket, requiring yet more government intervention to cure the problems caused by the government intervention.
To start with read Menger, it is excellent stuff and will kill most of your more fanciful notions.
There are solutions but these are so far from our current government and vested interest group controlled system the path from here to there is difficult at best. Steeevo and his Tiny-Tim-Geitner based currency is not a help, just another step in the wrong direction.
@Albion Rover
Steve Keen gives a sh*t about the ordinary person, that is what pisses you off
the ‘diging out of the ground thing=”productive human activity” and is the originating capital investment in a commodities value. kdt
Damaging the environment to dig up gold so it can be reburied in bank vaults is stupid.
Without fractional reserve banking, where would the money to lend come from? AR
I already told you. The universal bailout would provide the new reserves for 100% reserve lending and provide them at a rate such that the total money supply (reserves + credit) remains constant or grows at a slight rate.
And, fyi, I used to be an Austrian until I learned what mean-spirited, gold worshiping blockheads they are!
the path from here to there is difficult at best. AR
Because the Austrians are unimaginative blockheads more interested in causing unnecessary suffering than justice.
@not me
You still don’t understand balance sheets.
Universal bailout?!? So we are giving additional capital to the bankers too, but this is not inflationary? And they will lend it right? Just the way you want them to (sorry Tiny-Tim wants them to). They won’t use it for inflationary speculation, no not the bankers, such a responsible bunch. And this new money is to be given to the bankers at just the right rate for the good of us all.
And the bankers take their free money from the state and led it at interest (difficult job), but only to the right people at the right time (not sure how they’d know) and the state would prevent them from speculating – of course we need more regulation.
What is it that they call state controlled and directed capitalism…. oh yes fascism!
Lets be honest, all this universal bailing out will lead to Hyperinflation and the destruction of the currency; but before we get there we’d have totalitarianism and war. Not me and steeevo Keen would be dangerous if anyone listened, they are starting to make Keynes look good by comparison.
@Flopot
You are getting to the root of why you object to Austrian economics, it shows that your cherished fables wont work. Mises proved that central planning is doomed to failure, and he did it with a paper first presented in 1919. That is why you hate him, nothing to do with any differences from Menger. You don’t want some-one who told the truth to have any standing in this world of lies you wish to construct.
Those who want an empirical approach, look at the history of gov issued unbacked paper “money”. It always ends in inflation and collapse.
In short it seems there is very little dispute amongst Austrian School economists, but a huge gap between them and the Whacko-smacko schemes of the keiser reports favourite economist. The thing is, if such loopy ideas are ever implemented, I can see Max denouncing them in turn. He doesn’t know what he is talking about or what his philosophy and econmic principles are, so he, like others, is adrift, ready for the first charlatan than comes along to lead him to destruction. Steevo Keen wants to be that charlatan, at least it can be fairly said that he has understood the genius of Keynes, but that, dear reader, is no compliment.
goodnight and goodluck
@flopot steve k can care all he wants BUT that and a nickle won’t buy you squat these days and don’t make him any less wrong on his “jublee” deal it wont work it would be a bullet behind the ear for the system he wishes to enable and would in fact unleash hyper inflation as consumers AS oposed to banks would directly spent some of that cash in to the system in as debt levels very and gov will expend equaly to cover the worst debt offenders.
They won’t use it for inflationary speculation, no not the bankers, such a responsible bunch. AR
You’re such a dummy. Did you post as Defiant at NakedCapitalism? Or are all you pathetic propaganda victims the same?
A 100% reserve requirement means that the banks can’t speculate at all except with their own capital beyond their capital requirements or with money loaned to them for that purpose.
Moreover, a universal bailout would NOT increase bank capital since it would go to individuals, NOT banks!
@AR
I am not a believer in central planning (nice “straw man” argument there, I think that is the accusation that you guys keep using on this site) nor am I a believer in the “profit-motive” being the sole basis for political order. And that is the difference between us, you are a believer and I am sceptic trying to understand all these so-called economic theories.
But I did notice that you attacked Steve Keen’s ideas for helping the ordinary person and I called you out on that. Plus you willfully misrepresent Steve Keen’s approach which is heavily reliant on data and not at all linked to the hermetically sealed. I read with interest your debate with not_me and your philosophy is akin to describing the water to a drowning man.
The financial crisis (in fact the Western democratic crisis) is ultimately being caused by neoliberalism and guys like you always end up advocating policies that the corporations love: protecting profits at all costs, de-regulation and blaming the state for everything.
@not -me
You have contradicted yourself, with no money going to banks, we are back to the first scenario I outlined, interest rates to the moon etc, your answer to this was more capital to the banks, and now it is not- utter confusion reigns.
@ Flopot
I attacked steeevo keen’s ideas because they will HARM the ordinary man. The utopian dreaming of the communists, progressives, fascists etc (including Mr Keen) have been around for several centuries in their modern form and have failed everywhere. It is easy to wring one’s hands for the common man, harder to actually help him, as the welfare-warfare state daily shows us.
What is your philosophy, no to central planning, no to the profit motive as sole driver what do you say yes to? Most people in this position advocate some sort of third way (usually some form of fascism when the rhetoric is stripped away).
I do agree with you that what we have is a western democratic crisis, not just an economic one. As for the causes, there I suspect we would differ. As I see it, the destruction of the rule of law by that same western democratic system is largely to blame. Max sees this on wall street (where he is rather good) but misses it on main-street (because he has no first principles economic understanding on which he can rely). The problem is endemic. It can’t be solved by more of the same. Ultimately that all Steeeevo Keen is, more of the same.
You have contradicted yourself, with no money going to banks, AR
You’re a dummy. The money would go to individuals though it would be stored in the banks’ Federal Reserve accounts. It would NOT increase a bank’s capital.
Or I suppose a person could withdraw cash from his bank or credit union and store it in his mattress. In that case, a bank’s account at the Fed would be debited in exchange for the new cash.
You’re the one spreading confusion or at least attempting to. Please learn some accounting and how banking works before you further embarrass yourself and pollute this site.
It is easy to wring one’s hands for the common man, harder to actually help him, as the welfare-warfare state daily shows us. AR
Who said anything about the welfare state, dummy? What is needed is new MONEY, not more government.
Since credit creation is a form of counterfeiting then ALL debt to the banks is morally invalid. So how would like it if all debt to the banks was wiped clean? Would that be fair to people who avoided debt? And who have also been cheated by the banks?
AR = a banker tool and a dumb one at that.
I attacked steeevo keen’s ideas because they will HARM the ordinary man. AR
Wrong, jackass! Keen’s idea would help the common man and it wouldn’t really hurt the rich either.
What’s galling, AR, is you’re so obviously a twit yet feel free to attack a man who has forgotten more about economics than you’ll ever know if you remain a fool.
A whip is for the horse, a bridle for the donkey, and a rod for the back of fools. Proverbs 26:3
@ not me
You seem very irate! Did your mother not tell you you had to play nicely with the other children?
Now take a deep breath and explain how you think the market for loanable fund will work in the wonderful world of Steeevoo Keen. Remember 100 % reserves means the banks are not allowed to lend money they hold as demand deposits, You keep contradicting yourself on the subject of bailout, big-giveaway cash going to the banks, last I recall you said it wouldn’t.
My point: The vast increase in interest rates that will occur under this system will collapse the housing market and require a further bailout / big giveaway two, three and so on.
Now…and do try to answer the question, abuse doesn’t count…. have a go at a reply
@not me earlier post
Re “What is needed is new MONEY”
How will printing bits of green paper help exactly. If this was the solution it would have worked for John Law. The problem is mis-allocation of real resources, too much in some sectors (such as finance) not enough elsewhere, interference in price signals and general dislocation of the economy. The cause has been principally money printing by central banks. More of the same (hair of the dog) won’t work.
It’s time to get sober.
I think Steve is a likeable guy so I’m not gonna attack him on a personal level but I’m afraid his debt jubilee idea won’t work and I hate to say it but it’s only the Austrians who can see why. Firstly you need to understand what credit or borrowing really is; increasing present demand while reducing future demand. What happens when you have a bunch of people pay down a portion of their debt and at the same time a bunch of people that are not in debt suddenly have more disposable income? Combine this with no increase in production or supply of real goods. That’s right, present demand is dramatically increased and prices rise. He has failed to consider the supply side of the equation. So if we all have more money but prices just rise then none of us are any better off. Furthermore his mathematical model assumes that debtors are going to pay down their debt instead of just spend the money on consumer goods or even go on a holiday overseas where the dollar goes a lot further. Just how is that going to enforced? And why would they pay down debt if asset prices are going to rise? Why not just speculate on future capital gains? If capital gains exceed interest repayments, why bother repaying debt? That’s how we got into this mess. For his idea to work, all governments and bankers of the world would have to agree and that assumes there would be no capital flight. Let me ask you what would happen if the Australian gov gave all citizens 10000 and the US gov gave all US citizens 20000? That’s right, capital would flee the US and head to Australia, assuming there were only two countries in the world, further destroying the US economy and pushing up prices even more in Australia. Again there would be no incentive to pay down debt in Australia.
Debt jubilees only worked in ancient times before we had a global economy and a debt based fiat monetary system with floating exchange rates. Even capital controls don’t work because while they may stop money from fleeing the country they also act as a rather large deterrent for capital inflows further driving up import costs.
You can’t eliminate debt through money printing, it amounts to the same thing as defaulting. Why would you be a creditor if real interest rates are negative? You only do that if a large percentage of the value of your own reserves/savings are based on the debt instruments of the debtor – and only for so long. Enter the global US dollar reserve ponzi.
The world is moving back towards a commodity based sound monetary system once again, make no mistake about it. This phenomena occurs naturally through market forces and nothing can stop it, not religion, not government and certainly not fancy models.