Inequality, Debt and Credit Stagnation

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This was my keynote speech at the French Asso­ci­a­tion for Polit­i­cal Econ­o­my (AFEP) annu­al con­fer­ence in Mul­house, France (the oth­er keynote was given–in French–by my good friend Marc Lavoie, who is now based at the Uni­ver­si­ty de Paris 13). In this pre­sen­ta­tion, I:

• Dis­par­age the “sec­u­lar stag­na­tion” expla­na­tion that Lar­ry Sum­mers has regur­gi­tat­ed for the tepid lev­el of eco­nom­ic growth today. As did Hansen in the 1930s, Sum­mers pon­ders “why growth would remain anaemic in the absence of major finan­cial con­cerns?”, when finan­cial con­cerns are obvi­ous if you under­stand cred­it;
• Explain why cred­it plays a cru­cial role in both aggre­gate demand and aggre­gate income, once you under­stand that banks orig­i­nate loans rather than act as finan­cial inter­me­di­aries; and
• Show that my 1992 com­plex sys­tems mod­el of Min­sky’s “Finan­cial Insta­bil­i­ty Hypoth­e­sis” can be derived by work­ing from strict­ly true macro­eco­nom­ic iden­ti­ties, in an alter­na­tive to Lucas’s “micro­foun­da­tions” approach to build­ing macro­eco­nom­ic mod­els.