Steve Keen's Debtwatch

Out­go­ing Ohio Con­gress­man Den­nis Kucinich arranged for me to give a brief­ing at Con­gress today on the Fis­cal Cliff, and how the down­turn of 1937 could be a fore­taste of what will hap­pen if the Cliff comes to pass.

I argue that an attempt by the gov­ern­ment to reduce its debt now may trig­ger a renewed bout of delever­ag­ing by the pri­vate sector–and this is what appeared to hap­pen in 1937, when con­fi­dence that the worst of the Depres­sion was over led to the gov­ern­ment reduc­ing its deficit.

My pre­sen­ta­tion at the Rosa Lux­em­bourg Foun­da­tion in Berlin today on how Neo­clas­si­cal eco­nom­ics mis­un­der­stands the role of pri­vate debt in a cap­i­tal­ist econ­o­my. I show how to use my Min­sky pro­gram to mod­el both the Neo­clas­si­cal “Loan­able Funds” vision of lend­ing and the empir­i­cal­ly-informed Post Key­ne­sian “Endoge­nous Mon­ey” mod­el.

I’m also about to start a Kick­starter cam­paign to raise addi­tion­al funds to devel­op Min­sky. Please “watch this space” and be ready to help pro­mote this cam­paign and help fund it. Min­sky as it stands has been writ­ten by one pro­gram­mer in about 800 hours. I want to be able to hire 3 pro­gram­mers for a min­i­mum of 2 years to ful­ly devel­op the pro­gram.

I gave the talk below to the Cam­bridge Soci­ety for Eco­nom­ic Plu­ral­ism yes­ter­day. This stu­dent-formed soci­ety is attempt­ing to open eco­nom­ics to debate–something which, despite the enor­mous schisms that exist with­in eco­nom­ics, is in prac­tice sad­ly lack­ing.

Econ­o­mists of one school of thought (such as the Neo­clas­si­cal) don’t lis­ten to or debate with those from oth­ers (such as the Post Key­ne­sian or Austrian)-as you can see from Cochrane’s dis­mis­sive remarks about non-Neo­clas­si­cal eco­nom­ics in the Play­boy arti­cle on eco­nom­ics. Even with­in schools (such as the Neo­clas­si­cal), dif­fer­ent fac­tions bare­ly com­mu­ni­cate with each oth­er-as you can see by perus­ing some of the “Fresh­wa­ter, New Clas­si­cal” ver­sus “Salt­wa­ter, Old Hick­sian” (whoops, sor­ry, they think they’re “New Key­ne­sians”) blog entries.

This is the pre­sen­ta­tion I gave at the UN ESCAP meet­ing on the qual­i­ty of growth today in Bangkok.

The key theme is the need to make ener­gy the basis of the mod­el of pro­duc­tion, as argued by Bob Ayres and col­leagues.

The old­er I get, the more cyn­i­cal I become about gov­ern­ment inter­ven­tion in the econ­o­my.

That state­ment might appear to be either a recan­ta­tion of every­thing I’ve ever argued, or a sign of the usu­al tale of left-wingers mov­ing to the right, and right-wingers to the left, as life expe­ri­ence tem­pers youth­ful exu­ber­ance. It’s nei­ther (well, okay, maybe it’s a bit of the lat­ter), because my devel­op­ing posi­tion reflects the com­plex­i­ties of a mixed econ­o­my.

An IMF work­ing paper has received a lot of atten­tion recent­ly – and not for the usu­al rea­sons. Where­as the IMF is usu­al­ly crit­i­cised for being dog­mat­ic about free mar­ket eco­nom­ics and effec­tive­ly behold­en to the banks, this paper is being both praised and crit­i­cised for want­i­ng to rad­i­cal­ly reform them.

This clear­ly isn’t offi­cial IMF pol­i­cy, but the fact that it has been released by the IMF is note­wor­thy, and the paper deserves care­ful atten­tion. It is an enor­mous paper, not just in length (56 pages of text) but also in the range of top­ics cov­ered, and it will take at least three posts to do it jus­tice. In this one, I’ll focus on its analy­sis of today’s mon­e­tary sys­tem.

By Philip Soos

Recent­ly, Aus­tralian prop­er­ty ana­lyst Ter­ry Ryder, in an arti­cle on Prop­er­ty Observ­er, voiced com­plaints about hous­ing bub­ble advo­cates. His issue is “wait­ing for some­one who sub­scribes to the bub­ble the­o­ry to actu­al­ly define it. So far, nobody has. The term implies that some­thing has been over-inflat­ed and will burst.” Of course, Steve Keen has already done so in his volu­mi­nous and crit­i­cal work reach­ing back for over a decade.

If you were told the fol­low­ing graph showed two indi­ca­tors of Australia’s eco­nom­ic health, and one of them had to be addressed urgent­ly, which one would you expect politi­cians and econ­o­mists to try to bring under con­trol first?

If you picked the blue line, you’ve obvi­ous­ly not a politi­cian. The blue is the ratio of pri­vate debt to GDP in Aus­tralia; the red line is the ratio of gov­ern­ment debt to GDP (debt to the bank­ing sec­tor only; both series come from RBA table D02). The red line is the one that both sides of pol­i­tics in Can­ber­ra are obsessed about; the blue one they both ignore.

I’m not the only econ­o­mist cam­paign­ing to bring about a new, empir­i­cal, real­is­tic economics–far from it. In fact there is an asso­ci­a­tion ded­i­cat­ed to this end with over 10,000 sub­scribers: the World Eco­nom­ics Asso­ci­a­tion.

As is often the case, the for­ma­tion and man­age­ment of the WEA has rest­ed on the shoul­ders of one per­son: Edward Full­brook, the UK-based schol­ar who kept the PAECON move­ment alive after its birth with the French stu­dent “Protest Against Autis­tic Eco­nom­ics” revolt back in 2000. With­out his ener­gy and com­mit­ment, that spark lit by the French stu­dents might have petered out. Thanks to Ed’s efforts, the WEA is flour­ish­ing, and has almost as many mem­bers of the Amer­i­can Eco­nom­ic Asso­ci­a­tion. The WEA’s pur­pose is:

Three Busi­ness Spec­ta­tor read­ers con­tact­ed me direct­ly about one top­ic last week – bank mon­ey cre­ation, and how bank reserves work. Fol­low­ing an old jour­nal­ism adage that three direct enquiries about a top­ic from the pub­lic means that everybody’s inter­est­ed in it, I’m div­ing into wonkdom to answer their queries in detail here. Ignore this post if the adage isn’t true for you, but if it is and you haven’t yet had your morn­ing Java, now’s the time for that stroll to the barista.

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