Monday, June 11, 2012

Chris Martenson interviews Steve Keen (Podcast)



Steve Keen: Why 2012 is Shaping Up to be a Particularly Ugly Year
Interview with Chris Martenson (49 min)

Chris Martenson has a large following. His promotion of Steve Keen is spanning left and right. This was posted at Zero Hedge, for example, and Steve has even featured by Mish, too.

This shows that there is common ground between Post Keynesianism and Austrian economics through Minsky, who was a student of Schumpeter, who studied Austrian economics.

Randy Wray studied with Minsky, btw, so even with all the emphasis on differences between MMT and AE, there is likely to be some common ground that can be found, as John Carney, who leans toward AE but recognizes the value of MMT, too, has suggested, and Edward Harrison has show in his integration of MMT and AE.

13 comments:

SchittReport said...

http://www.youtube.com/watch?v=Rs76BOz2zMA

Matt Franko said...

SR,

"We had to destroy the village in order to save it."

http://en.wikipedia.org/wiki/Ben_Tre

Woj said...

Good comments regarding the potential for common ground between Austrians and Post Keynesians. Lord Keynes briefly discussed the potential a few days ago (http://socialdemocracy21stcentury.blogspot.com/2012/06/did-mises-believe-in-tendency-to.html).

My take is that the concepts of disequilibrium, dispersed knowledge, uncertainty and complexity, among others, can be applied to both disciplines. Carney and Harrison are clearly strong examples today. Steve Randy Waldman has also attempted to find common ground (http://bit.ly/IhFDDz).

Keen's work has greatly influenced my own views. As someone striving to merge the strengths of both disciplines I find this encouraging.

Matt Franko said...

Sounds like a discussion about ex post accounting.

% GDP of debt and so forth. (Sounds a bit Reinhart and Rogoff ish.)

I like our Paul's observation that yes "loans create deposits" but they create these deposit balances for the principle portion of the loan only. Where is the accounting for the balances necessary to pay the interest balances that is required under the terms of the loan?

Maybe the MMT statement "loans create deposits" should read "loans create deposits for the principle balance of the loan only".

I like the analogy 9 bones for 10 dogs. There is a "deficiency of bones" When loan contracts are written, since the banks do not have authority to create the balances to pay the interest at loan inception, this creates an immediate deficiency by law ("the law" being the loan contract)

I guess what Keen is doing is looking at data ex post on how fast or in what pattern this set-up fails, when it is bound to fail from the start just based on how the "horizontal" banks are restricted in their authority to create balances to service the interest portion of the loans they originate.

rsp

Matt Franko said...

Its like Keen is studying film of a bridge collapse seeking to find out why the bridge collapsed rather than looking for design flaws...

rsp

Matt Franko said...

what they could do is provide a borrower a $4$ tax credit for any interest paid on a loan.

Woj said...

@Matt Franko - I think you hit on an important topic about the deficiency of deposits necessary to pay interest balances. The Arthurian has recently been looking at this from a cost-push inflation perspective based on the rising factor cost of money. JW Mason and Arjun Jayadev have a good paper on the Fisher dynamics in Household Debt: http://bit.ly/KjeeaM. One major point of interest is that the rise in private debt has been less about new borrowing and more about the rise in interest costs.

Clonal said...

Matt,

$4$ tax credit on interest is a bad idea. It encourages asset bubbles and private indebtedness. The problem with a Keen/Hudson style debt jubilee is the moral hazard aspect of it. A better idea is to convert loans to equity, and both parties take losses. If in the process, banks go under, then they should be put under receivership or nationalized. This is more like done under Islamic banking.

Tom Hickey said...

The simple answer is that % of money creation through private borrowing is too great for the system to bear, so there are chronic financial crises. This % needs to be decreased and the govt created % increased in order to reduce the debt pressure.

Presently, govt money creation is regarded as supplemental. It needs to be primary with credit money created by the private sector supplementary, if needed at all.

Take the example of energy. The private sector provides energy from existing energy source, since energy can neither be created nor destroyed, only harnessed for use and dissipated through productive use.

We should look at money in the same way. The task of the private sector is to use money productively in investment and for consumption of what is produced through exchange, not to create the money, which government can do at zero cost. Why complicate the system with interest?

Matt Franko said...

Clonal,

What if the policy rate was permanently set to zero and then rates on loans for houses and cars (secured loans) would be a lot lower than has been the average.

Then provide a tax credit to the borrower for any interest (it would be fixed and small) so that at least the system design includes creation of the balances for the interest and people can have a better chance to be able to obtain a place to live and transport to get to work.

Otherwise you have to get rid of basically "lending on interest" entirely and come up with a new way to account for transactions.

If we retain a system that uses "lending at interest" without providing for the balances needed to pay the interest in the design, then that would be like sending out a construction crew to build a bridge span of 1,000 ft and only providing enough materials for an 900 ft bridge.... this would be the technical definition of what a moron would do.

rsp

Clonal said...

Matt,

Loans for non productive uses - and houses and cars classify as non productive uses - can be taken care of by a process of rent to own - in other words, a shared equity model. You can't afford to buy from your savings, so you can rent the use of the item, and pay a bit more if you want to own it (this could be if you really want to buy a property, rather than to just get to use the property.

Right now, because of tax benefits (interest deductions and no capital gains,) borrowing to purchase becomes the better solution - but as I said earlier, that leads to asset price bubbles and indebtedness. Some of the asset price bubbles can be prevented by the use of land value taxation.

paul said...
This comment has been removed by the author.
Gnoll110 said...

Looking down the barrel of a Great Depression and you are worried about Moral Hazard? Priorities people.

Moral hazard can be avoided by not rewarding the borrower over the saver. give tax credit/money to all (same amount). Browwers must pay off loan. saver get money: new depsits for banks & as compensation of resulting inflation.

Inflation or Depression, I choose inflation.