Wednesday, December 5, 2012

Steve Keen — Congress Briefing on the Fiscal Cliff: Lessons From the 1930s (video)



Outgoing Ohio Congressman Dennis Kucinich (seehttp://kucinich.house.gov/) 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. 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. Private sector deleveraging, which had stopped in 1934-35, began once more and unemployment rapidly rose from about 10 to almost 20 percent. The main danger with the Fiscal Cliff is therefore not what the reduction of government spending will do on its own, but that it might trigger a renewed bout of deleveraging from the $40 trillion overhang of private debt that I call the "Rock of Damocles".

Congress Briefing on the Fiscal Cliff: Lessons From the 1930s
Steve Keen

5 comments:

y said...

Oh God!

Total hodgepodge.

(I just thought I'd get in there before R does :)

Ramanan said...

y,

(Just browsed through the video ... )

As long as Keen is not doing any modeling or writing any equations, he is fine.

The minute he starts doing that ...

Tom Hickey said...

As long as Keen is not doing any modeling or writing any equations, he is fine.

The minute he starts doing that ...


Wondering — Have you tried fixing Keen's approach yourself, or do think that it is just ill-conceived and should be abandoned?

Ramanan said...

Tom,

Keen's approach if fixed, will just look like Wynne Godley's models! But he has a long way to go!

The fact that he uses differential equations etc are sideshow to the issues he stumbles. (Because making Godley's approach in differential equations as opposed to difference equations is not a big deal. Neither is it of any use. He did it in a few technical places where the difference becomes important and Godley used difference equations as a choice as per one of his book's reviewers).

Comparison is not however the main point IMO. Keen should first get some basic things right.

Tom Hickey said...

Thanks, Ramanan.