Private banks can make the money out of thin air and charge a small interest to cover the costs of the service, but if the borrower fails to repay some of his loan the bank can claim the borrowed assets, or home, or business, and for this reason Steve Keen says banks should be heavily regulated.
About China, he says their banks are creating deficits at 15% of the economy which is three times greater than the New Deal. He then talks about China's ghost cities which are badly made and buildings often don't have services yet, but he says everyone is busy and has a job. He considers the ghost cities to be a failure but now Nomi Prins is saying how the Chinese high speed rail is joining the cities up and people are moving into them.
What Steve Keen does praise is how China spent money on its high speed rail. He says the Chinese are not imperialist and do not demand that a country privatise all its infrastructure so that its elite can buy everything up, like the West does. Instead they say to a country we will pay for all the high speed rail we put in your country and you can use it how to please sending goods and services to other countries, including China, as along as we can send goods and services to your country and other countries further along the line. It's a win, win, for everyone.
12 comments:
One of the best I've read over the years bringing it all together nicely.
https://thenextsystem.org/learn/stories/money-matters-why-monetary-theory-and-policy-critical-terrain-left
Keen collects massive amounts of evidence proving the Austrian Business Cycle Theory. He would never acknowledge that, of course, and you guys won't either.
ok I acknowledge that...
And Keen has been largely discredited by Bill recently...
Steve Keen is correct. Private debt is crippling the world economy.
Eventually we will have a mass debt jubilee, consisting of global war and / or an impoverished dystopia.
This will happen because half of humanity refuses to change it thinking, and the other half are simply morons (two of which you can see above).
Steve Keen suggests that we use government money to pay down some of this debt. However this will be useless unless we change laws, and we regulate banks.
@ Footsoldier
Thanks. I missed that. Promoted to a post.
I certainly believe that government privileges for private credit creation cause the boom-bust cycle.
But the Austrian solution, "Liquidate, liquidate, liquidate" is as dumb and cold as the precious metals they idolize. It is also extremely unjust given that the government-privileged usury cartel drives people into debt and thus debtors are victims too.
But the Austrian solution.........
is that there would not be ANY unsustainable debt in the first place. Banks empowered by the fascist state to create debt out of nothing is a moral outrage and a social calamity waiting to happen. Calling such a statist policy "private debt" is quite presumptuous, as if it was all caused by the free market.
You know the other side has lost the argument before it starts when they cannot and will not accurately set forth your position.
However this will be useless unless ... we regulate banks. Konrad
When banks "lend", they create new deposits but also liabilities for fiat 1-for-1 with the new deposits.
But what good, in an ethical, fundamental accounting, and feed-back control systems view are those liabilities toward the non-bank private sector, if the non-bank private sector CANNOT* EVEN USE FIAT? What good are sham liabilities?
So let's fix the fundamental accounting first. Otherwise, we are attempting to regulate a needlessly unjust, needlessly unstable financial system.
*Except for risky, unhygienic, totally inadequate for modern commerce physical fiat, aka cash.
Keen collects massive amounts of evidence proving the Austrian Business Cycle Theory. He would never acknowledge that, of course,
Keen was influenced by Hyman Minsky. He even named his algorithm "Minsky" to acknowledge the connection.
Hyman Minsky was a student of Joseph Schumpeter, as were Paul Samuelson, James Tobin, Robert Heilbroner, Nicholas Georgescu-Roegen, John Kenneth Galbraith, Alan Greenspan, and Paul Sweezy.
Schumpeter was a student of early Austrian economist Eugen Böhm von Bawerk. He was appointed Finance Minister of Austria in 1919. Subsequently, he emigrated to the US and a professorship at Harvard. While Schumpeter, like Minsky after him, eschewed identification with any particular economic school, humans have a tendency to categorize, and he is viewed as an Austrian. Similarly, Minsky is viewed as a Post Keynesian.
There has been quite a bit written about Minsky's connection to Austrian economics and the ABCT (Austrian Business Cycle Theory) through Schumpeter. While Keen acknowledges his connection with Austrian economics in contrast to neoclassical economics, he has criticized the ABCT. Contemporary Austrian economists reject that criticism as off the mark.
While Keen acknowledges his connection with Austrian economics, he also acknowledges the influence of others. He views himself as making a unique innovation in the field of economics in connecting economics and finance, which he believes has not yet been done satisfactorily. The test will be comparing the output of his program with data.
Interestingly, Randy Wray, one of the founders of MMT, was a student of Minsky. Therefore, MMT is indebted to Austrian economics to some degree through Minsky's connection with Schumpeter, who is Wray's academic "grandfather."
Of course, Schumpeter had many more students than Hyman Minsky, Paul Samuelson, James Tobin, Robert Heilbroner, Nicholas Georgescu-Roegen, John Kenneth Galbraith, Alan Greenspan, and Paul Sweezy. They are the now famous ones. While all of them were influenced to some degree by their teachers, they are considered great because of their contributions and innovations. Neoclassical economics, which now stands in opposition to Austrian economics to a great degree, was founded in part by Austrian economists.
This is for the historians of economics and finance to sort out.
is that there would not be ANY unsustainable debt in the first place. Bob Roddis
Be that as it may or may not* be, the problem now is to eliminate or reduce that debt in a just manner - recognizing that government privileges for private credit creation cheat both non-debtors AND debtors.
*e.g. the Old Testament commanded debt forgiveness among Hebrews every 7 years - 400 years before ancient Israel even had a government!
is that there would not be ANY unsustainable debt in the first place. Banks empowered by the fascist state to create debt out of nothing is a moral outrage and a social calamity waiting to happen. Calling such a statist policy "private debt" is quite presumptuous, as if it was all caused by the free market.
You know the other side has lost the argument before it starts when they cannot and will not accurately set forth your position.
The argument as I understand it (imperfectly) boils down to different monetary and financial systems and the implications of each regarding various matters, which the different sides prioritize differently based on preferences and tradeoffs involved.
For example, one side prioritizes full employment over price stability, and the other side price stability over full employment (or defines "full employment" down).
The former favors wise fiscal space and the latter narrow.
ETC.
On top of this there are arguments over the correctness of the respective theories, with different parties to the debate advocating different frames and different criteria.
In the final analysis, it comes down to which side can dominate the others in policy and that is political. The political is decided more on the basis of persuasion than logical reasoning and data.
Presently, the neoclassical view that underlies neoliberalism has a lock on power pretty much globally.
Not sure how gold would stop unsustanable debt
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