Steve Keen's book, Debunking Economics, is mainly a compilation of well-established criticisms of textbook economics. He attempts as popular a presentation as the material will permit. These criticisms, in my opinion, leave textbook economics, both microeconomics and macroeconomics, in tatters.Thoughts on Economcs
A Keen Defense
Robert Vienneau
Steve Keen explains how banks engage in private money creation which is used to speculate in asset prices. That's basically what I say and which you MMT cement-heads dispute. Of course, Keen does not seem to understand that this illicit process fatally distorts economic calculation which is why the process results in excess and unpayable private debt and is not sustainable.
ReplyDeleteOh no! Keen is interviewd by Lauren Lyster.
http://rt.com/programs/capital-account/keen-fractional-reserve-companies/
Steve Keen explains how banks engage in private money creation which is used to speculate in asset prices. That's basically what I say and which you MMT cement-heads dispute. Of course, Keen does not seem to understand that this illicit process fatally distorts economic calculation which is why the process results in excess and unpayable private debt and is not sustainable.
ReplyDeleteMMT economists and allies like Bill Black and Michael Hudson are in agreement with Keen and have been writing about it for a long time. See also Warren Mosler's proposals for financial reform.
MMT just takes a different angle toward this than you do and offers a different solution.
I should have mentioned that Steve Keen is articulating a position based on Hyman Minsky, which is what unites MMT economists and allies like Black and Hudson on this issue. It's where PKE most closely intersects with Austrian economics, through Schumpeter, under whom Minsky studied. This has been pointed out here many time in the past.
ReplyDeleteOf course, the Minsky-ites stick a long sharp knitting needle into their prefrontal cortex so that they are unable to see (or unable to admit that they see) the self evident reason why funny money creation induces unpayable debt and asset speculation: The impairment of economic calculation leading to unsound levels of debt and investments in unsustaiable lines that only appear profitable due to the phony prices created by the creation of the funny money in the first place. This is a quite distinct analysis from the Mike Norman straw man that I am allegedly concerned in the short run with general price inflation. It is quite possible to have a funny money induced bubble in asset prices which does not lead in the short run to a substantial rise in the CPI. Austrians have been preaching that for 60 years, despite Norman's total ignorance of the subject.
ReplyDeleteBTW, I particularly like the Keen interview starting around 15:30.
As Warren Mosler has observed, federal regulators are authorized to exert micro and macro-prudential control over the banking and the financial industry. This crisis was a result in part of regulatory failure.
ReplyDeleteBill Black goes further to state that the crisis was at bottom a far-reaching criminal conspiracy orchestrated at the CEO level through control fraud. Authorities were not only malfeasant in micro and macro-prudential regulatory supervision but also law enforcement.
No need to change the monetary system to one that is biased toward deflation rather than inflation. Just carry out the present institutional requirement and institute needed reforms based on lessons learned.
Tom Hickey said... "to one that is biased toward deflation rather than inflation"
ReplyDeleteCould you expand on this?
Tom Hickey said... "to one that is biased toward deflation rather than inflation"
ReplyDeleteCould you expand on this?
Scarcity increases value with demand. Abundance decreases value with demand. Excess scarcity of money leads to increasing value of money which encourages hoarding. That is, money is demand for itself owing to an increase in the real rate of interest rather than to be used in investment and consumption. Excess abundance of money leads to spending before money loses value, which becomes inflationary as full employment is approached. That is, goods and assets are demand to replace money before its value falls with the real rate of interest as inflation rate picks up.