An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Thursday, October 29, 2015
Steve Keen — The Unnatural Rate Of Interest - Ultra Wonkish
Steve takes on Marx's labor theory of value, too. (It's not all that wonkish either.)
Toward the end Steve throws out an updated assessment of the US economy:
"Even though credit growth is positive again ... it is still a smaller percentage of GDP than at any time since 1994 ... the odds of sustained credit growth from now on are very low. The positive from this is there won’t be another US bust like 2008—because that requires a high rate of growth of credit to give way to a fall in credit. But the odds of sustained stagnation are very high."
So Steve envisions a continuing "lost decade" for the U.S., though not necessarily a major downturn.
The major difference with Japan is that Japan was enjoying an inflationary period in the rest of the world and was able to run big trade balance surplus. Same for other "Asian Tigers" and South America after the different crisis that happened in the last two decades. This situation does not apply anymore.
Now with the zombie export-obsessed EMU running huge unsustainable surplus the situation is highly volatile. As we haven't discovered any alien civilization we can export ourself to Nirvana I see the situation degrading faster unless there is a policy shift in the developed nations.
I'm not as optimistic as Keen that America's economy will be insulated from the rest of the world. Thanks to free trade and globalism, what happens in Europe or Asia is probably going to have an impact here.
Toward the end Steve throws out an updated assessment of the US economy:
ReplyDelete"Even though credit growth is positive again ... it is still a smaller percentage of GDP than at any time since 1994 ... the odds of sustained credit growth from now on are very low. The positive from this is there won’t be another US bust like 2008—because that requires a high rate of growth of credit to give way to a fall in credit. But the odds of sustained stagnation are very high."
So Steve envisions a continuing "lost decade" for the U.S., though not necessarily a major downturn.
"Crappification" of the economy will continue.
ReplyDeleteThe major difference with Japan is that Japan was enjoying an inflationary period in the rest of the world and was able to run big trade balance surplus. Same for other "Asian Tigers" and South America after the different crisis that happened in the last two decades. This situation does not apply anymore.
Now with the zombie export-obsessed EMU running huge unsustainable surplus the situation is highly volatile. As we haven't discovered any alien civilization we can export ourself to Nirvana I see the situation degrading faster unless there is a policy shift in the developed nations.
Agree with all that, Ignacio.
ReplyDeleteI'm not as optimistic as Keen that America's economy will be insulated from the rest of the world. Thanks to free trade and globalism, what happens in Europe or Asia is probably going to have an impact here.