Matias Vernengo — On the Blogs -- The Video Edition

One video is by Bill Mitchell, another is by Steve Keen, and another by Immanuel Wallerstein.

Naked Keynesianism
On the Blogs -- The Video Edition
Matias Vernengo | Associate Professor of Economics, Bucknell University

Two reviews of Steve Keen's Can we avoid another financial crisis?

I just read the new book by Steve Keen, which is … a little red book. It is very readable and brings the reader up to the economic theory and reality of 2017. The focus is on private debt, and that is very important....

Dirk says to read it.

econoblog 101
[book review] Steve Keen – Can we avoid another financial crisis?
Dirk Ehnts | Lecturer at Bard College Berlin

See also

Surprisingly good review from Reuters.

I would beg to disagree with Keen's analysis of private debt in China as comparable with private debt in a Western capitalist system. The systems are different, first owing to different and economic infrastructure, and secondly owing to economic conditions in China, where private sector incomes are increasing correspondingly, for example, and the household saving rate is high. We'll see.

Reuters
Review: Can we avoid another financial crisis?
Edward Chancellor

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Economic Growth And Private Sector Debt Levels: Lessons (Not Yet?) Learned — Investment Cycle Engine, Inc

Summary

• High private sector debt/GDP ratios will continue to hamper US economic growth.
• Mainstream macroeconomic models by design ignore the financial cycle and do not provide any insights about the financial cycle.
• Macroeconomic models should have macroeconomic foundations and incorporate financial stability considerations.

Good post based on a Post Keynesian analysis. But doesn't mention either Hyman Minsky, whose financial instability hypothesis explains the financial cycle, or MMT, which would bolster his argument. However, I understand the scope of posts at blogs is limited, so he had to make choices, and overall the post is well done the way he sets it up.

Seeking Alpha
Economic Growth And Private Sector Debt Levels: Lessons (Not Yet?) Learned
Investment Cycle Engine, Inc

Edward Harrison — Where Post-Keynesians and Austrians meet on economics

Credit.

Credit Writedowns
Where Post-Keynesians and Austrians meet on economics
Edward Harrison

See also

Can Macron reform Europe?: A mental model for thinking about the economics

Michael Hudson — The Economics of the Future

Mainstream [economic] models are unable to forecast or explain a depression. That is because depressions are essentially financial in character. The business cycle itself is a financial cycle – that is, a cycle of the buildup and collapse of debt.

Keen’s “Minsky” model traces this to what he has called “endogenous money creation,” that is, bank credit mainly to buyers of real estate, companies and other assets. He recently suggested a more catchy moniker: “Bank Originated Money and Debt” (BOMD)....

Counterpunch
The Economics of the Future
Michael Hudson

Jason Smith — Qualitative economics done right, part 2a

Jason Smith answers objections to his own objections to Steve Keen's modeling.

Information Transfer Economics
Qualitative economics done right, part 2a
Jason Smith

Jason Smith — Qualitative economics done right, part 2

Jason Smith looks at Steve Keen's model and finds it lacking.

Information Transfer Economic
Qualitative economics done right, part 2
Jason Smith

Jason Smith — Qualitative economics done right, part 1

Steve Keen, Wynne Godley, SFC, MMT mentioned.

Information Transfer Economics
Qualitative economics done right, part 1
Jason Smith

Jason Smith — Keen, chaos, and equilibrium

Physicist Jason Smith critiques a debate among Steve Keen, Roger Farmer, Noah Smith, and David Andolfatto over Steve' recent Forbes post asserting that the economy is best modeled as a complex non-linear system instead of using the conventional linear stochastic models (DSGE) based on assuming general equilibrium.

Actually, as a physicist, I would say that even if the economy was a complex nonlinear chaotic system, linear stochastic models would still be its effective theory description. Regardless of what the quantum theory of gravity is, general relativity -- and even Newton's universal law of gravitation -- is still its long-distance effective theory.

Anyway, this prompted me to write something about Steve Keen's article in Forbes. Keen suffers from a problem that all public economists seem to suffer: asserting matters of opinion as matters of fact, and ongoing research programs as well-established frameworks. This will be made clear as we progress. Let's begin, shall we?

Information Transfer Economics
Keen, chaos, and equilibrium
Jason Smith

Cameron Murray — A comment on Keen’s “Credit plus GDP” measure

Background

More than anyone, Steve Keen has raised awareness of the role of banking and money creation in driving economic cycles. Not only this, he has published just about every presentation and paper of his freely online, and participated in a variety of forums online and in the media.

Not only is he out there putting forward new approaches and ideas, he is doing so in a way that allows every man and his dog to nit pick at his work. That takes guts.

Because of public nature of his work for the past decade, his analysis and communication of these big ideas has evolved to become extremely powerful and hard to ignore. Just about everyone I talk to in the economics crowd these days has been influenced by Keen’s work in some way. Even I am still digesting his reconciliation of accounting identities and the dynamic effect of additional demand from credit creation, which I think could offer a clear path forward for gaining wider acceptance of his dynamic monetary methods.

The issue

In the spirit of this public debate I want to take issue with one of Keen’s latest ideas; adding change in credit (debt) to GDP. But I want to do so constructively so that as a profession we can incrementally improve our economic analysis and understanding of macroeconomic phenomena.

Fresh Economic Thinking
A comment on Keen’s “Credit plus GDP” measure
Cameron K. Murray

See also

Neil Wilson — Accounting for the Folly of QE

Steve Keen has an interesting piece up over at Forbes that describes the folly of QE and how it doesn't actually do what people thing it does.

The central points are correct. The amount of reserves in aggregate existing in the banking system is determined largely by the Central Bank, they don't get lent out and overall they can't really go anywhere other than back and forth.

However there are few things in there that perhaps could be misinterpreted.…

3spoken
Accounting for the Folly of QE
Neil Wilson

Andrew Lainton — ‘Thin Air’ and Economic Causality

Michael Pettis has a a long and interesting post which is effectively a critique of Steve Keen.

Decisions, Decisions, Decisions
‘Thin Air’ and Economic Causality
Andrew Lainton

Michael Pettis — Thin Air’s money isn’t created out of thin air

A recurring conversation I have with clients concerns the ability of banks to create credit, and of governments to monetize debt, and whether this ability is the solution to or the cause of financial instability and economic crisis. Monetarists and structuralists (to use Michael Hudson’s names for the two sides, whose centuries-long debate pretty, exemplified by Thomas Malthus and David Ricardo during the Bullionist Controversy, dominates the history of economic thinking) have very different answers to that question, but I will suggest that each side disagrees because it implicitly assumes an idealized version of an economy.

We are normally taught that banks allocate credit by lending the money that savers have deposited in the banking system, but in fact banks create deposits in the banking system by creating credit, so it seems to many as if they can create demand out of nothing. Similarly, if governments are able to create money, and if they can borrow in their own currency, they can easily monetize debt, seemingly at no cost, by “printing” the money they need to repay the debt (actually by crediting bank accounts, which amounts to the same thing). This means that when they borrow, rather than repay by raising taxes in the future, all they have to do is monetize the debt by printing the money needed to repay the debt. It seems that governments too can create demand out of nothing, simply by deficit spending.

There is a rising consensus – correct, I think – that the misuse of these two processes – which together are, I think, what we mean by “endogenous money” – were at the heart of the debt surge that was mischaracterized as “the great Moderation”. For example in a book published earlier this month, Between Debt and the Devil, in which he provides a description of the rise of debt financing in the four decades before the 2008-09 crisis, along with the economic risks that this has created, Adair Turner specifies these two as fundamental to the rising role of finance in the global economy. He writes:
…in modern economics we have essentially two ways to produce permanent increases in nominal demand: either government fiat money creation or private credit money creation.

I am less than half-way through this very interesting book, so I am not sure how he addresses the main characteristics of debt, nor whether he is able to explain how much debt is excessive, or identify the main ways in which the liability side of the macroeconomic balance sheet intermediates behavior on the asset side to determine the growth and volatility of an economy. He invokes the work of Hyman Minsky often enough, however, to suggest that unlike traditional economists he fully recognizes the importance of debt.

And it is because of this importance that the tremendous confusion about what it means to create demand out of nothing is dangerous. When banks or governments create demand “out of this air”, either by creating bank loans, or by deficit spending, they are always doing one or some combination of two things, as I will show. In some easily specified cases they are simply transferring demand from one sector of the economy to themselves. In other equally easily specified cases they are creating demand for goods and services by simultaneously creating the production of those goods and services. They never simply create demand “out of thin air”, as many analysts seem to think, and doing so would violate the basic accounting identity that equates total savings in a closed system with total investment.…

Endogenous money, Minsky, Steve Keen, MMT, I-S, and balance of payments.

China Financial Markets
Thin Air’s money isn’t created out of thin air
Michael Pettis | Professor of Finance at Peking University’s Guanghua School of Management

Steve Keen — 2 new positions at Kingston University London

We are hiring two new staff at Kingston University: one permanent position at Associate Professor level, and one short-term contract to cover an absent colleague.

If you’d like to work at one of the few pluralist-friendly economics departments in the world, and you’re suitably qualified, please follow the links below for more details and to submit your application. 

Associate Professor position 

Short-term lecturer position

The deadline for applications is tight: they are due by June 26.

Steve Keen's Debtwatch
2 new positions at Kingston University London
Steve Keen

IDEA — Consensus Falls Toward Keen's View

When IDEA published Steve Keen’s 2015 Global Economic Outlook in January, its predictions were well outside the consensus. Today, only five months later, the gap has substantially closed, without revising the outlook. Indeed, we witnessed a remarkable revision to the consensus Q1 US GDP forecasts, when they came down dramatically in April, after the quarter had closed, forecasting the past. 

Serious trouble in China, stagnation in Europe, weakening US data – none of it conclusive in terms of timing, but the pattern is ever more clear. Prof. Keen’s assessment is built on a model of the economy which recognizes the centrality of private debt and the change in private debt. The model integrates money, credit and banking and utilizes non-linear dynamics to simplify a complex system. In each of these ways it is unique among its peers.....

IDEA
Consensus Falls Toward Keen's View

RWER — Steve Keen's New Book – Developing an economics for the post-crisis world

Developing an economics for the post-crisis worldSteve KeenPublished 2 March 2015 by WEA Books  – price: $10

The veracity of mainstream economics has been called into question in the years since the economic crisis began. But the questioning of economics precedes the crisis, and not by merely years but arguably ever since 1898, when Thorstein Veblen published his brilliant paper “Why is Economics not an Evolutionary Science?” But Veblen’s critique fell on the deaf ears of the mainstream, and was unknown to the public. Only in the fringes of academic economists did Veblen’s words, and the spirit of rebellion he encouraged, live on.

Economics came under challenge again in the 1930s, and this time Keynes led the charge against an orthodoxy that, six years after the Great Depression began, had no idea what caused it, or how to overcome it. But Keynes’s challenge was largely deflected by Hicks’s reinterpretation of Keynes, and the taxonomic economics that Veblen hoped to defeat was rebuilt after the challenge of the Great Depression and the World War had ended.

In 2007, the global economy experienced its greatest crisis since the Great Depression, and once again, mainstream economics failed to anticipate the crisis, and even after it has apparently passed – in the Anglo-Saxon world at least – once again, can provide no explanation of why it happened in the first place.   What is different this time around is that there is a publicly accessible outlet for critical voices, and it has been around – in various guises – for 15 years. What was first known as PAECON (the Protest against Autistic ECONomics) and is now known as the Real World Economics Review was established by Edward Fullbrook in 2000 in response to protests by French students against the unworldly theorems they were forced to learn in the French economics curriculum. When the financial crisis hit in late 2007, the Real World Economics Review was already there, ready to provide an outlet for critical economists, and intent on getting their views to the public.

This short book provides the articles that I have published in RWER over the last fifteen years – starting with the first in July 2001. The topics covered include methodology, microeconomics, and the monetary approach to macroeconomics that I have been developing – along with many other non-mainstream economists – over the last 20 years.

You may purchase ($10) and download this book in PDF, EPUB, and MOBI formats here 

RWER Real-World Economics Review 

IDEA — Steve Keen in Beijing - Beijing Normal University, November 24-29

1) Lecture for Faculty & Graduate Students in BNU: Dragging economics into the 20th century with basic system dynamics for economics. November 26, 13:30-15:10 p.m., Room 217, Yingdong Building,

2) Lecture for New Economics Reading Group: How endogenous money alters macroeconomics. November 29, 9:30-11:30 a.m., Room 217, Yingdong Building,

3) Short Course, Room 205, 4th Teaching Building
Lecture 1: Failure of old paradigm and promising alternative paradigm: (1) Macroeconomics before crisis and after crisis, (2) Financial Instability Hypothesis, (3) Intro of Modeling Minsky.

Lecture 2: From linearity to nonlinearity: (1) The importance of nonlinearity, (2) 3 dimensions plus mixing for complexity, (3) Debt cycles.
Lecture 3: From equilibrium approach to nonequilibrium approach: (1) Foundations of non-equilibrium economics, (2) Examples of non-equilibrium economic process. November 25, 19:00-21:30 p.m. Room 106, 4th Teaching Building.

Lecture 4: From real economics to monetary economics: (1) Essential role of endogenous money in Minsky’s FIH, (2) Integrating endogenous money into macroeconomics

IDEA Economics: Institute for Dynamic Economic Analysis
Steve Keen in Beijing - Beijing Normal University, November 24-29

Alan Harvey

Steve Keen — Crash Boom Pop in the Wall Street Journal

Steve Keen's Debtwatch
Crash Boom Pop in the Wall Street JournalSteve Keen | Professor and Head Of School Of Economics, History & Politics, Kingston University, London

Steve Keen — What Austerity Hawks Ignore

My fellow Post Keynesian and good mate Professor John Harvey published an excellent piece on his Forbes blog today, pointing out the fallacy of composition in the pro-austerity. He took his cue from anti-austerity riots in Belgium:…. 

I thought it was a great post (and he’d come up with the analogy the night before when we shared dinner after establishing an exchange agreement between our two universities, TCU and Kingston). So I tweeted it and thought nothing more of it. 

But then my work on a presentation defending mathematics in economics that I‘m giving at Cambridge University on Monday was disturbed by a series of aggressive tweets from Geert Noels, the author of Econoshock, who argued that Belgium wasn’t in fact practicing austerity:….

Steve Keen's Debtwatch
What Austerity Hawks Ignore
Steve Keen

Clint Balinger — Endogenous money, MMT, Positive Money, & financial reform

Among the Post-Keynesian groups concerned with understanding and fixing problems that lead to the 2007/8 Global Financial Crisis (GFC) and other ongoing economic problems there are different areas of focus by circuit theorists, Modern Monetary Theory (MMT), Steve Keen’s approach to private debt, and other Post-Keynesians. (MMT, while often with a focus on other aspects of the economy [as L. Randall Wray writes, leading from neo-Chartalist and functional finance insights to fiscal policy] is nevertheless firmly grounded in endogenous money theory). Despite these various approaches having important disagreements and areas of interest all are grounded in reality & therefore their discussions on policy options are coherent and useful, unlike orthodox policy discussions. 

There is another perhaps small but dedicated and often visible group of reformers that focus on the monetary system. Broadly these are the various groups that want to change the monetary system such as The American Monetary Institute (AMI), Positive Money (PM), economists associated with the New Chicago Plan and others. Their relation with the Post-Keynesian groups mentioned above is somewhat complicated, and the key reason involves endogenous money. Before continuing, it helps to divide these diverse money reforming groups into two broad categories:

Clint Balinger
Endogenous money, MMT, Positive Money, & financial reform