Steve Keen's Debtwatch

I’m post­ing videos of lec­tures given by my Kingston col­leagues to the intro­duc­tory “Becom­ing an Econ­o­mist” course, since the Study­S­pace soft­ware Kingston uses doesn’t sup­port MP4 files. The first is Devrim Yilmaz’s lec­ture last week on “Data Col­lec­tion and Presentation”.

I’ve been Head of School at Kingston Uni­ver­sity Lon­don for over 18 months now, but these things do take time: last Wednes­day I gave my inau­gural Pro­fes­so­r­ial lec­ture to an audi­ence of about 200 peo­ple. My screen-recording video of the talk is below. Click here to down­load the Pow­er­point slides; Min­sky cri­sis model; Min­sky Loan­able Funds model; Min­sky Endoge­nous Money model; Pri­vate Debt lev­els (6 coun­tries); Pri­vate Credit growth (6 coun­tries); USA Pri­vate Debt change & Unem­ploy­ment; Pri­vate Debt Accel­er­a­tion & Asset Prices.

I like Joe Stiglitz, both pro­fes­sion­ally and per­son­ally. His Glob­al­iza­tion and its Dis­con­tents was vir­tu­ally the only work by a Nobel Lau­re­ate econ­o­mist that I cited favourably in my Debunk­ing Eco­nom­ics, because he had the courage to chal­lenge the pro­fes­sional ortho­doxy on the “Wash­ing­ton Con­sen­sus”. Far more than most in the eco­nom­ics main­stream—like Ken Rogoff for exam­ple—Joe is capa­ble of think­ing out­side its box.

But Joe’s lat­est pub­lic con­tri­bu­tion—“The Great Malaise Con­tin­ues” on Project Syn­di­cate—sim­ply echoes the main­stream on a cru­cial point that explains why the US econ­omy is at stall speed, which the main­stream sim­ply doesn’t get.

I’ve attended two con­fer­ences in two days where both the power and the impo­tence of the Euro­pean Cen­tral Bank (EBC) have been on vivid display.

Its polit­i­cal power is con­sid­er­able, both in form and in sub­stance. At both sem­i­nars, the ECB speaker—ECB Board mem­ber Peter Praet at the first, and ECB Pres­i­dent Mario Draghi at the second—spoke first, and then left. In form, the ECB has no need to defend its poli­cies because it is unim­peach­able in its exe­cu­tion of them. In sub­stance, it does not even con­sid­er­ing engag­ing with its subjects—I use the word deliberately—in open and robust discussion.

The posi­tion of the econ­omy in the envi­ron­ment is a shared blindspot in eco­nom­ics: no exist­ing school han­dles the topic well, and yet this is the key issue we need to under­stand. I explain the Laws of Thermodynamics–as well as I could in an intro­duc­tory class with­out using mathematics–and pro­vide some links to impor­tant top­ics that stu­dents wouldn’t nor­mally hear about in an eco­nom­ics degree.

Click here for the Pow­er­point slides.

This lec­ture cov­ers the Post Key­ne­sian school of thought in eco­nom­ics, focus­ing mainly on its mod­ern empha­sis upon endoge­nous money, sec­toral bal­ances, and Minsky’s Finan­cial Insta­bil­ity Hypoth­e­sis. I also show how to do non-equilibrium mod­el­ing (using my Open Source mod­el­ing pro­gram Min­sky of course).

Click here to down­load the Pow­er­point slides.

Paul Krugman’s lat­est col­umn—“Check Out Our Low, Low (Nat­ural) Rates” (which he didn’t flag as “Wonk­ish”, even though it is so in spades—noted that the “nat­ural real rate of inter­est” was falling, and that this jus­ti­fied the low inter­est rate set by the Fed­eral Reserve.

And this made me think about Karl Marx.

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Actu­ally they’ve done no such thing. But they do effec­tively assume that it’s unnec­es­sary all the time.

This tran­scen­den­tal truth became appar­ent to me in the reac­tions I have had from main­stream econ­o­mists to a lec­ture I gave to my Kingston stu­dents this month (which is posted on my YouTube chan­nel and blog).

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This lec­ture intro­duce the Aus­trian school of thought, which is closely related to the Neo­clas­si­cal mainstream–in that it shares its util­i­tar­ian the­ory of value, accepts basic sup­ply and demand analy­sis, and sees cap­i­tal­ism as gen­er­ally tend­ing towards equi­lib­rium. But it is also highly crit­i­cal of the main­stream for the absurd assump­tions about indi­vid­ual knowl­edge that it is will­ing to make to pre­serve its equilibrium-oriented math­e­mat­i­cal approach. It sees capitalism’s strengths as how it encour­ages inno­va­tion, which is an equilibrium-disturbing process, and regards money as being both inte­gral to cap­i­tal­ism and the pri­mary source of eco­nomic cycles.

This talk cov­ers all “the usual sus­pects” for me–the Neo­clas­si­cal obses­sion with equi­lib­rium, finan­cial insta­bil­ity, the Loan­able Funds myth and the real­ity of Endoge­nous Money, and the fool­ish­ness of gov­ern­ments try­ing to run a sur­plus as if they are house­holds, when the bet­ter anal­ogy is that they are banks and should run deficits to cre­ate part of the money sup­ply the non-bank pri­vate sec­tor needs.

Click here to down­load the Pow­er­point file (Min­sky files are embed­ded in it and can also be extracted and saved to your PC, if you’d like to play with them).