Full Circle: Steve Keen on Money for Nothing
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Central banks around the world are increasingly turning to unconventional, once unthinkable monetary policies to help jumpstart our moribund economies. Quantitative easing, negative interest rates, helicopter money. These measures are changing economics as we know it. But who really benefits from them and what are they good for? Steve Keen is a long time critic of conventional economic thought, and among a remarkably small number of economists who predicted the 2008 financial crisis and recession. He's now one of the few to propose to inject money not to financial institutions but directly into people’s bank accounts. It's money for nothing. A viable rescue plan for the Eurozone? ABOUT Steve Keen is one of the very few economists who best predicted the Great Financial Crisis and the Great Recession. He was among a remarkably small number who foresaw the crisis and raised the alarm in advance of the largest economic event of the post-Depression era. He is the Chief Economist at the Institute for Dynamic Economic Analysis (IDEA) and the Head of the School, Economics, History and Politics, Kingston University London, with the mandate to form the first truly heterodox economics department in Europe. GOODREADS Debunking Economics – Revised and Expanded Edition: The Naked Emperor Dethroned? (2011). KEY LINKS http://www.debtdeflation.com/blogs/ www.ideaeconomics.org Recorded in Brussels on 20th June 2016 --------------------------------------------------------------------- Web: http://fullcircle.eu/ Facebook: https://www.facebook.com/fullcirclebr... Twitter: https://twitter.com/FullCircleEU
Comments
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Was this recorded in the back of a pub? The background noise is so annoying.
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Wow, I've never seen so many self proclaimed "experts" in a comment section before.
So many professors........ -
Keen also argues that banks, by their lending to speculators drive up property prices. Not so.
This cannot be so over a long term since speculation is based on an expectation by the investor of increasing prices from the sale of properties which does not necessarily happen.
It simply puts more properties on the market by directing finance into the property market enabling more houses to be built.
That in turn results in building of more housing which increases the supply of housing in the demand, supply, price curve. The overall effect is lower housing prices caused by this increased finance put into housing.
Evidence of the increased supply and it's effect is the drop in prices that occurs whenever there is a glut. As a result speculators incur a loss that subsidises home buyers in that case.
The statement that real estate funding is a Ponzi scheme is blatantly false and demonstrates that Keen does not know what a Ponzi scheme actually is. Ponzi schemes are based on the absence of an actual output coinciding with a quick return for the promoter unrelated to the productive outcome of the scheme. -
Keen his given an example of the Petrol Station owner and the bank's operation in crediting the account with too much money by making a keyboard error.
Unwittingly provided a very good reason why governments have irresponsibly created too much money without thought of the consequence or constraint . Yet he then argues that a problem in people owing too much debt could be solved by a similar process that the clerk in the bank has done - just making or re setting digits on a keyboard.
Who would be happy if they were owed money that they had worked for and saved by denying the opportunity to spend and lent to someone else just to see government wipe it out by some computer keystroke. That is in no way fair on savers.
His assertion that 90% or 95% of money created by banks is for real estate development is plainly false as is his belief that real estate speculation can be stopped. Yet he asserts it can without even defining what speculation is and distinguishing it from straight investment in some.
t's all more a dreamland belief divorced form reality.
His belief that debt can be wiped by cancelling it and not advantaging debtors over savers is just likewise a pie in the sky belief that resembles demagoguery.
No explanation given about how this will be achieved. -
Keen misleading again.. He has only explained part of the situation of bank reserves and the impact of credit multiplicaton by governments.
Banks reserves are held in accounts at the Federal reserve which results in interest that has to be paid to the banks for those reserves..
That interest received by the banks allows them to increase their lending.
The QE process involved the Treasury and Fed together creating more money units and at the same time more debt. It is fact that new money cannot be created without debt and has no value until spent into the private sector.
The banks are an intermediary for new money to be created and spent this way. They have balance sheets and operate in the private sector like a business or private person.
Banks do however have the opportunity to create credit money in the form of loans which is their main business. They do this and that money they create in this way , e.g. mortgages, to allow people to borrow and use that money to pay for goods or services that they need.
These loans are on the proviso that the loan is serviced by interest payments and eventually paid back which destroys this credit money that the bank created. In the normal course of business these loans are paid off on a continuing basis.
The stark contrast with government created new money is that the new money the Federal Reserves create with the co operation of the Treasury are never paid off and remains as a debt for the private sector to pay for. Technically it could however be paid off and reduced if governments chose to do so but that would require politicians with conviction to reduce the debt. The obvious part of that increasing debt burden is the rise in the national debt of which a sizeable proportion is owed to overseas interests who will eventually have to be paid back when the debt matures.
Presently governments are increasing that debt to pay for government programs of all kinds and assisted by ignorant and misinforming economists who are sometimes on their payroll in one form or another are not telling concerned people the truth or simply pretending that thigs are "different" with governemnt debt and not understood by the average person.
That new money has no value until it is spent acquiring goods and services from the private sector. Just like a counterfeiter's money has no value and only gains it's money by being accepted and being undistinguished by a trader from other money.
In the case of part of the deal for QE new money was manufactured and used to prop up the banks by purchasing their toxic debt and bolstering their reserves. That meant banks which would have had to go bust were kept in business.
You also have to know that the toxic debt that the Federal Reserve in the US bought in a deal with treasury and government is still in the hands of the Federal Reserve.
It has not gone away and the US Federal Treasury has the stated intention of selling it off. Selling it to some poor sucker in a package just like the initial debt was sold to become part of the GFC problem. -
Stev Keen wrong about the chemistry of the changes in the state of water .
Ice has a stronger hydrogen bond than the covalent bond of water. Ice crystals are formed when there is change in state. In water the bonds are always breaking and re attaching but the case with ice is a more crystal structure with adhesion mostly by a more rigid hydrogen bonding.
Further the assertion by Keen that going from a micro to a macro in economics is also critically faulted.
He has not stated and never does state any point where micro suddenly becomes a macro.
That's because there is no point of cross over from micro to macro where some change takes place.
Does this crossover happen in an economy of over 5 people? Or perhaps 10? or maybe 200 ? or 10,000? Not ever explained by any of these economists.
It's a fully false belief based on no legitimate reasoning. But it suits some economists to put across this to support their faulted theories .
The reality is relative price systems are right.
You don't have to be very awake to understand that.
If relative prices were not the reality then all prices would be the same.
They are clearly not !! They allow realive comparison between two differing situations.
That is because the 'Price' is itself a way of comparing two or more different products offered for sale.
Price IS a relationship. -
Steve Keen's analogy of the jackhammers is totally is full of faults. It omits the fact that increased efficiencies are sought to improve overall unit costs.
The adjusting factor is Not just more labour or less labour. He should have stated the reality that new investment has improved techniques and developments in mind and that would mean fewer numbers of workers can do what a larger number used to do with more primitive equipment.
For instance a mechanised garbage truck now has only one person to operate it when it added to require a driver and a person to load the garbage. All due to investment of new capital assets to improve efficiencies.
The improved wealth is a result of technological developments that made the jackhammer in the first place - that same jackhammer that preciously replaced many workers with picks by the application of capital. -
£1OO,OOO,OOO bonuses - for failure : to build homes - UK (Unkind to Kids) economy in ruin - my brother has 10,000 business customers : in every sector - had 6 phones - now 1 : virtually silent all year - 25 year business savings - gone in 6 years of economic growth murder - and North harrying blight R > G
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"GLOBALIZATION will not see light of day" - year 2000 Institute for economics Zagreb Croatia place where prodigies work.
EURO is political project not economic one. -
anne pettifor says that the Cumulative decision making of commercial banks to loan and borrowers willing to borrow have more affect on the economy than any central banker. This is true.
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I took a year of (American) University Economics. Here's one of the most important "take home" ideas the instructor was sure to make every student understand...
The national debt can get as large as it wants and it should not be the concern of anyone, i.e., we were being instructed to purposely ignore the national debt altogether. Why? The economics professor explained that the American public are the ones who purchase the national debt by buying bonds AND the American public are the ones who get paid the interest on the bonds for the national debt. Therefore, since we're all members of the public, we are actually paying interest to ourselves. That why / how we can ignore the amount of national debt. The national debt doesn't matter because it's all a matter of paying money to ourselves. When a student questioned the professor on this point, he nearly got kicked out of school. -
Whole current "economy" is a desperation management scheme, in very wide sense. You will either be desperate for unnecessary luxury or desperate for basics. Out of impotence and lack of understanding system fucks those it can: poor, neglected, desperate and sick as it always did. They are much closer to the abyss of non-existence and its simply more natural and efficient to do so. But it must be shrouded in all kinds of blame tactics, bullshit narratives, fake theories, elitist ramblings, meritocratic utopias etc to maintain semblance of order and sufficient societal control. Who else would wipe the asses of "intellectuals" and the rich without desperate people?
Changing title of Varoufakis's book from question to statement we get all there is to know about world "economy":
The weak have and will suffer what they must.
Disgusting.
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