Steve Keen's Debtwatch

Last week I vis­ited the stu­dents who have started the Post Crash Eco­nom­ics Soci­ety at Man­ches­ter Uni­ver­sity, and took part in a debate on the topic of “Should (and could) eco­nom­ics have pre­dicted the eco­nomic cri­sis?” with Peter Backus. The soci­ety will release a video of the talk at some point, but in the mean­time here is my presentation.

Eight years ago, in Decem­ber 2005, I began warn­ing of an impend­ing eco­nomic cri­sis that would com­mence when the rate of growth of pri­vate debt started to fall. My warn­ings hit a pop­u­lar chord: jour­nal­ists through­out the world picked it up and pub­li­cised my views – as well as sim­i­lar argu­ments from Nouriel Roubini, Dean Baker, Ann Pet­ti­for, Michael Hud­son, Wynne God­ley, and a few oth­ers.

In the intro­duc­tion to last week’s post on my blog I appended the state­ment “Health warn­ing: con­tains sub­stan­tial por­tions of irony. May exceed your daily allowance”. Judg­ing from the com­ments onBusi­ness Spec­ta­tor, that was indeed the case for some read­ers. So I’ve eschewed irony in this week’s post.

Guest post by Geoff Davies*

Read­ers of this blog will have encoun­tered the idea that near-equilibrium neo­clas­si­cal eco­nomic the­ory is irrel­e­vant to dynamic, far-from-equilibrium, real mod­ern economies, and that the body of the­ory built around the neo­clas­si­cal assump­tions is full of incon­sis­ten­cies.  You will also be famil­iar with the idea that money and debt play cen­tral, dynamic roles in mod­ern economies.

I was invited to give a speech on that topic to the Sec­ond Meet­ing of Min­is­ters of Finance of the CELAC in Quito, Ecuador today (Novem­ber 29 2013). In it I out­lined Keynes’s Ban­cor pro­posal from Bret­ton Woods, explained why White’s plan was adopted instead, sup­ported the pro­posal by Zhou Xiaochuan, the Gov­er­nor of the Cen­tral Bank of China, to insti­tute Keynes’s scheme, and pro­posed that Latin Amer­ica could try a regional ver­sion of the same via the Bank of the South.

Recently Krug­man has been defend­ing text­book eco­nom­ics, argu­ing that if pol­icy mak­ers had sim­ply fol­lowed their advice, the cri­sis would have been far less severe.

It is deeply unfair to blame text­book eco­nom­ics either for the cri­sis or for the poor response to the cri­sis.  (Krug­man, The Trou­ble with Eco­nom­ics is Econ­o­mists)

The “Mun” iter­a­tion of Min­sky, the Open Source sys­tem dynam­ics pro­gram with spe­cial fea­tures to han­dle mon­e­tary mod­el­ing, is now avail­able at SourceForge:

The Min­sky Home Page at SourceForge

The Finance News Net­work’s Lelde Smits inter­viewed me just before I left Aus­tralia last week: Link to the Inter­view.

I’ll also be giv­ing a num­ber of talks in Europe in the next few weeks. Fol­low the links below for more details:

Thurs­day Decem­ber 5th, 5pm the Oxford PPE Society

Larry Sum­mers’ speech at the IMF has pro­voked a flurry of responses from New Key­ne­sian econ­o­mists that imply that Sum­mers has located the “Holy Grail of Macro­eco­nom­ics” – and that it was a poi­soned chalice.

“Sec­u­lar stag­na­tion”, Sum­mers sug­gested, was the real expla­na­tion for the con­tin­u­ing slump, and it had been with us for long before this cri­sis began. Its vis­i­bil­ity was obscured by the sub­prime bub­ble, but once that burst, it was evident.

Com­pare the fol­low­ing two state­ments, and see if you can guess who the speak­ers are, when they made these speeches, and what they announced in them: