Jun09
I will be in Boston and New York soon, either side of the Hyman Minsky Conference that I’m speaking at at the Levy Institute.
I am committed to meetings on Tuesday-Wednesday June 22-23 (and possibly Friday June 25), to the Levy conference June 27-29, and there may be a seminar jointly organised with Eric Janszen of iTulip on July 2. I will be free at other times, and open to suggestions for meetings or seminars. If you’d like to arrange something, please contact me via my gmail email address (debunking at gmail.com) or via a comment to this blog entry.
Steve, I hope you have an interview with Eric Janszen that is posted to his site where I am a subscriber. I think you both have very similar views of the financial crisis but you differ on whether government can induce inflation either because the amount is extraordinary (25 trillion in private debts as per your response to me on Dec 22-09)or the government won’t give it to debtors but rather will give it to bankers but who won’t lend. Rather than rehash how much you both agree I think the mechanism for inflation issue is the more important one as Eric is very inflation oriented. Maybe the compromise is the Ka Poom thesis that Eric developed with minor deflation followed by excessive inflation. Thank you.
Hi Orion,
In fact Eric is arranging a webinar right now. Details will be posted here and on iTulip (http://www.itulip.com/)
Steve, Thank you for the response. I pulled this from an interview you did with him in 2009.
EJ: You and I have discussed the inflation case, because you know I’ve made this case for ten years now, that eventually the US will engineer some kind of inflation, for this very reason: all other political options will be exhausted. I’m an optimist on this because I’ve argued that this process will not necessarily produce a technical hyperinflation. But now I’m starting to wonder if I’m being overly optimistic, given the rate of change, because as you know what drives a hyper-inflation is government obligations to make payroll, to fund government, to fund the military, and to fund pensions–all the expenses which either politically, mostly politically, can’t be reduced easily. At some point a decision is made, easily at a time when inflation rates are very low or even negative, that we need a little inflation anyway, we’ll just print a little money to cover this quarter’s Federal budget shortfall and then next quarter we’ll do something else, we won’t do it again. That often kicks off the process of a hyperinflation because the next quarter the purchasing power of tax receipts is now lower than the previous quarter, and the government says, Well, we’ll print again just his one more time to meet the budget shortfall, which is now cause by both not enough tax revenue (nominal declines in tax revenue) and a decline in the purchasing power of tax receipts (real declines in tax revenue). This process is internal of course, within the domestic economy, ignoring exchange rate effects.
SK: I don’t think, given the scale of the debt, that most of the governments are probably going to go straight to debt repayment and not actually cause a rise in prices. So I think you’re going to see deflation going on until such time as governments start thinking of possibly Zimbabwean levels of money creation. I frankly can’t see that happening, so meanwhile I differ on that in that I don’t think we’re going to see hyperinflation. I think we’re going to see hyper-deflation. And then it’s a question of what political response the government makes and then we’re really debating which way the cockroach runs across a wire rather than the necessary dynamics of the system because if the government finds it can’t cause inflation by printing money offset by new debt creation, I think it’s going to learn that lesson the hard way, then there are those that decide to print absolute bucket loads of money (monetize existing debt by printing without an offset of new debt) and, alternatively, those that decide to abolish the debt. I have a feeling that the political response in will be the latter rather than the former.
I guess this is still where things stand, that it is a government coin toss for inflation or more deflation once the deflation crisis becomes profound?
Only time will tell Orion, but you can watch Eric and I debate this in a webinar we’re planning for early next month–details will be available soon (and actually, Eric is looking for a moderator from within the iTulip community…).
The problem is that once everyone works out that their models aren’t working, they are just going to throw whatever looks good at the situation, which is what they are doing already, just that it will become more bizarre.
As Stevie Wonder sang:
When you believe in things
That you don’t understand,
Then you suffer,
Superstition aint the way
Steve,
“I guess this is still where things stand, that it is a government coin toss for inflation or more deflation once the deflation crisis becomes profound?”
The essence of the deflation vs inflation debate in one sentence.
Steve,
Eric Sprott of Sprott Asset Management speaks highly of this analyst’s work on the banking sector.
By Reggie Middleton
Australia: The Land Down Under(water in mortgage debt
http://boombustblog.com/reggie-middleton/2010/05/27/australia-the-land-down-underwater-in-mortgage-debt/
Part 2 here
Australia: The Land Down Under(water in mortgage debt), pt. Deux: Which Banks to Short?
http://www.zerohedge.com/article/australia-land-down-underwater-mortgage-debt-pt-deux-which-banks-short
I will also vouch for Reggie, he posts on his older research for free on http://www.zerohedge.com frequently and is quite right on fundementals, but as SK knows, the politics can bite your fundemental analysis in the arse and reflate a bubble, so Reggie admittedly got hurt in the US market rally, especially the banks. The question is can Australia do same to their banks as US did.
Mr. Keen, can you stop in and have a moment with Obama while you are in US and tell him to fire Geithner and hire you instead…really.
Finally, just wonder Mr. Keen, are you acquanited with Michael Hudson and what are your thoughts his economic politics.
Somehow I don’t think I’d make it past the front gate glubilee!
Michael and I are good friends and are very consonant on our economic politics. He is even more of a firebrand than I am, and I think his expression “Debts that can’t be repaid, won’t be repaid” summarises the crisis nicely.
Don’t despair about not getting past the gate, I have heard Obama say he “couldn’t find an economist that thought ____” but of course he is not listening to the likes of you but rather listening to the guys with the theories you have already debunked. I trust you and all your righteous equations will be getting much more, deserved, attention soon, and very soon..
Glad to know you and Mr. Hudson are consonant…as I find his writings fascinating and very compelling, to me it is so interesting how we (the mass of us regular folks) know so little about critical economic truths, long known, but quietly hidden away or ignored.
Thanks for the MH quote, like that, like that very much…
And thanks again for your academic work and demonstration with math of our incorrect understandings…I’m just a boring old civil engineer, but IMHO what you are doing is invaluable as so few others are being scientific about our financial systems.
Hope conference goes well for you and all involved…it is you, not Lord Blankfein, who is doing God’s work…
There is the Dollar & Sense Collective in Boston. They put out a good magazine. And in New York City there is Doug Henwood’s radio show on WBAI. An hour with him would make a good interview. In between, many hours from either city, is the center of heterodox thought around here – University of Massachusetts at Amherst. Perhaps many of them travel to the Minsky conference. I hope some debtwatch readers in the Boston area will get together and buy you dinner.
Thanks for the reminder of Doug Henwood Ik2–he and I have been in touch irregularly and it would be great to meet up.
Notice of events where you speak that are open to the general public in NY would be very much appreciated.
Alternative economics- starved in Northern Virginia.
steve
Sure Steve–I’ll add your name to a list of people whom I’m corresponding with about events in NY.
Steve, I have read your articles always with interest. I saw something on the news which was quiet interesting, and it puts things in perspective of what the lay person can understand. USA Gross Debt at June 2010 (pardon me if I havnt got the figures right) equates to the US running up a debt of $1.7 million USD per day since the birth of Christ, scary…,
Thanks poopall,
I use a similar metric to point out to my students that the rates of real wealth growth they aspire to are unsustainable: if they were given $1 worth of gold at the time of JC’s birth and it grew at a mere 2% compound, by 2000 they would have owned a ball of gold roughly 1.3km in diameter.
A 4% rate would give them a ball 600,000km wide; and the 6% rate some of them aspired to would result in a ball of gold multiples of the Milky Way in diameter.
It’d be great to have some sort of meeting in Boston (or just buy you a beer).