AMI Talks in FLV format

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I made the mistake of posting the talks from the AMI conference in SWF rather than Flash Video format; I'll amend that post shortly, but in the meantime here are the talk by myself and Michael Hudson, and the panel discussion.

Keen Talk: Why Credit Money Crashes

Steve Keen's Debtwatch Podcast 

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Hudson Talk

Steve Keen's Debtwatch Podcast 

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Hudson Discussion

Steve Keen's Debtwatch Podcast 

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AMI Panel Discussion

Steve Keen's Debtwatch Podcast 

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About Steve Keen

I am a professional economist and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous debts accumulated in Australia, and our very low rate of inflation.
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110 Responses to AMI Talks in FLV format

  1. elliottwave says:

    SOHO44,

    Gold is not in a bub­ble, it is in the early stages of a sec­u­lar bull mar­ket that will con­tinue for a long time to come, as gold will re enter the finan­cial sys­tem as part of a cur­rency and that will mean that it does not fall like it did in 1980.

    Please do not believe every­thing you hear from the same talk­ing heads you see on CNBS, Bull­berg and our own SKY CRIMINAL BUSINESS CHANNEL that are dragged out fre­quently, as these peo­ple have their own agen­das they push.

    Stick with the guy who is never in the pub­lic eye and has always been right and an unblem­ished record for being cor­rect in not only their area of exper­tise but also in other markets.

    TOO LATE SORRY

  2. Jason Murphy says:

    Thanks for the leads steve.

    elliottwave, I am inter­ested in mod­el­ling eco­nomic items as hav­ing a mon­e­tary and non mon­e­tary value.

    To get to that objec­tive cur­rently I am con­tem­plat­ing what I would need to describe and define the mon­e­tary and non mon­e­tary value of 3 seper­ate eco­nomic items defined as ounces of gold, houses, and fiat money, if we could mag­i­cally flick a switch and make it so each of them in turn was the only legal tender.

    [Obvi­ously fiat money is the cur­rent legal ten­der].
    [Gov­ern­ment hav­ing to build houses and dis­trib­ute them as legal ten­der will be an inter­est­ing one sure to illu­mi­nate much].

    [When I say mon­e­tary and non mon­e­tary value I mean for exam­ple that gold has some value in being incor­po­rated in prod­ucts, but it also has some value over and above that as a store of value.]

    [Mon­e­tary Value, Non Mon­e­tary Value, and Eco­nomic Items are terms I made up — I am not focussing on the stan­dard eco­nomic lingo just yet].

    SO: In terms of what I am ask­ing you for, when it comes to the topic of gold and it’s value just what­ever comes into your mind in what­ever way you want to express it.

    To give it a struc­ture per­haps answer these two questions:

    Do you buy phys­i­cal ounces or secu­ri­ties asso­ci­ated with gold, and if so how do you buy?

    When you think of gold and it’s value how what are you con­tem­plat­ing, and where are you get­ting those things that come into your con­tem­pla­tion from?

    #########################################
    To give you an idea so far from your con­tri­bu­tions I have:

    - Per­cep­tion of long term set of affairs [“not be end­ing any­time soon”]
    – Expe­ri­ence of infor­ma­tion [“you see neg­a­tive com­ments”]
    – Sim­ple numer­i­cal story [“18 months ago when gold was at $900 and you are wrong again at gold $1370″]
    – A story through time
    – Com­par­i­son [“usdol­lar is a right off”]
    – Com­mu­ni­ca­tion of story [“ratio­nal when talk­ing”]
    – Fear and Glory [“aban­don­ing”, “pain felt will scar”, “go even higher”]
    ########################################

    I will take any­ones thoughts and views on the topic if any­one else wants to chip in as well … if not no problem.

  3. elliottwave says:

    Jason Mur­phy,

    Are you seri­ous or is this a joke?

    If you are seri­ous then your tal­ents would be bet­ter put to use as a deriv­a­tive trader or as a quant.

    The pay is fan­tas­tic and at least your hard work will be put to use in one form or another.

    Eco­nomic mod­el­ling like Dr Keen will never be used in real­ity but i sup­pose it makes inter­est­ing din­ner con­ver­sa­tion between the “intel­lec­tu­als” and would make them feel good about themselves.

    TOO LATE SORRY

  4. mahaish says:

    prior to the early 70’s the world oper­ated under either a gold stan­dard or gold exchange standard,

    after bret­ton woods, it enjoyed a duop­oly with the US dol­lar as reserve currency,

    gold still holds some ves­tiges of that past today

    i think these rea­sons alone would skew the data in terms of the amount of gold the finan­cial sys­tem held prior to the early 70’s, and wasnt fully worked through, until the end of the stagfla­tion­ary oil shock through to the early 80’s

    the cur­rent trend in the gold price is very much a reflec­tion on the US dollar.

    faulty eco­nomic think­ing rears its ugly head, in that peo­ple seems to think qe(quantitative eas­ing mark1 and now mark2 will have dire infla­tion­ary con­se­quences, or pose some sort of quasi default risk

    and hence short­ing the dollar,

    well, they may be wrong

    with 10% unem­ploy­ment, unless large chunks of that qe money mirac­u­lously finds its way into the bal­ance sheets of the idebted non bank pri­vate sec­tor , the future on the bal­ance of prob­a­bil­i­ties is still deflationary.

    so if you have non US dol­lar finan­cial assetts, think long and hard about putting it into gold.

    gold is very much a long run as oppossed to a short run sce­nario for non US dol­lar investors, since the long term fun­da­men­tals for gold are sound

    but who knows , i could be wrong

  5. elliottwave says:

    Mahaish,

    As the esteemed Pro­fes­sor Keen keeps using as an excuse to why he was wrong ” i under­es­ti­mated the size of the gov­ern­ment reac­tion and stimulus”.

    Please do not make the same mis­take and under­es­ti­mate what Bernanke will be FORCED to do as to ” defla­tion mak­ing sure it doesn’t hap­pen here”.

    The US will never default on its loans, never ever, they will default on their loans in a way that the sheeple will not real­ize is even happening.That is the sad thing, they will get away with it and the poor sheeple pub­lic will just be com­plain­ing about the price of beer, cig­a­rettes, food and elec­tric­ity ris­ing and hav­ing no idea why or what is caus­ing it.

    Gold is the answer to the problem.

    TOO LATE SORRY

  6. 707338 says:

    Mahaish: ” … faulty eco­nomic think­ing rears its ugly head, in that peo­ple seem to think QE(quantitative eas­ing mark1 and now mark2 will have dire infla­tion­ary con­se­quences, or pose some sort of quasi default risk

    and hence short­ing the dollar,

    well, they may be wrong”

    Mahaish, I think you have a valid point. On hyper­in­fla­tion you could rightly point to QE1 and say, if that didn’t reflate the US econ­omy how will a sec­ond round of QE be hyperinflationary?

    By the text­book, all that extra money SHOULD be infla­tion­ary but hasn’t it been described as “push­ing on a string” in terms of its actual effect at the grass roots?

    Mahaish: “so if you have non US dol­lar finan­cial assets, think long and hard about putting it into gold.

    gold is very much a long run as oppossed to a short run sce­nario for non US dol­lar investors.”

    Hmmm, tell me about it! I am still wait­ing for my July gold invest­ment to break-even in AUD despite the price of gold soar­ing by $170/oz from $1,200USD to $1,370USD over the last 3 months.

    Elliot­wave: “… you will be kick­ing your­self for not buy­ing when you were told to buy.

    It is too late to buy any­more you have lost, so give up.

    My new sign off is no longer BUY GOLD it is now

    TOO LATE SORRY

    How so mate? I can still buy gold cheaper today (in AUD) than I could three months ago!

    I agree with you though about the advan­tage of hold­ing gold over those coloured coupons the “dol­lar bugs” hold dear.

    When the fore­clo­sure mess cur­rently unfold­ing in the US com­bines with the sov­er­eign debt cri­sis to crip­ple the credit mar­kets and bring down the global bank­ing sys­tem, watch the price of gold soar dur­ing the sub­se­quent flight to safety.

    EVERYONE should read this (could the “shit hit the fan” in the next few weeks?):-

    http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2010/10/15/the-subprime-debacle-act-2.aspx

  7. Derek says:

    Jason,

    If I under­stand you cor­rectly, you are think­ing of includ­ing two types of money within your model, gold and “fiat money”. How­ever I believe that you may want to try mod­el­ling using three types. The three types are com­mod­ity money (such as gold or sil­ver based cur­ren­cies which have some intrin­sic value), credit money (which is issued by banks and which Prof Keen uses in his own mod­el­ling), and fiat money (which is issued by gov­ern­ments and gains its value from the amount of it required to pay taxes).

    Steve Keen’s web­site has an excel­lent dis­cus­sion of credit money in var­i­ous arti­cles. But for a dis­cus­sion of fiat money I would read the arti­cles on one of the Char­tal­ist web­sites such as War­ren Mosler’s or Bill Mitchell’s one. Then put it all together to get the full pic­ture of what money is.

    To sum­marise the Char­tal­ist posi­tion, the basic thing that gives fiat money its value is that the gov­ern­ment issues it then demands it back in the form of taxes on pain of pun­ish­ment for non-payment. So if you don’t have it you must must buy it by trad­ing goods, ser­vices, com­mod­ity money or credit money with some­one who has more than they need. If the gov­ern­ment issues some of its “worth­less” tokens only to the unem­ployed and then only taxes land-owners, you can see how it would cause eco­nomic activ­ity as the landown­ers scram­bled to pro­vide goods and ser­vices to the unem­ployed in order to get the tokens required.

    In mod­ern economies the dif­fer­ence between credit and fiat cur­ren­cies is not imme­di­ately appar­ent since either they are only fig­ures on a ledger or the same paper notes are used to denom­i­nate both. How­ever there are excep­tions. The Scot­tish banks issue their own notes which are dif­fer­ent in design from the UK ban­knotes, but of the same value. Of course that is just a small part of the credit money in the UK. Most of it is inside bank accounts and it vastly out­num­bers the com­mod­ity money or fiat money in the econ­omy. But as credit money and fiat money are freely inter­change­able in most mod­ern economies the dif­fer­ence between them isn’t imme­di­ately obvi­ous. Still it’s worth think­ing about if you’re look­ing at modelling.

  8. elliottwave says:

    707338,Mahaish

    I would like to take you task on your state­ment below,

    On hyper­in­fla­tion you could rightly point to QE1 and say, if that didn’t reflate the US econ­omy how will a sec­ond round of QE be hyperinflationary?”

    If you really did pay atten­tion to what is hap­pen­ing in the world you would have seen that since QE1, pork is up 70%, cof­fee 40%, sugar 25%, salmon 30%, oranges 35%, bar­ley 35%, beef 25%, DJIA up 70% and GOLD IS UP 100%, Oil up %100. Yet Unem­ploy­ment is also up %50? WHY?

    You do not know that hyper­in­fla­tion is the loss of con­fi­dence in a cur­rency and can only become real­ity in the most depressed of busi­ness conditions.

    You are wit­ness­ing the early stages of hyper­in­fla­tion and it will sur­prise every­one except the ones hold­ing gold.

    TOO LATE SORRY.

  9. mahaish says:

    hi 707338,

    no argu­ment with you ,

    i was merely try­ing to point out that the strength in gold was a reflec­tion of a weak­ness in the greenback.

    and your illus­tra­tion points that out, since against our cur­rency it hasnt done much, which is pre­cisely what i was imply­ing by the state­ment ” non US dol­lar finan­cial assett hold­ers” need to take care.

    i think you miss inter­pret my statement.

  10. slaphappy says:

    #76 elliottwave

    ” as gold will re-enter the finan­cial sys­tem as part of a currency ”

    Do you mean like the for­mer gold stan­dard — the promise that a $US was redeemable in a set weight of gold — the promise that Nixon broke in 1973 and left its debtors hold­ing paper.

    In real­ity it was a gold stan­dard in name only.

    I sold out of my gold stocks in 2006 after reach­ing the con­clu­sion that the gold price in rigged by the Fed and US Treasury.

    After all they own all the phys­i­cal gold and they are not likely to sit back and watch cap­i­tal flow into an unpro­duc­tive asset.

    I hope you work this out before its too late.

  11. Pingback: AMI Talks in FLV format | Economics for People

  12. elliottwave says:

    Slaphappy,

    Gold has been for cen­turies a store of value and a stan­dard in a stan­dard­less society.

    Paper that has num­bers writ­ten on it backed by noth­ing except the faith of the sheeple is the unpro­duc­tive asset.

    Go back and read Greenspans com­ments on gold before he was the reserve chair­man and then tell me if you still believe that the fed is rig­ging the gold price.

    Gold has risen from $255 to $1380 so where is the rigged mar­ket that you are talk­ing about?

    I bet that you are sorry that you sold out of your gold posi­tion but that his how a bull mar­ket works it will throw off all the sheeple and weak hands who should not have been in gold in the first place.

    Be right and sit tight, thats how you make the seri­ous wealth as an investor, not as a spec­u­la­tor and gam­bler like your­self.
    Play the pok­ies that seems to suit your spec­u­lat­ing needs.

    TOO LATE SORRY

  13. slaphappy says:

    elliottwave

    Gold has only risen in line with the other base met­als and you always run the risk of a cen­tral bank some­where dump­ing a cou­ple of hun­dred tonnes on the market.

    If you believe the infla­tion story then the $US denom­i­nated in nick­els ( 5 cents) appears a far safer bet.

    US$40 worth of nick­els yields 3kg of cop­per and 1kg of nickel.

    That’s US$50 of base metal.

  14. Frank says:

    Steve

    I won­der if your mod­els could be reworked into sim­u­la­tions of dis­crete events. I won­der if some unex­pected dif­fer­ences in results could arise out of rep­re­sent­ing the dis­crete event nature of transactions.

  15. Jason Murphy says:

    We talk­ing fish­ing sto­ries boys.

    The best return I ever had was a com­pany called Pal­adin which I picked up at an aver­age cost of about 10c in about 2000 and cashed out at just over $7 in 2006. [They went on to over $10 3 months later].

    To give a com­par­i­son, say gold was $600 6 years ago that would mean gold would need to be $42,000 today!!!

  16. Jason Murphy says:

    re: elliottwave @78

    I’m seri­ous not jok­ing. I do it for the fun, for men­tal excer­cise! Hav­ing said that though dynamic mod­els seem to be the way to go to me — Dr Keen seems to be a firm believer.

    You argu­ing with that?

  17. 707338 says:

    Mahaish, I didn’t mis­in­ter­pret your state­ment — I was agree­ing with it and pro­vid­ing an exam­ple (my own experience).

    Elliot­wave, fair point! … but I pre­sume those com­mod­ity increases are all in USD?

    As gold is denom­i­nated in USD it pro­tects AMERICANS against the debase­ment of THEIR cur­rency and IMHO should be held by all Amer­i­cans for the very rea­son you state — to pre­serve their wealth as the FED inten­tion­ally destroys the value of the USD.

    The point Mahaish was mak­ing (and I was agree­ing with) is that “gold is very much a long run as oppossed to a short run sce­nario for non US dol­lar investors”.

    I’m still with you on gold but more for safety if/when the credit mar­kets freeze and trig­ger the col­lapse of the ponzi scheme known as the Aus­tralian hous­ing market.

  18. Jason Murphy says:

    re @82

    Thanks for that Derek.

  19. Steve Keen says:

    Each eco­nomic trans­ac­tion is a dis­crete event Frank, but they occur asynchronously–like births do in a human pop­u­la­tion. The appro­pri­ate way to model such a process is via con­tin­u­ous time, dif­fer­en­tial equations.

    Dif­fer­ence or dis­crete equa­tions suit processes that occur synchronously–like births in the pop­u­la­tion of coral larvae.

    You can only use dis­crete time sim­u­la­tions for processes like those in the finan­cial sys­tem if you model at the indi­vid­ual agent level and aggregate–a multi-agent simulation.

  20. mahaish says:

    re QE 707338,

    QE is based on the mis­taken belief, that banks need reserves to lend, and that the cen­tral bank can make a mar­ket at the desired price for that lend­ing to take place.

    QE is basi­cally an assett swap for the bank­ing sys­tem, swap­ping bank assetts for reserve bal­ances through trea­sury and cen­tral bank com­plic­ity, which increases the liqi­u­dity of the bank­ing sys­tem and reduces the price of money,

    but pre­cious lit­tle else,

    no pos­i­tive impact on non bank bal­ance sheets,

    whether the money gets loaned out or not,

    and as you say its like push­ing on a string,

    because banks dont need reserves to lend, they need credit wor­thy customers.

    no, con­gress and trea­sury need to get off their arse, and do what that well know econ­o­mist, and would be some­time actor rus­sell crowe sug­ested, and give every body a mil­lion bucks straight into their bank accounts.

    well may be not a mil­lion bucks, but the direc­tion of his argue­ment is correct.

    it would make a hell of a lot more sense than QE.

  21. Frank says:

    Steve @ #94

    Thanks. That’s what I was won­der­ing: if there could be any hid­den dif­fer­ence or unex­pected dif­fer­ence between the results of the con­tin­u­ous mod­els and some aggre­gated result of dis­crete events in a mas­sive multi-agent model.

  22. soho44 says:

    A economic/political post.

    Just caught up on some You Tube clips from the governor’s race (Meg Whit­man, the ex-CEO of EBay and Jerry Brown). Much of it is the usual pre-programmed two-party only for­mat. Yet, there are trou­bling signs on both sides:

    Nobody talks about per­sonal debt.
    Nobody talks about forc­ing the state banks to reveal all of their toxic debt. If they didn’t, can the state step in and take con­trol of the banks? Or, is it the fed­eral govt? Not sure.
    Write off the debt and let every­one who needs to go bank­rupt go bank­rupt. Is any­one going to bailout Block­buster? Prob­a­bly not.
    Bill Clin­ton endorses Brown. Many peo­ple see Clin­ton as a war crim­i­nal (for his role in over­throw­ing Arist­ede, etc.). Do you really want that attached to your cam­paign? Bad move, Jerry.
    Arnie ran state govt. as a busi­ness. Noth­ing hap­pened. Now, Whit­man wants to con­tinue the same process.
    Despite all of the “change” that Obama’s never done, not once did Brown ever crit­i­cize him.

    In short, Brown can get some mileage from his envi­ron­men­tal poli­cies. But as for the rest of it, noth­ing will change (regard­less of who wins). Nobody will drop Prop. 13 (which essen­tially freezes prop­erty tax rates).

    This prob­a­bly means that even more will be pri­va­tized. Do you really want to live in a city where many key ser­vices are out­sourced? If you do that, that means pos­si­bly stronger unions and more fights between them and the city.

    Brown puts out some mean sound­bites. But in real­ity, I’m think­ing that Gavin New­some (cur­rently mayor of SF) would actu­ally do a bet­ter job.

  23. soho44 says:

    One last point. Many of the rich and pow­er­ful here in the States are “pri­vately” say­ing that the States will default on their debt within the next two years.

    Tell me that some hedge fund isn’t short­ing the national debt. At this point, noth­ing seems to shock anybody.

  24. myopia says:

    @sirius #69 just wanted to watch it on my phone — I’ll look a download/convert of FLV. Cheers.

  25. Steve Keen says:

    There is a dif­fer­ence between a con­tin­u­ous time and a dis­crete time model of a process like pop­u­la­tion growth, which mat­ters when the actual phe­nom­e­non is dis­crete at the macro level–like the dif­fer­ence between ani­mal pop­u­la­tions where births occur at all times of the year, and those where they all occur at one spe­cific point in time. The for­mer will have “smooth” dynam­ics, the lat­ter can be chaotic if the rate of growth of pop­u­la­tion is high and the pop­u­la­tion is near the car­ry­ing capac­ity of the envi­ron­ment. This gives rise to the “logis­tic chaos” map.

    But in the area we’re work­ing in, con­tin­u­ous time is the apt frame­work. A multi-agent model could gen­er­ate sim­i­lar results–and I have a PhD stu­dent who is embark­ing on that topic–but the dif­fi­culty lies in spec­i­fy­ing agent-level behav­iour (which we can’t observe in eco­nomic stats) in such a way that it gen­er­ates the macro level behav­iour that we actu­ally do see.

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