Finance as the Humpty Dumpty of Academia

flattr this!

(My apolo­gies for the pre­vi­ous post–I didn’t check the YouTube link**, which was to an ear­lier video.)

I gave the pre­sen­ta­tion below to a Grif­fith Uni­ver­sity sym­po­sium on Finance the­ory “after” the GFC/Great Reces­sion.

Speak­ers only had 20 min­utes, and if you think I nor­mally speak fast, brace your­self for the speed of this pre­sen­ta­tion. I sug­gest you keep the mouse near the “pause” but­ton in case you want to spend more time read­ing some of the text–which is also here of course in the Pow­er­point File.

** PS The rea­son for not check­ing was that Google Chrome, which I pre­fer to Inter­net Explorer, doesn’t show me the video when I go to pre­view mode within WordPress–though it does show up when I pub­lish the post. If any Word­Press whiz out there can tell me how to fix this, I’d be obliged.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, 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 private debts accumulated globally, and our very low rate of inflation.
Bookmark the permalink.

143 Responses to Finance as the Humpty Dumpty of Academia

  1. Lyonwiss says:

    Peter­jbolton July 30, 2011 at 8:21 pm

    If bureau­cracy is really about pol­i­tics and not about apply­ing the best skills and knowl­edge for the pub­lic good, then the best econ­o­mists, the best engi­neers, the best doc­tors etc are not a pri­or­ity for the pub­lic ser­vice. The sys­tem selects (as you say) “the bot­tom lev­els of intel­li­gence and are soon indoc­tri­nated into the priest­hood of bureaucracy”.

    Indeed, the best advice may con­tra­dict polit­i­cal objec­tives. (I have per­sonal expe­ri­ence of a gov­ern­ment min­is­ter inter­fer­ing with my work in the past.) Hence the best knowl­edge and exper­tise are not really wel­come in oper­at­ing the pub­lic sec­tor. One senior bureau­crat explained to me “only per­cep­tion mat­ters”. Most gov­ern­ment agen­cies have sub­stan­tial “pub­lic affairs” depart­ments to man­age spin for their pub­lic image.

    Under such arrange­ments, gov­ern­ment agen­cies are run by polit­i­cal bureau­crats with just enough knowl­edge worker under­lings to fol­low orders to get the basic jobs done. Since real exper­tise is not wel­come to serve the pub­lic, the pub­lic sec­tor can be down­sized at will with­out any pal­pa­ble dif­fer­ence, eg “Max the Axe”:

    Moore-Wilton typ­i­fies the new gen­er­a­tion, self-styled CEOs anx­ious to break the Pub­lic Ser­vice from what they per­ceive to be its cob­webbed past and adopt the cul­ture of the com­mer­cial world.”

    Aus­tralia fol­lows the US model of the “revolv­ing door”, where politi­cians (the PM) can appoint any­one, eg a CEO of bank, to be the head of a gov­ern­ment agency. The enabling leg­is­la­tion is the Pub­lic Ser­vice Act 1999. For his act of cor­rup­tion of the Aus­tralian pub­lic sec­tor, Max Moore-Wilton was rewarded with the posi­tion of CEO of Syd­ney Air­port Corp. in 2002. The die is cast.

  2. peterjbolton says:

    @ Lyon­wiss July 30, 2011 at 10:39 pm | #

    If bureau­cracy is really about pol­i­tics and not about apply­ing the best skills and knowl­edge for the pub­lic good, then the best econ­o­mists, the best engi­neers, the best doc­tors etc are not a pri­or­ity for the pub­lic ser­vice. The sys­tem selects (as you say) “the bot­tom lev­els of intel­li­gence and are soon indoc­tri­nated into the priest­hood of bureaucracy”.

    What you dis­turbingly describe I also have expe­ri­enced, but, it is still mere vari­a­tions upon the theme of bureau­cracy evolved. John Howard is / was an awful/ ugly / nasty Prime Min­ster in the ranks of his pre­de­ces­sors; a sweat­ing, lying pimp of extra­or­di­nary dis­gust and just another step in the devo­lu­tion of an Epoch which reaches towards, urgently, putrification..

    In milk we find acid and alka­line. Alka­line is also an acid. Time leads to insta­bil­ity and even­tual sep­a­ra­tion; coag­u­la­tion, coa­les­cence, putri­fi­ca­tion and a nat­ural return to the basic ele­ments. Where through­out the Uni­verse do we not find this process? At the present time our igno­rance of the basic fun­da­men­tals of sci­ence lead us towards the total destruc­tion of civ­i­liza­tion by falsely and wrongly believ­ing that we can sur­vive in an envi­ron­ment that we can abuse and cor­rupt. We can­not. We either live in accord with the Uni­ver­sal Laws or we per­ish (suffer).”

    I have great admi­ra­tion for Minsky’s work and often won­dered as to why he has been so con­sen­su­ally ignored only to find that it is you that prof­fer the answer:

    If bureau­cracy is really about pol­i­tics and not about apply­ing the best skills and knowl­edge for the pub­lic good, then the best econ­o­mists, the best engi­neers, the best doc­tors etc are not a pri­or­ity for the pub­lic service. ”

    No “if” about it at all, as it is “a priori”.

    Bureau­cracy: v. Mises

    There are lessons to be learnt here amongst these obser­va­tions. Oui?

  3. peterjbolton says:

    @ Lyon­wiss — an after-thought:

    Bureau­crats are unelected “politi­cians”, whereas, elected “politi­cians” are sub­servient bureau­crats. This is “democ­racy”. This is the system.

    Where, both are sub­servient to the Bank­ing Cartel.

  4. Lyonwiss says:

    Peter­jbolton July 31, 2011 at 1:48 am

    The first Roth­schild said: “Give me con­trol of a nation’s money and I care not who makes the laws.” I would say sim­ply: “Money makes the laws”, as we saw in the GFC, money cor­rupts the politi­cians who make the laws.

  5. peterjbolton says:

    Lyon­wiss July 31, 2011 at 11:41 am | #

    Indeed, no argu­ment; where Money has no moral­ity nor ethics — it goes where money demands, but only when money demands it so.

    So, we must seek the solu­tion in the “money” mate­ri­al­is­tic Sys­tem that lords over and con­trols our socio-economic orga­ni­za­tions and forges our Minds and those Minds of our youth, while cor­rupt­ing every­thing human in its path.

    Or, human­ity is being jerked around through the thor­ough cor­rup­tion — by the mon­e­tary credit dis­tri­b­u­tion sys­tem — that is, our sys­tem, which we do not at all com­pre­hend or even understand.

    Now, we start to see that which Eco­nom­ics is unknow­ingly deal­ing with, er, unsuc­cess­fully, and that by open­ing the win­dow slightly wider, or by lift­ing the veils of Isis, one can glimpse that it is the Mon­e­tary sys­tem that is con­trol­ling us and not we, it!.

    Quelle sur­prise!

    Did not Jesus — as the ancient texts of the Bible states in the alle­gor­i­cal Act of hunt­ing the money lenders from the steps of the Tem­ple ~2000+ years ago? Has not Usury been declared ille­gal and for­bid­den by numer­ous Nation States over the past 3000 years?

    But, as we know best sans con­sid­er­a­tion or ref­er­ence to any his­tor­i­cal rea­son­ing, or record, just as we col­lapse the whole global sys­tem.
    Man, are we quick… and smart too? I believe Isaac Azi­mov made the same observation.

    Bureau­cracy is a pro­lific and viral disease.

    Hold­ers of US Trea­sury Debt

  6. johnm says:

    A few weeks ago I thought I’d look for a ‘cen­tral bank­ing’ game which would help me explain whats going on to the grand­kids, some­thing like monop­oly but with just bankers as play­ers, so every­one could win. It would have to be com­puter based, han­dling all that paper cur­rency would make for an untidy game, couldn’t find one. Any­one know an open source games writer up for a bit of subversion?

  7. Pingback: P?íštipká?

  8. peterjbolton says:

    @ Steve

    Finance as the Humpty…”

    View the “Door­bell” — this is how it works…

  9. peterjbolton says:

    The link to the above — sorry again. Really! 😉

  10. peterjbolton says:

    Sup­port­ing evi­dence that says (as I) that RBA will hike rates this week giv­ing Mr Stevens a surge of a much needed fix of accel­er­ated adren­a­line: Risk Rated.

    –By Feb­ru­ary, Europe’s sovereign-debt trou­bles resur­faced, this time in Greece. A bailout deal was reached. But the real­i­sa­tion that Europe’s bank­ing sys­tem was stuffed with gov­ern­ments bonds as col­lat­eral, and that gov­ern­ment bonds were…well…stuffed…clearly scared the big pants off the mar­ket. The forces of debt defla­tion marched again and stocks fell.

    –Then the earth moved in Japan. It seems odd that the tri­fecta of dis­as­ters in Japan would be bull­ish for Aussie stocks. After all, Japan is a big con­sumer of Australia’s energy exports (ther­mal coal, LNG). But it’s not so odd if you under­stand the rela­tion­ship between the Aussie dol­lar, the Japan­ese Yen, and Aus­tralian stocks.

    –In short, the forces of credit expan­sion and easy money fuelled the rally in March. The Yen rose in the early days after Japan’s quake. The belief was that Japan­ese cap­i­tal deployed over­seas (where inter­est rates are higher than zero) would be repa­tri­ated back to Japan to pay for the cleanup and fund the rebuild­ing of quake-struck zones.

    –That may have hap­pened. But what def­i­nitely hap­pened is that cen­tral banks in Japan, Amer­ica, and Europe all agreed to inter­vene in cur­rency mar­kets to stem the Yen’s appre­ci­a­tion. A stronger Yen would have been a big blow to Japan­ese exports. And Japan had enough on its plate at the time.

    –Thus, Aussie investors were again saved by the flood of easy money result­ing from low inter­est rates in another coun­try. The carry trades—where investors bor­row at low rates in one coun­try to invest in higher-yielding assets in another country—have been a huge boon to Aus­tralian stocks. As the Rev­erend Jesse Jack­son might say, “If the money doesn’t flow, the stocks won’t go.”

    –This may sur­prise a lot of Aussie investors. It’s com­mon­place to think that China’s resource demand is what sup­ports Aus­tralian stock prices. But the chart above proves that’s not the case. Cor­po­rate earn­ings are directly affected by Chi­nese demand, of course. But the chart above sug­gests Aussie stock prices don’t trade on cor­po­rate earn­ings but on global money flows. And global money flows depend on whether credit is expand­ing or contracting.

    From The Daily Reck­on­ing Dan Den­ning this very day.

  11. Lyonwiss says:

    Peter­jbolton August 1, 2011 at 11:40 am

    Finance the­ory, such as the “effi­cient mar­ket” doc­trine, has pro­vided the moral umbrella for wide­spread fraud in nearly very level of Amer­i­can soci­ety. There can be no recov­ery until this sim­ple fact is offi­cially and com­monly recognized.

  12. Lyonwiss says:

    Peter­jbolton August 1, 2011 at 12:12 pm

    I’m not sure that Dan Den­ning is right about Japan­ese money flow affect­ing our stock mar­ket. Cer­tainly there is a close cor­re­la­tion between AUD/JPY and the Aus­tralian stock mar­ket, as the fol­low­ing chart shows. It is a ques­tion of causality.

    But the data sug­gest when the All Ords falls, then Aussie dol­lar weak­ens against the Yen, sug­gest­ing out­flow of Japan­ese money. That is cur­rency flows FOLLOW stock mar­ket fluc­tu­a­tions. A pos­si­ble expla­na­tion is Japan­ese sav­ings are look­ing for bet­ter returns in Aus­tralia and are react­ing (not antic­i­pat­ing) to invest­ment prospects.

  13. Lyonwiss says:

    The chart:

  14. peterjbolton says:

    The Solu­tion: Mov­ing ahead by chang­ing the Paradigm:

    This ani­mate was adapted from a talk given at the RSA by Sir Ken Robin­son, world-renowned edu­ca­tion and cre­ativ­ity expert and recip­i­ent of the RSA’s Ben­jamin Franklin award. For more infor­ma­tion on Sir Ken’s work visit:

    A vitally impor­tant Pre­sen­ta­tion that should res­onate amongst those of you that are not yet dead.

  15. peterjbolton says:

    @ Lyon­wiss: Your var­i­ous post today.

    Thank you for your com­ments and the graph:

    But, as Key­ne­sians and neo­clas­sics and indeed the Aus­tri­ans, etc., — and I speak in gen­eral but sug­gest most — if not all for those in influ­en­tial posi­tions we can see as Steve Keen infers, none of these Econ­o­mists stay with the script but indeed all carry their own Book of inter­pre­ta­tions like the Holy Books of Insti­tu­tional Reli­gion and dis­pense accord­ing to con­sen­sual com­pro­mises which are arrived at through polit­i­cal expediency.

    So in the case of what the Trea­sury, or the black duck or Glen Stevens *per­ceives* us hap­pen­ing through arbi­trage and carry trades of ‘bor­rowed’ Hot Money flows is what is impor­tant as opposed to actu­ally what it is that is occur­ring. Not only this, but polit­i­cal pres­sure aris­ing out of the Indus­trial and Col­lec­tives Lobby plus pres­sure imposed by the Brown (Green) Party, For­eign Empire pres­sures — all that is bun­dled under Diplo­macy — also bias the results to what can only be described at chaotic Chaos. This is not com­plex­ity at all; it is just pure mad­ness where the results can eas­ily be deter­mined and pre­dicted as bad news.

    We are at the point that those who know some­thing but which is all wrong and frag­mented in its inter­pre­ta­tive essence, will even­tu­ally fail.

    I have also heard and read the argu­ments that the fiats of the West are high because of our greater pro­duc­tiv­ity and I would like to point out that in Australia’s case this is incor­rect because our pro­duc­tiv­ity, au con­traire. is low and heav­ily inef­fi­cient and hor­ri­bly expensive.

    Man­age­ment in work sites are just a dis­as­ter where 15% of bud­gets spent on safety, results in more than 50% in real pro­duc­tiv­ity (my esti­ma­tion) and you can see worse that this in Coun­cils’ and gov­ern­ments and civil engi­neer­ing works. Ask a work­man on a major site if they are on time and in bud­get and he will nor­mally tells the truth that sug­gests totally incom­pe­tent man­age­ment and huge over­runs in cost and time.

    And there is noth­ing more costly and inef­fi­cient that the machin­ery of Gov­ern­ment. And Australia’s Gov­ern­ment or Tiers of Tax­a­tion are a per­fect exam­ple of the hor­rors of Hanlon’s Razor.

    I also end with a clar­i­fi­ca­tion: Bureau­cracy is not Pub­lic Ser­vice (IMO) but what we have in Oz is Bureau­cracy but I believe that we once did have Pub­lic Ser­vice. We need to get back to Pub­lic Ser­vice as our Bureau­cracy is just a budge for the unem­ploy­able with the lurks and perks of Royalty.

    But, you must also under­stand that none of this will change because those that could change it, do not want it to change as they profit too well with the sta­tus quo — which has always been the case.

    Law, trumped Rea­son,
    Power trumped Law,
    And Ethics only, and not the per­cep­tion of an arro­gance of supe­ri­or­ity,
    can trump Power.

  16. peterjbolton says:

    The Ghost of Mur­ray Roth­bard Haunts The Economist

    by Gary North

    Seems applic­a­ble and relevant

  17. Lyonwiss says:

    Peter­jbolton August 1, 2011 at 8:26 pm

    Very rel­e­vant, but a badly writ­ten arti­cle, because it is unclear whom Gary North is quot­ing half the time. Despite this short­com­ing, the arti­cle jus­ti­fies some of Mur­ray Rothbard’s crit­i­cisms of Mil­ton Fried­man, who was often mis­un­der­stood to be a cham­pion of the free mar­ket, but not as seen by the Austrians.

    Aus­tri­ans would never con­done the manip­u­la­tion of fiat money by the gov­ern­ment to induce infla­tion, which is the cen­tral idea of Friedman’s mon­e­tarism. Bernanke is a dis­ci­ple of Friedman’s in his belief in the power of money.

    On the cel­e­bra­tion of Friedman’s 90th birth­day, Bernanke said: “Fried­man and Schwartz’s insight was that, if mon­e­tary con­trac­tion was in fact the source of eco­nomic depres­sion, then coun­tries tightly con­strained by the gold standard…”

    Bernanke con­cluded his speech:

    by say­ing “I would like to say to Mil­ton and Anna: Regard­ing the Great Depres­sion. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

    Heli­copter Bernanke increased base money to $2.7 tril­lion from $0.8 tril­lion in 2006 (year of Friedman’s death), when he became Fed chair­man. The real-time exper­i­ment of mon­e­tarism and his flawed under­stand­ing of the Great Depres­sion is before our eyes — emerg­ing infla­tion and fal­ter­ing growth and employment.

    (Dis­claimer: I’m agnos­tic to eco­nomic reli­gions, only observer.)

Leave a Reply