Interview: a decade of volatility

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The Finance News Network has just released an interview with me on the current financial turmoil. Click the link below to watch it (or read the transcript):

Steve Keen predicts a decade of volatility

FNN is about to establish a paid subscription service, so shortly interviews such as this will only be available to subscribers.

On a similar note, I urge readers of this blog to support CfESI, the Center for Economic Stability Incorporated ( by signing up to one of the three levels of membership (see the table below for details).

CfESI needs subscribers to raise funds to support the development of the realistic, empirical approach to economics that I have championed on this blog. The majority of economists are adherents to the neoclassical school of thought, and since neoclassical economists dominate decisions about which research projects get funded, non-neoclassical research like mine receives very little funding from research funding bodies. This situation persists despite this school’s extraordinary empirical failure to realise that a major economic crisis was about to break out in 2007.

I have provided my analysis here for free because my main objective is not to make money, but to help develop a realistic theory of economics to replace the delusionary theory that played a large role in leading us into this crisis. But developing a realistic theory takes time, and the capacity to hire people with skills (such as computer programming) that I don’t have. So CfESI has been formed to provide a non-profit institute through which, hopefully, such funds can be raised by public subscription.

The fees we have set for membership start at a very low A$13 per year. This could still raise a substantial sum if the many members of this blog–and its many more readers–signed up.

This blog now has 12,150 subscribers. Some are undoubtedly would-be spammers, whose attempts have been blocked by Akismet. For example, I’d hazard a guess that the user whose email name starts with “sexdating4u” isn’t here for the economic analysis. But at least 10,000 have signed up for the non-orthodox economic analysis that this site provides.

There are also roughly 50,000 unique readers every month (not surprisingly, August is well on the way to setting a new record, with 55,000 so far and eight days still to go). Visitors also come from all over the globe: the majority are now from the USA, followed closely by Australia and then the UK. I’m told that the site has quite a following amongst hedge fund managers (and again, I’d hazard a guess that signing up to CfESI would still leave the average hedge fund manager with some spare pocket money).

I would hope that it’s expecting too much to think that something of the order of $250,000 p.a. could be raised annually from Debtwatch’s readership base . But for that to happen, you have to decide to sign up. So far, only a handful have done so.

If we do raise funding of that order, the first project we will support is the development of a monetary macroeconomic modeling program, to be called “Minsky”.

Development has already started courtesy of a grant of $128,000 from INET–the Institute for New Economic Thinking that George Soros funded with a donation of $5 million per year for five years, specifically to help fund non-orthodox research into economics that conventional funding bodies normally ignore. That grant will let us develop version 1.0 of Minsky, and make it available for free to economists and students. But much more could be done than will be possible with such a small grant. Continuing funding from our membership base would provide some of those development funds.

So please click here to go to the membership page and sign up.

Membership Level Rights Fee
 Associate You can access all existing content on the entire site and download one document every 30 days  A$13 per year
 Fellow   Associate rights plus a copy of the latest eBook by a CfES author (currently the second edition of Steve Keen’sDebunking Economics), and the capacity to download all papers and participate in live lectures online  A$78 per year
 Partner   Fellow rights plus a signed copy of the latest book by a CfES author in place of the eBook, and the capacity to attend live lectures in person   A$260 per year

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.
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22 Responses to Interview: a decade of volatility

  1. TruthIsThereIsNoTruth says:

    Congratulations on the grant from Soros!

    Will the software be available to the general public?

  2. sj says:

    TTNT I second that!
    It’s ironic Steve got the funding from Soros he believes in calling himself a idiot and realises he knows nothing about markets a popper student.
    Mr Keen comes from a University culture where everything is about how much you know who can make the most complex clever mathematics.
    Maybe Steve got the funding because they are sick of the usual arrogant flaws I know it all economic gurus.
    By the way anybody who uses complex risk reward mathematics to trade will end up in the poor house eventually, just ask Long Term Capital shareholders.

  3. Steve Keen says:

    Yes. I’ll release version 1.0 under the GPL licence. Later versions may have a fee for research use, simply to raise funds for continuing development, but a student/casual user version will always be available.

  4. VB says:

    I just joined the CfESI! Here’s the comment I made as I joined:
    cheers VB (not the beer, it’s my initials!)
    Hi Steve,

    I have nothing to do with economics – bar the typical household ‘make-ends-meet’ variety – nor do I fully understand the debates on your blog. What I do understand is the importance of pioneers like yourself and your more ‘in-the-real-world’ view of the economy. That’s why I’ve become a member of the Centre for Economic Stability – we need to fund research into alternative economic models and viewpoints.

    I’ve been saying to my mates for a decade now that Australians can’t keep accumulating such huge private debts – credit cards, personal loans and mega-mortgages – without repercussions to the whole economy. I’ve watched ALL of my middle income married-two-kids friends load their shoulders with houses up to seven times their family income, along with their car loans and some extra debt for renovations chucked in for good measure; and I wonder what they’ll do in a downturn, or if one partner gets sick or if their house value plummets.
    Grandparents on both sides of our family are still clinging to the wobbly idea that their houses will sell for quadruple the purchase price whenever they are ready to sell, ensuring them a comfy retirement (even as they watch their Super hop on the roller coaster). Other friends refinanced their houses to ridiculous amounts to put in a pool or buy a car or go on holiday. Private debt is massive, it’s scary and it’s all around us- and you don’t have to be an economist to see that and wonder…

    Thanks Steve for your interesting blog and amazing drive to see an alternative theory/universe at least explored in more detail.

    ps I realise there must be “a tad” more to economics and world economies than private debt, and that reasonable private debt is good to let us buy a house and invest in the future etc. But the private debt I see around me is gargantuan and terrifying as we enter, again, uncertain economic times.

  5. Steve Keen says:

    Thanks VB,

    Your gut reactions are a lot closer to reality than 99% of economic theory.

  6. Robert K says:

    Hello Professor Keen: In case you don’t get to my question on a prior post, could
    you provide details of how to wire funds from USA, or is swift code plus account name sufficient. Thanks

  7. koonyeow says:


    I think Soros did not say he is an idiot. He simply said he is fallible. Being fallible to me is a strength and not a weakness. A person who is aware that he or she can make irrational mistake is wise indeed. His theory of Reflexivity is interesting too.

    Risk reward mathematics is not complex conceptually; they are just variations of the bell curve (or normal distribution). The mathematics can mislead people to emphasize probability and de-emphasize consequence.


    Your gut reactions are a lot closer to reality than 99.9% of economic theory. The other (closer to reality) 0.01% are insights from people like Steve Keen, MiSh and Nassim Taleb, my imaginary Secretary of Treasury, central banker and Secretary of Education respectively. By the way, I have nothing to do with economics too.


    I am sorry for plagiarizing your comment to VB. I have also modified and possibly exaggerated your percentage. I would like to ‘boast’ again that I am now a member of CfESI. I am at times boastful because my ancestor (two million years ago) was an alpha male ape.

    Question: if loans re-payment by firms creates reserves, are these reserves an asset or a liability on banks’ balance sheets? Banks’ balance sheets do not seem to balance once reserves are created.

    Thank you if you are reading this.

  8. Steve Keen says:

    Hi Robert, I did reply but something may have gone amiss. Yes, the SWIFT code plus the Bank Account number should be all you need. Let me know how it goes, and thanks for joining.

  9. Steve Keen says:

    They’re an asset Koonyeow, and the system does balance. Check my paper in the Economics E-journal on that front:

  10. sj says:

    Koonyeow quote from fooled By Randomness by Nassim Taleb.
    Taleb knows Soros well.
    “My lesson from Soros is to start every meeting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake prone but happen to be endowed with rare privilege of knowing it”
    Imagined if economics teaching was like that?
    I hope Steve Keens AGM on shoe walking economics has the same spirit as Taleb and Soros.

  11. koonyeow says:


    That is an excellent excerpt from Fooled by Randomness. I like Taleb’s work very much; I assume you are too. Imagine if education is like that, not just economics teaching.


    Thanks for the link to your paper. I was actually looking from a shareholders-owned-private-banks perspective, as below

    In the beginning:

    banks’ assets banks’ liabilities
    notes equity

    After loans are made:

    banks’ assets banks’ liabilities
    notes (balance) equity


    notes (balance) + loans = equity

    which is balanced.

    The source of my confusion is the word ‘deposits’. The deposits in your paper are actual physical notes; whereas I thought that deposits are money ‘deposited’ in banks; thereby causing the imbalance below

    banks’ assets banks’ liabilities
    notes (balance) equity
    loans deposits


    notes (balance) + loans = equity + deposits

    which is not balanced.

    Thanks for reading

  12. koonyeow says:

    My banks’ balance sheets columns are not legible after posting (caused by auto-formatting?).

    Just imagine

    banks’ assets, notes, loans = left column


    banks’ liabilities, equity, deposits = right column.

    Automation is delightful, but not always (laugh out loud).

  13. Steve Keen says:

    That’s my perspective too Koonyeow, and it is balanced in my papers and models. Download QED from the blog and load model 3 that is linked there to check it out.

  14. myopia says:

    I love that interviewers accent.

    Europe is certainly in serious trouble. After years of either ignoring or bully their electorates the political “elites” have a democratic deficit almost as big as the financial one. They’re now faced with solving the paradox that the only way to reduce the latter is to increase the former! As a measure of how scared they are we’ve now reach the ludicrous position that arch Euro skeptics like UK finance minister George Osbourne are now pushing for European fiscal union! You can almost smell the fear!

    Back in the financial world we have a revived interest in the politico economics of government debt – are the Austrians right or maybe the Keynesians? What about the MMTer and their get the “description” right pick you policy approach – all the while the real cause, a broken banking system where the incentive to create unsustainable levels of private debt – gets ignored and papered over all in the interests of saving the skins of the financial “elite”.

  15. koonyeow says:


    It seems to me that your model is not fractional reserve banking, am I right? By fractional reserve banking I mean the situation where amount of deposits is greater than amount of notes.

    I also think that the ‘Quesnay Table’ in the QED program (version 2.78) had been re-named to ‘Godley Table’.

  16. Steve Keen says:

    Dead right Koonyeow–read the following post to see why:

    And yes it has, after Wynne’s death.

  17. vk says:


    Ever since the wikileaks saga I try to avoid using paypal whenever possible.

    It is good that you have a direct deposit option. Sadly I couldn’t go past the first step – “Join CfESI as a browser member (no fee);” . How do I do that? The “Signup” link in the top right corner seems to redirect to the same page.

  18. koonyeow says:


    I am stuck trying to see how a bank’s balance sheet evolves, using the second table (the one with the new column named ‘Unlent Reserves’) from your ‘Roving Cavaliers’ paper as the model.

    Since there are a total of ten flows-recording rows in that table, I will number them 1 to 10 from top to bottom. I will stick with the letters you used for records. I need to add the letter ‘Z’ as the initial amount of loans to firms to start the evolution. Due to the formatting issue I encountered previously, items to the left of the symbol ‘|’ are the bank’s assets and items to the right are the bank’s liabilities; which means my columns are not aligned visually.

    The evolution is as below

    in the beginning:

    Firm Loan = Z | Firm Deposit = Z

    row 1:

    Firm Loan = Z + A | Firm Deposit = Z

    what should be on the assets or liabilities side to balance ‘Z + A’?

    row 2:

    Firm Loan = Z + A – B | Firm Deposit = Z – B
    | Bank Deposit = B

    it does not balance because the flow says ‘-B = -B + B’;

    row 3:

    Firm Loan = Z + A – B | Firm Deposit = Z – B + C
    | Bank Deposit = B – C

    row 4:

    Firm Loan = Z + A – B | Firm Deposit = Z – B + C – D
    | Bank Deposit = B – C
    | Household Deposit = D

    row 5:

    Firm Loan = Z + A – B | Firm Deposit = Z – B + C – D
    | Bank Deposit = B – C – E
    | Household Deposit = D + E

    row 6:

    Firm Loan = Z + A – B | Firm Deposit = Z – B + C – D + F + G
    | Bank Deposit = B – C – E – F
    | Household Deposit = D + E – G

    row 7:

    Firm Loan = Z + A – B – H | Firm Deposit = Z – B + C – D + F + G – H
    Unlent Reserves = H | Bank Deposit = B – C – E – F
    | Household Deposit = D + E – G

    it does not balance because the flow says ‘-H + H = -H’.

    I will stop at row 7 as I am already unable to reconcile row 1, 2 and 7.

    Please help me out as I may be arguing from the wrong premise.

  19. Steve Keen says:


    You have left a +A off your first line:

    row 1:

    Firm Loan = Z + A | Firm Deposit = Z+A

    Do us both a favour and download the program QED from the QED page. Then load the demonstration files that come with it and check them out.

  20. koonyeow says:


    Before I ‘annoy’ you again, let’s see if I understand your model correctly.

    Does the balance sheet below

    Firm Loan | Firm Deposit
    Unlent Reserves | Bank Deposit
    | Household Deposit

    capture your model accurately and completely?

    The mathematical representation of my balance sheet is as below

    Firm Loan + Unlent Reserves = Firm Deposit + Bank Deposit + Household Deposit.

  21. Steve Keen says:

    Sorry Koonyeow! I did get a bit frustrated because it was hard to read your posts with the formatting stripped out, and I’ve also been through this type of discussion more than once.

    Yes that does capture it, and it is balanced.

    On advice from a bank accountant, the correct way to lay these tables out is so that they express the equation “Assets – Liabilities = Equity”:

    Unlent Reserves | Firm Loan || Firm Deposit | Household Deposit || Bank “Deposit”–the last of which my bank colleague would prefer to be called Bank Equity.

  22. koonyeow says:

    Title: Thank You, Steve

    The word ‘annoy’ was meant to be taken with a sense of humour. I am at times a prankster. I sometimes imagine myself dropping a mouse into a neo-classical economist’s shirt.

    I personally would prefer to treat accrued interest on loan as retained profit, which is a component of equity.

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