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:–31

  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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