George Mon­biot Sem­i­nar

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This is the video of the sem­i­nar I gave in Oxford ear­lier this month that The Guardian’s George Mon­biot attended. George then wrote the fea­ture “It’s in all our inter­ests to under­stand how to stop another Great Depres­sion”, which briefly pro­pelled the new edi­tion of Debunk­ing Eco­nom­ics to No. 89 on Ama­zon UK’s Best­seller list.

Given that my audi­ence included aca­d­e­mic economists–from PhD stu­dents to Pro­fes­sors of some note–I went into more depth on the mod­el­ling I have done of Minsky’s Finan­cial Insta­bil­ity Hypoth­e­sis than I nor­mally do in pub­lic talks. The dis­cus­sion I had after­wards is also recorded, which is why the video is so lengthy.

One part of the dis­cus­sion that I found quite notable was that, even after show­ing empir­i­cal evi­dence on the impact that ris­ing and then falling pri­vate debt had on the econ­omy both now and dur­ing the Great Depres­sion, I couldn’t con­vince sev­eral of the aca­d­e­mics in the audi­ence of the impor­tance of pri­vate debt: they kept com­ing back to “one person’s debt is another person’s asset, there­fore the level of debt doesn’t mat­ter”. They there­fore argued vehe­mently that the dis­tri­b­u­tion of debt was impor­tant, but its aggre­gate level was irrel­e­vant.

I tried to point out that since the rate of change of debt con­tributes to aggre­gate demand (for both newly pro­duced goods & ser­vices, and exist­ing assets), then the change in debt mat­ters, but I made no head­way at all with the argu­ment.

As I noted at the end, maybe I’d bet­ter come back for a longer sem­i­nar then. The point I would make, in much more detail, is that even if one accepted that the level of debt can be any­thing at all with­out hav­ing macro­eco­nomic con­se­quences on its own (which I don’t accept–at some level of debt, debts can’t be repaid and both cred­i­tor and debtor fail in a chain reac­tion of bank­rupt­cies), the rate of change of debt and its accel­er­a­tion do mat­ter. This in turn gives the level of debt an imputed rel­e­vance, since at a low level of debt the rate of accel­er­a­tion of debt can be both pos­i­tive and quite high, while at higher lev­els of debt it will gen­er­ally be low and can be sub­stan­tially negative–just as a car’s accel­er­a­tion can be very high and pos­i­tive when the car is mov­ing slowly, but will be low and poten­tially very neg­a­tive when the car is trav­el­ling at a high speed.

I hope that argu­ment would get through, but there’s a les­son to be learnt in the fail­ure of my argu­ment on the day to get past eco­nomic a-prioris–even amongst econ­o­mists who were quite sym­pa­thetic to my over­all crit­i­cal atti­tude to neo­clas­si­cal eco­nom­ics. This is that a sta­tic mind­set is so much a part of eco­nomic think­ing that the “slice of time” con­sid­er­a­tion that “one person’s debt now is another person’s asset now” com­pletely dom­i­nated how they thought about the macro­eco­nomic impact of debt.

I would have left that sem­i­nar some­what deflated if George hadn’t been in the audi­ence. But of course his pres­ence there, and his sub­se­quent col­umn, made it all worthwhile–and helped the first print run run out in a cou­ple of weeks (hence the delay in get­ting copies to some blog sub­scribers and CfESI Part­ners and Fel­lows; they’ll be on their way–and as signed copies to make up for the delay–after I get to Eng­land again in mid-Novem­ber)

If you’re not a reg­u­lar reader of Mon­biot, you’re miss­ing some real gems of both com­men­tary and jour­nal­ism. Being an Aus­tralian, I have almost no idea of who Christo­pher Booker is, but George’s hatchet job on him in The super­hu­man cock-ups of Christo­pher Booker in his blog today is a gem of a piece.

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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  • koonyeow

    Title: A Response to Geoff Davies (a.k.a. The Seen and The Unseen)

    The Seen:

    Credit money leads fiat money.

    The Unseen:

    Who is coerc­ing whom? Cen­tral banks influ­enc­ing finan­cial insti­tu­tions or finan­cial insti­tu­tions coerc­ing cen­tral banks? The repeal of the Glass-Stea­gall Act should serve as a guide.

    P.S. Eagerly await­ing your paper, Lyon­wiss.

  • I think we’re speak­ing at cross pur­poses then. I see the orig­i­na­tors as the buy­ers of the promise to pay from the bor­row­ers, who then on-sell this to the pur­chasers of secu­ri­tised loans. The orig­i­na­tors I see as defraud­ing in both direc­tions.

    In any case, this is one of the many instances of a con­ver­sa­tion between us being too com­plex to do jus­tice to the top­ics via snip­pets of com­ments over the web.

  • Lyon­wiss

    @ Steve Keen Octo­ber 29, 2011 at 11:15 pm

    You said you want to pun­ish the lenders, being buy­ers: caveat emp­tor. But you now say “The orig­i­na­tors I see as defraud­ing in both direc­tions.” But the orig­i­na­tors are not the lenders/buyers. The orig­i­na­tors have taken their money (fees), ran and out of the pic­ture. How does a debt jubilee pun­ish the orig­i­na­tors?

  • Pun­ish­ment is not my pri­mary inten­tion Lyon­wiss: end­ing the drag on aggre­gate demand from delever­ag­ing is.

  • mahaish

    . The orig­i­na­tors have taken their money (fees), ran and out of the pic­ture. How does a debt jubilee pun­ish the orig­i­na­tors?”

    it cant, lyon­wiss

    but the state or the own­ers of those secu­ri­ties can sue using cor­po­rate or dare i say it crim­i­nal law

    the whole lot of them should be thrown in jail, from the bro­kers pro­mot­ing these flawed prod­ucts, that they knew were flawed,

    the bankers pack­ag­ing these prod­ucts which wouldnt even meet the most char­i­ta­ble under writ­ting stan­dards.

    in fact any­body involved in deli­brately design­ing these prod­ucts to fail so that hegde funds can make a killing on cds swap shorts,

    they should all be thrown in jail, and their feet shouldnt touch the ground while we are escort­ing them to their jail cells

  • @ Lyon­wiss — I present, in the below link, the irrefutable and damn­ing evi­dence that the US peo­ples are now openly com­pet­ing (gasp) to usurp the Aus­tralian peo­ples’ intel­lec­tual (sic) grasp and posi­tion in the global field of epis­te­mol­ogy. I believe that the Bogan through their “lead­er­ship” should offi­cially declare an offi­cial objec­tion and shock and awe motion (sic) with the UN Secu­rity Coun­cil before we trans­fer that ~US1B to the US for their not-yet-built satel­lite for our defence against all them evil and con­spir­a­to­r­ial Indone­sian peo­ple smug­glers and ter­ror­ists — you know all those that have since become taxi-dri­vers.

    There is always a choice but I won­der if they have been told this?

  • @ Lyon­wiss
    @ Steve Keen
    @ Mahaish


    The object of intel­lect is for the ben­e­fit and peace­ful pas­sage of human­ity along those roads where evolv­ing con­scious­ness leads us.

    As such, as there is over­whelm­ing and abun­dant evi­dence that the — in the first instance — whole Pro­fes­sion of Eco­nom­ics has totally and irre­spon­si­bly failed in its objec­tives, ori­en­ta­tion and social func­tion­al­ity and has per­mit­ted mas­sive fraud and suf­fer­ing to be imposed onto human­ity, the first pri­or­ity that should be addressed should be to reverse this error and this can be done by pub­lish­ing the truth — the whole truth — the big pic­ture: not dif­fi­cult!

    At some future time, the due process of Law in a pri­ori rea­son can be applied to those alleged to have per­pe­trated unlaw­ful and fraud­u­lent acts upon the pub­lic but this should not become the focus on today’s’ crit­i­cal neces­sity, nor a fetish as it diverts us from what is urgently nec­es­sary.

    I esti­mate that there is still some time prior to the mad­men of “lead­er­ship” launch­ing nuclear attacks against human­ity — well maybe I just hope there is? — so any move by those of influ­ence and rea­son within the rank and file of the Econ­o­mist brethren would be a respon­si­ble expec­ta­tion.

    We need to cor­rect all that erro­neous infor­ma­tion that has been fed to human­ity as it is these incor­rect and false dis­courses on the fun­da­men­tal prin­ci­ples of the socio-eco­nomic order­ings that has pri­mar­ily led us to the brink of plan­e­tary-wide destruc­tion.

    We need peo­ple to care as it is they that will receive the full soul and body destroy­ing impacts, as a direct result of those false vol­umes of sup­posed learned words by the hands of those that they have been led to believe (and paid for their ser­vices of respon­si­bil­i­ties to the com­mu­nity at large) that they should / could /must trust and obey.

    And which has now clearly been exposed and demon­strated as all “faith and hope” at best and “piss and wind” at worst.

    Be so informed at what comes — destruc­tion:

  • al49er

    It appears Steve that in an effort to demon­strate your regard for the excel­lent jour­nal­ism, astute­ness, clear think­ing and judge­ment of The Guardian’s George Mon­boit, that you choose to demon­strate his sta­tus by ref­er­enc­ing his
    ” hatchet job” on one of those dis­gust­ing ‘cli­mate change scep­tics’. (ref link to “super­hu­man cock up of Christo­pher Booker”)

    You and oth­ers might like to read the full text of another very insight­ful jour­nal­ist John Izzard ( even if not of the stature of a jour­nal­ist who writes for “The Guardian”! — with apolo­gies to John because for all I know he MAY have been pub­lished in the ‘Guardian’ or some equally eru­dite news­pa­per ) “Quad­rant’ online 25th. Oct.

    The irony for Steve of course ( and his small group of con­trar­ian econ­o­mists — and of course we more ordi­nary plebs who have judged against all the wis­dom of the world’s main­stream econ­o­mists and politi­cians, that HE might in fact be cor­rect), is that HE is ‘the scep­tic’.

    I am cer­tain there­fore that John Izzard’s arti­cle should give Steve con­sid­er­able com­fort. Here is just a taste.


    Over the [past] decade or so, polit­i­cally dri­ven cli­mate deniers have adroitly used instru­ments of demo­c­ra­tic prac­tice to erode the author­ity of pro­fes­sional exper­tise.
    Clive Hamil­ton, Aus­tralian Pub­lic Intel­lec­tual (No.64)

    Per­haps the most mon­u­men­tal waste of time, effort and money in all his­tory was the build­ing the Great Pyra­mid of Giza for the Pharaoh Khufu—that is until around 4500 years later when Aus­tralia decided to “save the planet” by the intro­duc­tion of a Car­bon Tax. 

    Back in 2500BC Khufu wanted to ensure his entry into the after­life. All avail­able evi­dence sug­gests that his effort was in vain. Tomb-rob­bers saw to that. Indeed back then all of the tem­ple priests and courtiers and after-life sci­en­tists had, no doubt, lit­tle need to whis­per in Pharaoh’s ear that he might not make it. After all the sci­ence “was set­tled” both as to his after­life prospects and the invi­o­la­bil­ity of the Great Pyra­mid, to intrud­ers. The great­est intel­lec­tual minds in Egypt, no doubt, agreed upon that point. 

    Mean­while, back in Aus­tralia, circa 2011, a new pyra­mid scheme is now under­way, a Car­bon Tax, which has about as much chance of alter­ing the tem­per­a­ture of planet Earth as Pharaoh Khufu’s efforts to stay in one piece—forever. Now we, like the ancient Egyp­tians, are about to under­take a gigan­tic endeav­our, a voy­age into the unknown world of cli­mate manip­u­la­tion.

    So you would expect that the great intel­lec­tual minds of Australia—those eagerly sup­port­ing the cli­mate-change the­ory— would be very happy with the out­come of the Gillard government’s pass­ing of the Car­bon Tax leg­is­la­tion. But no, they are most unhappy. Why? Because blasted democ­racy was get­ting in the way of set­tled sci­ence — or as Pro­fes­sor Clive Hamil­ton put it: “instru­ments of demo­c­ra­tic prac­tice” were “adroitly used” to “erode the author­ity of pro­fes­sional exper­tise”.

    Another unhappy intel­lec­tual, Pro­fes­sor Robert Manne, stated in his recent essay, “Bad News” that: 

    Democ­racy relies on an under­stand­ing of the dif­fer­ence between those ques­tions that involve the judg­ment of cit­i­zens and those where cit­i­zens have no alter­na­tive but to place their trust in those with exper­tise.

    You might well ask Pro­fes­sor Manne: Since when has democ­racy relied upon trust­ing sci­en­tists? Surely this is ven­tur­ing into the world of Dr. Strangelove? 

    Clive Hamil­ton, Vice Chancellor’s Chair (CAPPE) Charles Stu­art Uni­ver­sity, stated in a recent arti­cle in The Con­ver­sa­tion:

    The prac­tices of democ­racy at times do not sit com­fort­ably with the best advice of those most qual­i­fied and knowl­edge­able…

    They [cit­i­zens] have attempted, with con­sid­er­able suc­cess, to under­mine the author­ity of cli­mate sci­ence by skil­ful exploita­tion of a free media, appeal to free­dom of infor­ma­tion laws, the mobil­i­sa­tion of vocif­er­ous cit­i­zens, and the pro­mo­tion of their own to pub­lic office. In this way democ­racy has defeated sci­ence.

    Wow! And here’s me think­ing it was the other way around. 

    Per­haps these unhappy intel­lec­tu­als should pon­der for a while as to why peo­ple, who nor­mally never ques­tion sci­ence, now dis­trust it so much, par­tic­u­larly when it comes to cli­mate-change the­ory. Why has pos­si­bly the most trusted aca­d­e­mic dis­ci­pline, sci­ence, sud­denly become the butt of sus­pi­cion and doubt? It is no good blam­ing the cit­i­zenry, it’s their the­ory, not ours. 

    What has hap­pened to some of our unhappy intel­lec­tu­als is that they are now con­fronted with a new con­cept, sci­ence-pol­i­tics. Sci­ence-pol­i­tics fol­lows closely on the heels of his­tory-pol­i­tics, which was first spot­ted in acad­e­mia in the writ­ings by his­to­ri­ans of Abo­rig­i­nal his­tory. The basic premise of his­tory-pol­i­tics was that you can force polit­i­cal change upon a coun­try, and it’s cit­i­zens, by re-jig­ging his­tory to achieve a desired polit­i­cal out­come. That is, cre­ate a feel­ing of guilt, then work on the guilt fac­tor to demand change. It works a treat. It really does. ”

  • vk

    …end­ing the drag on aggre­gate demand from delever­ag­ing is.

    It is debat­able whether a debt jubilee will end the drag on the aggre­gate demand. True, it will allow bor­row­ers to spend into the wider econ­omy the funds they cur­rently allo­cate for pay­ing prin­ci­pal and inter­est (at least these bor­row­ers who are not cur­rently default­ing on their loans). How­ever the hold­ers of debt-backed secu­ri­ties would surely spend a lot less after the jubilee.
    This also applies to the debt on the banks’ bal­ance sheets. Once that debt is writ­ten off the banks’ share­hold­ers (and pos­si­bly bond­hold­ers) will have to write off the expected future income from their now worth­less assets and that will severely affect their own spend­ing.

  • LCTesla

    Steve, should you feel a need to engage in men­tal spar­ring against spir­ited oppo­si­tion on the “debt jubilee” front, this may suit your needs:

  • Lyon­wiss

    The fol­low­ing recently released movie is a real­is­tic por­trayal of the atmos­phere inside finan­cial engi­neer­ing fiirms, but the film is a bit thin on story line and action.

  • mahaish

    This also applies to the debt on the banks’ bal­ance sheets. Once that debt is writ­ten off the banks’ share­hold­ers (and pos­si­bly bond­hold­ers) will have to write off the expected future income from their now worth­less assets and that will severely affect their own spend­ing”

    they will all be broke vk,

    under a debt jubillee, 

    unless the state decides to re cap­i­talise them, 

    or the state with the cen­tral bank, sets up a spe­cial pur­pose vehi­cle or port­fo­lio, to help them re cap­i­talise, along with chang­ing the account­ing rules

    in order to pre­serve arti­fi­cially the liq­ui­dated val­ues of the now worth­less assetts

  • vk


    Account­ing is sup­posed to reflect real­ity. Chang­ing the account­ing rules — with­out chang­ing the under­lay­ing real­ity — is just fraud. The only excep­tion is if we sud­denly find that account­ing hasn’t been reflect­ing the real life and needs fix­ing. Some­how I doubt that.

    You seem to sug­gest that a debt jubilee should be accom­pa­nied by a mas­sive expan­sion of the gov­ern­ments bal­ance sheet. With pri­vate debt ~ 150% of GDP and gov­ern­ment cur­rently account­ing for ~30% of GDP this means 4–5 fold increase in the gov­ern­ment. Bor­row­ing on that scale to pur­chase soon-to-be-worth­less assets is a very hard sell.

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  • Lyon­wiss

    @ Vk Octo­ber 31, 2011 at 11:38 pm

    Mahaish is right. You should not doubt that gov­ern­ments legalised fraud:

  • michael bur­rows

    Surely a com­puter sim­u­la­tion with rea­son­able assump­tions could demon­strate that eco­nomic col­lapse is inevitable given suf­fi­cient debt? I see debt defla­tion as a non lin­ear phe­nom­e­non akin to col­umn buck­ling. Maybe the crit­ics live in a lin­ear world.

    Do you think it pos­si­ble that a the­o­ret­i­cal analy­sis cal­i­brated with his­tor­i­cal records would reveal an upper limit to the amount of debt a coun­try could safely sus­tain?

    I think both exces­sive intra and inter state debt are desta­bi­liz­ing. Do you agree?

    I’ve read a tiny frac­tion of your work so please excuse me if you already answered these ques­tions.

  • michael bur­rows

    I sus­pect sup­port­ers of the “zero sum game debt argu­ment” don’t really con­sider what hap­pens when the debts aren’t repaid and when the over­all debt level is suf­fi­ciently high that the cas­cades through a finan­cial sys­tem.

  • koonyeow

    Title: Straw Dogs by John Gray

    Thank good­ness, Lyon­wiss, that the laws of nature are not nego­tiable.

  • Lyn­donB

    Other post-key­ne­sians talk about wealth effect. Pri­vate debt cre­ates “inside wealth” which is con­trasted with “out­side wealth”, that is pub­lic sector’s lia­bil­i­ties to the pri­vate sec­tor.

    If you think about it, pri­vate cor­po­ra­tions for exam­ple carry always some debt in their bal­ance-sheets, and that debt is of course wealth to some­one. But no com­pany own­ers would have to count that debt as part of their per­sonal lia­bil­i­ties, because of lim­ited lia­bil­ity. So indi­vid­u­als as a whole would feel more wealthy when lia­bil­i­ties are “buried” inside these lim­ited lia­bil­ity cor­po­ra­tions.

    And this dis­cus­sion about debt com­pletely leaves out pub­lic sector’s lia­bil­i­ties to the pri­vate sec­tor, which is cru­cial for com­plete macro-pic­ture.

    But it is swings in wealth that I believe cause swings in con­sump­tion. Hous­ing bub­ble cre­ates fic­ti­tious wealth, but then, sud­denly, it is gone. House­holds make sim­ple cal­cu­la­tion: assets — lia­bil­i­ties = net wealth, and if that is too low they reduce con­sump­tion. Claims on gov­ern­ment go to the asset side of the bal­ance sheet and that’s how key­ne­sian stim­u­lus works.

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