Debtwatch began in March 2007 as a way of distributing my monthly newsletter on the economic crisis I expected to soon erupt, and about which I had been warning in media interviews since December 2005.
Click here for this post in PDF
Figure 1: Excerpt from the 1st Debtwatch Report in November 2006
From humble beginnings, the blog has grown like Topsy to have over 12,500 subscribers, about 60,000 unique visitors, amost one million page views and six million hits per month.
Figure 2: Debtwatch readership stats for 2011
| Month |
Unique visitors |
Number of visits |
Pages |
Hits |
Bandwidth |
| Jan 2011 |
54,007 |
213,979 |
1,178,465 |
5,755,277 |
762.99 GB |
| Feb 2011 |
44,146 |
190,016 |
724,556 |
3,456,678 |
626.80 GB |
| Mar 2011 |
49,623 |
216,183 |
672,231 |
4,364,184 |
697.79 GB |
| Apr 2011 |
48,297 |
208,923 |
608,629 |
6,040,060 |
459.78 GB |
| May 2011 |
48,046 |
213,571 |
651,215 |
6,011,869 |
430.63 GB |
| Jun 2011 |
51,167 |
215,396 |
718,569 |
4,886,530 |
1084.37 GB |
| Jul 2011 |
49,721 |
214,755 |
606,315 |
3,792,248 |
711.63 GB |
| Aug 2011 |
67,387 |
261,520 |
778,592 |
6,040,035 |
527.67 GB |
| Sep 2011 |
53,820 |
233,337 |
821,232 |
4,929,737 |
500.04 GB |
| Oct 2011 |
56,484 |
224,704 |
907,002 |
5,201,679 |
1344.37 GB |
| Nov 2011 |
58,761 |
210,423 |
907,440 |
5,613,472 |
992.02 GB |
The readership is international. The majority of readers are American, with my home country of Australia second, and the UK third.
Figure 3: Top ten countries by page views in December 2011 (till December 18th)
| Country |
Pages |
Hits |
| United States |
236,314 |
1,029,507 |
| Australia |
151,676 |
1,044,075 |
| Great Britain |
45,939 |
363,924 |
| Canada |
19,365 |
129,093 |
| Germany |
14,839 |
50,996 |
| Netherlands |
7,422 |
28,566 |
| New Zealand |
6,208 |
39,197 |
| European country |
5,689 |
34,678 |
| France |
5,434 |
28,010 |
| Spain |
5,106 |
19,242 |
The audience is also highly educated, both in general and in comparison to sites of prominent media outlets.
Figure 4: Alexa demographic data on Debtwatch
Ironically, given that my sympathies are firmly with “the 99%”, and that my objectives include drastically reducing the power and size of the financial sector, this blog is popular with both the well-paid and the financial sector.
Figure 5: Alexa income level data
In fact, my blog is now so popular with the finance sector that I am being approached by funds that are interested in sponsoring both Debtwatch and the Center for Economic Stability.
So I am now presented with a paradox: my objectives are to drastically reduce the size and power of the financial sector—hedge funds included—and yet organisations within that sector now want to sponsor my work.
The motivations behind such offers of financial support undoubtedly range from simply wanting to have a corporate logo appear in front of blog readers’ eyeballs at one extreme, to sharing some of the same objectives I have at the other—as George Soros clearly does in his funding of the Institute for New Economic Thinking.
I certainly need funding to be able to achieve my own aims. I can’t do the work needed to overthrow neoclassical economics and develop a realistic alternative on my own, and the work involved in maintaining this blog and handling correspondence from the public means I now spend far more time working out the intricacies of the internet and answering emails than I spend doing original research. So funding is necessary, which is the main reason I instituted a membership scheme on Debtwatch: to raise sufficient funds to employ assistants who can take those tasks off my hands, so that I can focus on that research.
That fund raising has been mildly successful—about $18,500 has been raised since membership schemes for Debtwatch and CfESI commenced in September 2011, of which about $10,000 is recurring funding.
Figure 6: Recurring Funding for Debtwatch as of mid-December 2011
| Membership Level | Number of Members | Annual Payment | Total |
| Supporter | 183 | $2 | $366 |
| Keen | 107 | $10 | $1,070 |
| Schumpeter | 12 | $50 | $600 |
| Minsky | 11 | $100 | $1,100 |
| Keen+ | 4 | $200 | $800 |
| Schumpeter+ | 1 | $500 | $500 |
| Minsky+ | 0 | $1,000 | 0 |
| KeenSchumpeterMinsky | 0 | $10,000 | 0 |
| TOTALS | 318 | $4,436 |
Figure 7: One-off Funding for Debtwatch as of mid-December 2011
| Membership Level | Number of Members | Payment | Total |
| KeenOnce | 32 | $200 | $6,400 |
| SchumpeterOnce | 3 | $500 | $1,500 |
| MinskyOnce | 1 | $1,000 | $1,000 |
| KeenSchumpeterMinskyOnce | 0 | $10,000 | $0 |
| TOTALS | 36 | $8,900 |
Figure 8: Recurring funding for CfESI as of mid-Deccember 2011
| Membership Level | Number of Members | Payment | Total |
| Associate | 57 | 13 | 741 |
| Fellow | 44 | 78 | 3432 |
| Partner | 6 | 260 | 1560 |
| TOTALS | 107 | 5733 |
This funding has been useful—amongst other activities, it funded my trips to London to launch Debunking Economics II and to be interviewed by the BBC—but at this rate it will be decades before I can afford to hire staff as well. I haven’t got that long.
So I will accept corporate sponsorship—including, but certainly not limited to, sponsorship from the FIRE sector—but only on my terms. These are spelt out in The Debtwatch Manifesto, which is now a permanent page of this blog. Any corporate sponsor has to accept that those are the aims to which sponsorship will be put.
There are at least two reasons for stating my objectives in this manner.
Firstly, I am aware of the danger of letting commercial sponsorship alter one’s message, and I want to make it clear that I will not let that happen to me. As someone who has spent 40 years opposing the conventional wisdom in economics, I’m not about to let sponsorship persuade me to do otherwise, or to resile from policy positions that I believe are justified by good analysis and empirical data. For that reason I’m putting my objectives on public view before sponsorship becomes an important source of revenue for my work.
Secondly, I know that this is in the interests of those who might sponsor me—even if some of what I hope to achieve works against those interests. I have developed the following I now have because of my empirically-oriented analytic realism. I would be doing a disservice not only to myself, but to sponsors themselves if I let sponsorship affect my analysis or my views.
Levels of sponsorship
There are 3 levels of sponsorship:
Figure 9: Sponsorship Levels
| Level | Payment |
| Sponsor | US$125,000 p.a. |
| Foundation Sponsor | US$250,000 p.a. |
| Principal Sponsor | US$500,000 p.a. |
Sponsorship funding is allocated between my blog Debtwatch and CfESI. If you are interested in sponsorship, please contact me at ProfSteveKeen AT gmail DOT com.
First Sponsor
The first Foundation Sponsor for Debtwatch and CfESI is Sabretooth Capital Management, whose logo now appears on both sites.
Benefits of sponsorship
The primary benefit is an altruistic one: by sponsorship, you contribute to my efforts to build a new realistic theory of economics to replace the myths of neoclassical economics that have played such a major role in causing the crisis we are now in.
The funding will make it easier for me to devote my time and energies to developing the theoretical and empirical analysis that made this blog influential in the first place, but which today receives so little of my personal time because of the sheer workload that my success has generated.
Other benefits include:
- Acknowledgement of your support on Debtwatch & CfESI (if required; I have been contacted about sponsorship by some institutions that do not want their support publicly acknowledged);
- An annual seminar by me on economics for your staff or customers, as requested;
- Early access to my analysis (but not exclusive access—I am committed to informing the public about realistic economics, and this is not going to change);
-
Informal access for analysis and data (but not consulting unless separately arranged; I am loathe to undertake consulting, given that this takes time away from fundamental analysis);
- By doing this I am not offering financial advice. Apart from the legal restrictions on offering financial advice in Australia—for which I am not licenced—giving financial advice involves having knowledge of a customer’s financial situation and needs, which I do not have and will not seek; and
- Signed copies of my latest book (currently Debunking Economics: the naked emperor dethroned)—2 dozen, 4 dozen and 10 dozen copies respectively for each level of membership.
How Sponsorship will be used
Part will go to my income. I didn’t start the blog to make money, but to warn about its destruction on a global scale. However, now that I have succeeded in that aim, I want to be able to continue working on developing an alternative economics full-time, without having to consider my financial security while I do it.
Well before I reach that level of funding, sponsorship will enable me to reduce my teaching commitments and focus on writing Finance and Economic Breakdown, with the hope that it can be published in 2014.
I need to hire staff for a range of purposes. Major priorities are a personal assistant, a webmaster to take over maintenance of Debtwatch (three cheers for WordPress—as a computer amateur, I couldn’t have reached the audience I have without this brilliant Open Source program—but the blog itself desperately needs a professional makeover), a research assistant to populate Econodata, and a statistician to help with the design of leading indicators and the empirical verification of my dynamic models. The development of the Minsky software program will be on-going, and with sufficient funding full-time programmer(s) will be hired for this purpose.
The funding to date has mostly been expended on travel, computer hardware and software. Once sufficient funds, standard ancillary expenses like office rental will also arise.
Changes to the blog
There will be some changes to the blog in coming months. Some of these are long overdue cosmetic changes, which I can now finally afford to hire a professional designer to undertake. Others will be designed to increase the revenue generated by the blog.
This may include requiring browsers to register to read, but it will not include restricting readership to paying subscribers (as, for example, Nouriel Roubini has done). My primary objective will always be developing a realistic theory of economics, and public knowledge of both the flaws in neoclassical analysis and the existence of alternatives is vital to that objective. That’s why my current membership scheme is a “Clayton’s” one, where the only restriction is on downloading documents.
Congratulations Steve on the success of your blog. It’s a testament to your insight and writing that you’ve such a great membership and corporate sponsorship is the logical next step.
I did note that your blog is featured as one of the Top 10 Australian Property Blogs listed on AustralianPropertyPortal.com (you’re in number 2 position!).
Australia’s Top Ten Property Blogs
If I could offer one suggestion when redesigning the blog style. The background image is quite distracting. Perhaps you should have a plainer background?
Keep up the great work!
Peak Debt.
“Corporate sponsorship” — these words bring a mild shiver to the spine. But then again, I am sure you will know how to keep the wolves out of biting range.
The weight of all your duties have been obvious, separating you from the important work you would do. Attracting support from a moneyed audience seems to be a measure of your success so far, as long as they are willing to accept the terms of the manifesto. Increased funding can bring the opportunity to develop your ideas into a more finished form, and this can only lead to benefit.
There is nothing wrong with corporations Steve. Only with Corporations who thrive on government largess and protection. Corporations provide jobs, widgets, services and such which are all beneficial to society. Its when they are protected or live out of the public trough that things go wrong.
Take the sponsorship on your terms. A contract should be between equals, you have something they want and they have something you want. There is no reason to believe that all corporations are dining with the devil. Most are probably just trying to make a buck for their shareholders.
I agree tcgibian: I had to think long and hard about it. In the end, the issue that tipped me in favour of accepting it was the fact that my blog has achieved its popularity with would-be sponsors because of my independent thinking. I would actually do sponsors a disservice if that independence suffered via sponsorship.
Title: 100% Support from A Human-like Bonobo
Dear Readers,
I am a bonobo. The only difference is I look like a human and I proudly claim the title ‘bi-pedal monkey’.
Since my bonobo community cannot do maths, we are lucky that our minds have not been tainted by the neo-classical synthesis. By the way, we climb and swing between trees without knowing Newtonian gravity.
Although my bonobo community cannot do calculus, we understand Steve’s qualitative and close-to-real-world side perfectly.
Steve’s system dynamics approach is intuitive to my bonobo community. Our eco-system is system dynamics (bonobo population to the rate of supply of bananas).
With the manifesto declared, my bonobo community fully support Steve’s sponsorship scheme.
There is a banner at the entrance to my bonobo community. It reads:
I have been contacted about sponsorship by some institutions that do not want their support publicly acknowledged
Most of the members of my bonobo community are stoics. I am the outlier (I am a skirt-chaser).
Great news, I can’t see Steve selling out now and the money will sure help!
Steve,
There are dangers here and I don’t have a ready suggestion as how you can maintain your independence in the face of the seductions of receiving what sounds like large sums of money. I have come to believe that Soros is overall committed via INET and other initiatives to the project of the Enlightenment in many areas of his complicated life, but corporate sponsors I would, if I were in your position, feel the need to vet very carefully.
Having been on the outside so long, isn’t it going to be tempting to become an insider and power broker? Being given large sums of money such as these will I imagine feel very flattering and gratifying, yet there may be strings attached. You make plans that are contingent upon these funds being there and then there may be a conflict between the interests of one or all of these sponsors and a line of research that might be beneficial for the common good. How will you decide such a conflict? You may be capable of maintaining your independence but you would be bucking what might be called our “patrimonial” (quid quo pro) tendencies, which are to some degree natural for us human beings.
On a substantive note, I believe that the issue of public banking and/or public ownership of some key, special purpose banks is probably a solution that merits more serious consideration in these pages. Where your view and the MMT view (as well as other public banking advocates) intersect is not yet clear. Should public banks compete with private banks or should government even exclude private banks from certain businesses? I haven’t worked out answers to these questions but I would hope that you and the analytic frameworks you generate would not “naturalize” the role of private finance in a way that shields your sponsors from potential losses of business or influence. I would want to use the analyses you generate as a guide in these matters and not as another “perspective” to be relativized by allowing for a pro-industry bias.
Thanks for the great website. It is great information and great to share with others for discussion.
Well done that man. Some of us still make a living in the dreaded FIRE, yes…but some of us in the FIRE have ethics, and recognise that a world really free, including freedom of thought, is a bonus to all of us as a specie.
I just ask to be free to be more knowledgeable, more entrepreneurial, more skilled than anybody else, If I will ever manage to achieve this ambition…but I want a levelled playing field for us all (far from that …today), and compassion to be exercised with the ones deserving it.
I think I found a fine professional not only with intelligent, bright new insights, but also sharing that view here, and I will help as much as I can…
Subscribed to both…not a huge amount of money..but as I grow income, I will grow contributions.
Keep going mate!
This IMF report on Australia provides some interesting facts: http://www.imf.org/external/pubs/ft/scr/2011/cr11300.pdf
p.8: house price to income ratio and house price to rent ratio above that of Spain, US and UK
p. 34: household debt to disposable income ratio above that of US, Canada and NZ; interest payments to disposable income above that of Canada and UK; Australia has the highest house price index, greater than Ireland, UK, US, France, Spain, NZ, Canada in 2011 (2000 = 100).
All valid concerns Michael. But I am fairly self-critical: I find it about as hard to bullshit myself as i do to tolerate bullshit from others. So I hope I will maintain the capacity to remain independent despite the temptations. There’s also a wonderful feeling of freedom in life for me now: having been an iconoclast for so long despite the financial sacrifices that entailed, there’s now a great joy in being able to remain an iconoclast while finally receiving some remuneration. I’m not going to surrender that.
Hi Steve,
After consulting with the RBA, they advised me, that in order to create a financial debt to GDP ratio by counting the money lent from the shadow banking sector to the banks, I needed to use APRA’s data.
By adding ‘Deposits from financial corporations’ and ‘certificates of deposit’ from the ‘Back Series of Monthly Banking Statistics’ – http://www.apra.gov.au/adi/Publications/Pages/monthly-banking-statistics.aspx – I could arrive at an approximate value. Unfortunately, the APRA data in its mega spreadsheet only goes back to 2002.
Do you think these two monetary categories are correct?
I’ve graphed all private and public debts to GDP, total debt value, and also the bank’s off-balance sheet business.
What do you read into the $18 trillion worth of derivatives? Weapons of mass destruction as Warren Buffet put it?
Thanks for this info Phil–sorry not to have responded on the US Flow of Funds data (I am sort of on holidays). My primary table there is in the file ltab1d, which gives the long term data from L.1 Credit Market Debt Outstanding in the FoF.
I think it might also be worth chasing up Morgan Stanley, since their figures for financial sector debt were at least twice as high as you give here. I’ll see if I can get a clue from the source for you.
The Morgan Stanley report with the total debt to GDP graph (the one with the 1000% UK debt) can be found here, page 26.
http://linkback.morganstanley.com/web/sendlink/webapp/BMServlet?file=5h6qulfe-3o8p-g000-8b84-001a64f36000&store=0&d=UwBSZXNlYXJjaABNVEI3NjMyNg%3D%3D&user=kbzdjj9emacl-9729&__gda__=1448565376_7b5febfafb6c3fabb3f5c666e7762e06
Hi Steve, great to see you finally being rewarded for all the work you have put in following your path. I was introduced to economics by following your blog several years ago and admire your resolute views, all the best for the future. go forth and Occupy Economics.
Man cannot live on goodwill alone. At least not until we get the resource allocation system fixed and the service robots fired up.
And to do that we first need an economic model that works in reality.
I would be very surprised if Steve can be bought off like some third rate politician, so I see this as a positive step.
Being fully transparent about this change is a good omen in my view. I say take the money and create some productive jobs!
Steve, I’d like to formulate a tentative criticism of some of your ideas. You often seem to make the implication that as debts rise in an economy, the ability for the economy to take on more debts is diminished. However, when party A gets in debt to party B, doesn’t party B get an increased ability to service new debts from the revenue stream from said initial debt?
I also still have doubts about the fact that when A is in debt to B…
there is a near equivalence between:
B taking on a new debt to A by extending a service (asset sale?)
and
A paying down the debt to B by extending a service (asset sale?)
The first would increase the total amount of debts in the system, whereas the second would decrease the total amount of debts, while the same exchange of services occurs. Is the difference in nominal aggregate demand given rise to entirely by the fact that the former expands the money supply whereas the latter contracts it?
Also, have you ever looked into the implications of some of your ideas on Austrian Business cycle theory? According to the criticism section on wikipedia (http://en.wikipedia.org/wiki/Austrian_business_cycle_theory) the neoclassical critique as formulated by P. Krugman hinges quite strongly on the thesis that supply matches demand at any point in time. Your approach to analyzing credit expansion would probably shed a different light on that issue.
Credit cycle theory (http://en.wikipedia.org/wiki/Credit_cycle) seems to be influenced by post-keynesian thought. Is this what the result of deriving the implications of post-keynesian views on business cycle theory would be?
Dear Steve
Congratulations on blog. What you are trying to do is create large scale change.
For interest this is what the academic literature says about how it tends to happen in reality:
Large-scale change in a social systems context (e.g., the NHS) comes about…
…when there is a sufficiently well-defined topic area…
… that has been translated into a vision and key themes that people can get
their headsaround…
…on which there is a sufficient mix of pressure, will, incentive, consequences, receptivity,(re)connection to existing values, etc…
…that is felt (i.e., experienced on an emotional as well as an intellectual level)…
…by a small, but large-enough, group of people..
…who then find some means to exert some influences…
…over multiple processes and subsystems (e.g., service delivery, hand-over processes, clinicaldecision making, finance flow, public opinion, policy, etc.)…
…to make some pragmatic changes in a sufficiently effective and visible way.
This pattern of framing/reframing, engaging and connecting others, and making pragmatic changes in multiple processes and subsystems repeats many times, in hard-to-predict ways.
Momentum is further created by…
…the appearance of success (e.g., measurements, stories, celebrations)…
…that is communicated widely and effectively enough…
…to attract previously neutral others, who then join actively in the change process, …
…thereby creating another cycle of framing/reframing, engaging and connecting others, and
initiating pragmatic changes in multiple processes and subsystems.
This momentum continues for some time until (in reverse order of frequency of occurrence):
1. The change becomes a reasonably well-established norm across a social system, and multiple processes and systems have changed or adapted to accommodate or support it in a sustainable way. This is, obviously, the hoped-for outcome.
2. The change hits a plateau at some level and is no longer attracting new supporters.
(At this point, people tend to separate into those who believe they ‘get it’, and others who these people think ‘simply do not get it’. The ones who think they ‘get it’ can become cynical and separated unto themselves; thereby effectively preventing further attraction of others and sealing the change at the plateau. A new round of LSC and renewed interest might come
later; perhaps with new players, which can further embitter the old players.)
3. The effort effectively ‘runs out of energy’ for some reason (lack of engagement, lack of resources, attention diverted elsewhere, political change, etc.) and simply fades away.
The full, measured results and unintended consequences from a true LSC are often not known until some time into the future. By that time, things have typically already sorted themselves into the three categories above. Therefore, while data is helpful and essential, throughout most of the
process of LSC a certain amount of faith, courage, intuition, judgement, and proceeding forward on incomplete evidence is inevitable. Hindsight is always 20/20, insight and foresight rarely are.
Future LSCs may be required to build further on what has been accomplished, or to undo the damage; but there is no way to know in advance. Inordinate worry about change paralyses action, sustains the status quo, and is sometimes used as a ‘trump card’ by resistors to justify inaction.
Hope that helps
BW
Steve
Congratulations Steve, to be in this position is an endorsement of your uncompromising hard work to date. It is time that you took your work to the new level having reached your original objectives. Your open disclosure of this move is a further indication of where your values lie.
I won’t feel so bad about the minimal sponsorship I’ve provided to date (considering the knowledge you’ve imparted to me!)
LCTesla, if i may, the primary point there is the use of debt for productive purposes,, something that gets harder to do once inflationary policies start to gear an economy towards speculation. We are not short of money and we are not short of debt, but we are short of value.
Hi Steve:
I have tried ProfSteveKeen AT gmail DOTcom. (with the spaces and without them)
using the caps and lower case as shown, but cannot send. Am I doing something
wrong, and is there an alternative? Hope you can be of help. Best regards,
Matthew K: Your last line reminds me of a certain poster and blogger who uses the
acronym “Blondie”.
Michael Hoexter said…
“”
I haven’t worked out answers to these questions but I would hope that you and the analytic frameworks you generate would not “naturalize” the role of private finance in a way that shields your sponsors from potential losses of business or influence.
“”
That has already happened here. I appreciate that few here (including Mr Keen) see this.
I bear no ill.
Let me pose a question to you?
If banks should not use their ability to create “thin-air” credit for “non-productive assets” then why on Earth is a bank able to channel this credit into houses that are already built and being re-sold? (What we might refer to as “second- hand houses”).
There are several (fundamental) flaws in Mr Keen’s analysis. (Demonstrable).
I shall provide you with a metaphor.
There are sharks in the sea.
There are not sharks in the streams.
A salmon has no choice but to swim upstream to spawn. It is “his nature”.
The sharks have positioned themselves in the streams – a place where they should not be.
Living in a house is a “natural” desire.
The banks have moved themselves into the streams. A place where they should not be “naturally”.
The solution then is not to try to tell the salmon to be “wary of the sharks”. This will never work.
The solution is to put the sharks back where they “naturally” belong.
No rational solution is possible until a “natural” order based upon sound analysis has been done.
I repeat
“the analytic frameworks you generate would not “naturalize” the role of private finance ”
this has already occurred here.
Ther are in addition several things that Mr Keen has not taken into his account with his models at what I call a “1st approximation” level.
These need to be present and understood.
Hey Robert – we must draw our inspirations from somewhere and it looks like you and I like to draw it from similar wells! To the flow of value!
I don’t see the word “bank” here – do you ?
and these losses must ultimately be allocated among homeowners, lenders,
guarantors, investors, and taxpayers
http://federalreserve.gov/publications/other-reports/files/housing-white-paper-20120104.pdf
from
http://market-ticker.org/akcs-www?post=200337
Denninger is useful from seperating out one thing from another…
a useful “Ticker” for those not familiar with Denninger’s work…
“”
The response? Even easier credit. Liars loans. Zero-down mortgages. Goading people into speculating on property, taking out HELOCs to buy Suburbans and similar. Frauds were run throughout the financial system in order to prop this up, including issuing CDS and various securities based on claimed credit quality that the writers knew damn well was impossible, as there was at the time a 20 year history that showed credit expansion and thus asset price inflation was the only way it could possibly “work.”
“”
http://market-ticker.org/akcs-www?post=200244
A wise man settles upon some definitions. Here at least we have an attempt by Denninger to define some types of money…
“”
{KINDS OF MONEY – DING DING==>}There are three sorts of “money” — actual surplus capital from past economic activity, self-liquidating credit and non-liquidating credit. All three spend exactly the same but they are not the same.
The first is earned by someone’s efforts and it is what’s left after you pay your costs (including taxes, if any.) That’s actual wealth — and is the only sort of “money” that one can call “real.” At least in theory it is supposed to be durable and able to be saved, invested, or spent as you choose.
The second is credit money that is created to liquify an asset. An example of this is a letter of credit guaranteeing payment for a shipment from Japan to the United States. It’s hard to sue someone in the US from Japan, so this is very useful to commerce. But this credit money goes away when the bill is either paid or defaulted. The same model exists with a credit card that you pay off every month. This has no inflationary impact because it disappears when the transaction is closed.
The third is credit money that is created based on nothing other than a promise to produce something tomorrow. In the case of government that “something” is of only one form — taxes. In the case of an unsecured private loan it could be anything from a revolving credit card to an OTC derivative trade. The problem with such a loan is that it does not self-liquidate as it’s never closed — instead, it’s rolled over again and again. Since this sort of loan permanently expands the number of monetary units in circulation it is a pure act of monetary inflation. It is important to note that all government deficit spending has been of this form in the modern era — we have never actually run a budget surplus save one year — a tiny one in calendar 2000 (but not fiscal 2000.)
Why is this understanding so important, you might ask? That’s simple — it is the explicit and intentional acts of the government in their overspending that lends cover to virtually all of the other ills with capital misallocation, trade imbalance and other games.
“”
from
http://market-ticker.org/akcs-www?post=199758
For heaven’s sake if you are going to adopt a “scientific approach” publish some definitions including definitions for “capital” and “inflation” as people use these words to mean totally different things. Hence what meaningful conversation can be had?
You will go round and round for ever never seeing the truth !