Lars Schall inter­view

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Lars Schall is a free­lance finan­cial jour­nal­ist in the indus­trial heart­land of Ger­many, the Ruhr Area, who focuses on oil, pre­cious met­als and the mon­e­tary sys­tem. Lars inter­viewed me sev­eral weeks ago for his pod­cast; click here for the MP3 file, or lis­ten to the link below.

Steve Keen’s Debt­watch Pod­cast


Lars’s overview of the inter­view is avail­able here.

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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  • LCTesla

    Paul Krug­man responds to your cri­tique of his treat­ment of Min­sky in his lat­est blog post:

    Con­grat­u­la­tions on get­ting him to show atten­tion toward you in pub­lic. Unfor­tu­nately the response is rather low on sub­stance and full of hand-wav­ing.

  • Steve Hum­mel

    Doesn’t Krug­man make a rather ele­men­tarymis­take in say­ing that banks lend deposits too?

  • RickW

    Many of the com­ments on the Krug­man arti­cle point out that bank credit plays a key role in demand. Here is prob­a­bly the best of them:
    ” Brett Seat­tle


    I have not read Steve’s lat­est post, or his new paper, but I think it is pos­si­ble to clar­ify the issue a bit by address­ing a cou­ple of your points above.

    You write:

    If I decide to cut back on my spend­ing and stash the funds in a bank, which lends them out to some­one else, this doesn’t have to rep­re­sent a net increase in demand.”

    Of course this is cor­rect, but it misses the main point of how credit economies work.

    Say I go out to buy a car. I take a loan out at my national bank, which (for simplicity’s sake) hap­pens to be the same bank used by the auto dealer and the man­u­fac­turer. The bank cuts me a check for $25k, which I hand to the auto dealer, who then turns around and deposits it in the same bank.

    Voila, by agree­ing to pledge more of my future resources, I just expanded the loans and deposits on the bank’s bal­ance sheet (with­out absorb­ing $25k of somebody’s sav­ings, and with­out need­ing any mon­e­tary expan­sion from the Fed), and I expanded aggre­gate demand in the sys­tem.

    I have sug­gested in the past that, if you just keep fol­low­ing the logic of your work with Eggerts­son, you will end up in a very dif­fer­ent place. In fact, I think you will find that your areas of agree­ment with Steve will have expanded expo­nen­tially.”
    End Quote

  • Steve Hum­mel

    As an adden­dum to our recent series of posts there are sev­eral points I’d like to make. First money and pur­chas­ing power are not the same things. Sec­ond, time is a decep­tive fac­tor. Third Free is free, not sticky, enforced in any way or rigged. And fourth ideas, inten­tions and over­all psy­chol­ogy make all the dif­fer­ence in the world for Man and sys­tems.
    It is true that there is all man­ner of money out in the econ­omy at any GIVEN PERIOD of time. How­ever, not all of that money is avail­able as pur­chas­ing power. Thus pur­chas­ing power (not just money) math­e­mat­i­cally must run out for the indi­vid­ual before the sys­tem is able to math­e­mat­i­cally LIQUIDATE AND CLEAR ALL PRODUCTION IN THE SAME PERIOD OF TIME…….unless of course there is an injec­tion of pur­chas­ing power i.e. unen­cum­bered credit for the indi­vid­ual, and save the lot­tery, a wealthy and gra­cious rel­a­tive or some other rare happenstance….there is no sys­temic avail­abil­ity of such. Of course one can bor­row more money with or with­out debt attached to it, but then your next cost account­ing period is going to be less in bal­ance than the last one. Which tends severely to effect your future sol­vency.

    Now the fact that the wheel of com­merce is con­tin­u­ous into the future and as a result more money is cre­ated is irrel­e­vant. Why? Because inevitably even though there is suf­fi­cient money in the sys­tem there is both less over­all pur­chas­ing power in that cre­ation of credit BY COST ACCOUNTING CONVENTION as well as a smaller frac­tion of pur­chas­ing power in ratio to over all PRICES. Money cre­ation, bor­row­ing, goes on. But what if it didn’t? Well pro­duc­tion would slow and even­tu­ally stop, but that’s not good for busi­ness prof­its or for indi­vid­u­als pay­ing their bills or eat­ing reg­u­larly. And so we see that finance is a NECESSITY if the sys­tem is to func­tion as it is cur­rently con­structed. (Time does not stop and this obscures this fun­da­men­tal truth. Time is a tricky con­cept.) Even if you have cen­tral bank injec­tions, because they are all pri­vate cen­tral banks and thus incur­ring costs with each finan­cial cycle, the prob­lem is exac­er­bated.
    Now I has­ten to men­tion here that the inter­est of finance is not the cause of the prob­lem itself, but rather it is the EFFECT of it. Gen­er­ally, the real prob­lem is THE NECESSITY TO FINANCE ITSELF in order to keep the sys­tem func­tion­ing even mar­gin­ally, and SPECIFICALLY it is the inher­ent scarcity of indi­vid­ual pur­chas­ing power ENFORCING that neces­sity through its inabil­ity to liq­ui­date all of pro­duc­tion in any GIVEN period (not the flow) of time/cycle of pro­duc­tion. (Thus the sys­tem is in actu­al­ity not free flow­ing at all except as it is rigged around enforced finance which still leads to an inevitable imbal­ance. Free mar­ket eco­nomic the­ory is “free”.
    Specif­i­cally man­dated cost­less sup­ple­men­ta­tion of pur­chas­ing power via a citizen’s div­i­dend and a com­pen­sated retail dis­count of prices to the indi­vid­ual to avoid infla­tion, all from a cen­trally admin­is­tered source is the cor­rect pre­scrip­tion for its true lib­er­a­tion.

    Dis­trib­utism is an evo­lu­tion of profit mak­ing sys­tems because it replaces the faulty ortho­dox accep­tance of enforced mon­e­tary scarcity with the more accu­rate and lib­er­at­ing eco­nomic real­i­ties of rel­a­tive abun­dance. It also has as its inten­tion the actual free­ing of the indi­vid­ual AND the sys­tem not just the cob­bling together of the sys­tem in a fash­ion which con­tin­ues to degrade the rights of the mass of indi­vid­u­als, ignores the sus­tained com­mon­wealth eco­nomic real­i­ties of a cul­tural her­itage of pro­duc­tive capac­ity and still enables the usurpa­tion of this vast source of wealth by a monop­oly of finance. Said inten­tion, and other uni­ver­sally accepted human ideas, expe­ri­ences and val­ues like con­fi­dence, hope, love and a sense of the abun­dant grace of the nat­ural world can then replace their present under­ly­ing psy­cho­log­i­cal oppo­sites enabling poli­cies that place the sys­tem in ser­vice to the indi­vid­ual instead of the per­son slav­ishly hav­ing to serve it.
    This does not pre­clude cer­tain sane and pru­dent reg­u­la­tions to help guide soci­ety and pre­vent human frail­ties from hijack­ing it with lesser val­ues. It also acknowl­edges the impor­tance that icon­o­clasm has as a lever for free­ing minds from the men­tally con­di­tioned con­ta­gion brought about by long asso­ci­a­tion with dis­eased cul­tural and eco­nomic sys­tems. Amen. So be it. Even so, come Lord Keens, along with your heav­enly father C. H. Dou­glas. 🙂

  • Derek R

    Rick, I agree. That was a par­tic­u­larly good com­ment, illus­trat­ing exactly what is wrong with the idea that you can only lend money that savers have pre­vi­ously deposited. I am sur­prised that it appar­ently made no impact.

  • Chris Arm­strong

    Thanks Steve — I found that inter­view very easy to under­stand and fol­low, prob­a­bly the most lucid and com­plete that you have done.

  • RickW

    I have fol­lowed the Krug­man arti­cle a bit fur­ther. In try­ing to jus­tify his posi­tion on Steve Keen against the odds of his “com­menters” he gets more mud thrown at him:

    Here is one of the com­ments:
    ”-mike G-Cor­val­lis

    It was funny, Mr Krug­man, to read the com­ments on the pre­vi­ous post, and see how many peo­ple accuse you of not know­ing how banks work, and of get­ting eco­nom­ics wrong.
    You really should read a good text or two… :-)”
    End Quote

    The prob­lem is that the texts he is read­ing are based on regur­gi­tated non­sense and he lacks suf­fi­cient enquiry to work out they are based on non­sense.

    I think it is funny, in a sad sort of way, that there are enough peo­ple around who under­stand what Steve Keen is work­ing on to defend his work although not many econ­o­mists among them.

  • Thanks Chris,

    I had some­one on Twit­ter abuse me over the same inter­view, so it’s nice to get a dif­fer­ent take on it.

  • Steve Hum­mel


    While you’re absorb­ing “the slings and arrows” of the eco­nomic estab­lish­ment for cor­rectly per­ceiv­ing flawed mod­el­ing etc., you might just as well take on the addi­tional deri­sion from ortho­dox minds that refuse or are unable to com­pre­hend what is true par­a­digm change actu­ally is.

    His­tory out­lives us all, tech­no­log­i­cal inno­va­tion is an inex­orable (and mostly pos­i­tive) force and the ulti­mate vec­tor and inten­tion of Human­ity IS freedom…so why not be men­tioned as one of the fore­most advo­cates of that inten­tion? I admire your brav­ery. Can you be braver still in advo­cat­ing (even if you do not nec­es­sar­ily or com­pletely agree with the accu­racy of Douglas’s analy­sis) his solu­tion which is par­a­digm chang­ing and free­ing of both eco­nom­ics AND the indi­vid­ual? Who knows we might all get lucky and this time make “the impossible”.…possible. The cri­sis is cer­tainly big enough this time. And if that hap­pens you’ll be one of the few who will have earned the right to address oth­ers with the greet­ing of “You’re wel­come!”

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