Steve Keen's Debtwatch

Discussion (11) ¬

1. 
   Glenn Stehle

   May 18, 2012, 2:59 am | #

   David Burchell:

   I think what you can say is Keen is describing his academic views as post-Copernican…and therefore by implication that Krugman is still living in the world where the sun was supposed to be rotating around the economic earth…

   It sounds as if Burchell has his cosmologies mixed up. Copernican cosmology underpins Modernism. Ptolemaic cosmology underpinned pre-Modernity, the Middle Ages.

   And yes, the moral, political, social and economic structure that the Copernican model informs, and which has been the dominant cosmology since the 17th century, is very much under siege. Copernican cosmology calls for a highly ordered, hierarchical, predictable and unchanging universe with the sun at the center and the planets orbiting about. Each planet obeys immutable physical laws of motion which determine its path and its orbit (it’s place), and to break out of that path or orbit would be unthinkable. Perhaps the ethos is best captured by the Victorian era economist Alfred Marshall whose economic philosophy Robert Heilbroner describes as follows:

   [T]o sum up Marshall’s basic concern is the term we have already identified as the new Victorian vision of the economy—-the term “equilibrium.” … Marshall was primarily interested in the self-adjusting, self-correcting nature of the economic world. As his most brilliant pupil, J.M. Keynes, would later write, he created “a whole Copernican system, in which all the elements of the economic universe are kept in their places by mutual counterpoise and interaction.”

   –Robert Heilbroner, The Worldly Philosophers

   However, as Stephen Toulmin goes on to explain in Cosmopolis: The Hidden Agenda of Modernity, the indomitable human will has once again asserted itself:

   In the 18th and 19th centuries the upper (“respectable”) classes had assumed that the varied and numerous lower (“unfortunate”) classes “knew their places”, and could, if necessary, be kept in those places by social pressure of some kind.

   Now, all these classes began to speak up for themselves, in distinct but concerted tones. In theory, the interests of the NAACP, La Raza, the Grey Panthers, and the Gay and Lesbian Alliance, were anything but identical: in practice, they united in opposition to those structural rigidities that “respectable” people had viewed as inevitable preconditions for a stable social order. There followed a sequence of assaults on the inequalities entrenched in European society around 1700, and legitimated by the new cosmopolis… Throughout the 1970s, all the inequalities built into modern society came under attack in turn: women, the elderly, the handicapped, lesbians and gays, all spoke up, one group after the other. Those who never questioned the rights and wrongs of modern nationhood found it a terrible shock… Now, many believers in “traditional values” understood…that it is the business of the poor to stay poor, of blacks to stay deferent, of women to stay home, of the handicapped to stay in the back room, and of homosexuals to stay in the closet.

   [T]he traditionalists’ shock was intelligible…
2. 
   Glenn Stehle

   May 18, 2012, 3:44 am | #

   David Burchell:

   Krugman can point to another fact which I think Keen would struggle to explain which is that the global economy understood as a system does seem to have a major problem in terms of the relationship of China and the rest of the world which really isn’t about banking….

   Here I strongly disagree with Burchell’s assertion that the relationship with China has nothing to do with banking.

   The best and easiest-to-understand explanation of how banking and the real economy are inextricably intertwined in regards to China was given by Adam Curtis in his latest film, All Watched Over by Machines of Loving Grace.

   The explanation begins here in Part 1, “Love and Power” at minute 50:48

   http://topdocumentaryfilms.com/all-watched-over-by-machines-of-loving-grace/
3. 
   Steve Hummel

   May 18, 2012, 6:25 am | #

   Demon est deus inversus.
4. 
   Glenn Stehle

   May 18, 2012, 6:39 am | #

   David Burchell said:

   Paul Krugman sees himself as the embodiment of John Maynard Keynes, the famous economist from the 1930s who proposed in 1936 in a famous book Remedies to the Great Depression that really meant spending money to stimulate demand to get the economies out of the crisis. And at the time John Maynard Keynes was much less concerned with financial matters than he was as it were the real economy. I think it’s fair to say that Krugman has kept the Keynesian flame afire ever since….

   Burchell gives us a bowdlerized version of Keynes, sanitized of Keynes’ earlier comments concerning what Keynes called the “murder of Vienna” in which a Carthaginian peace was agreed upon following WWI, and Germany mandated to pay a sum of reparations so huge that it would force her into the most vicious practices of international trade in order to earn the pounds and francs and dollars.

   Keynes’ opposition to the massive debt being heaped upon Germany was so strong that he resigned his position as Deputy for the Chancellor of the Exchequer and began a polemic against it:

   The danger confronting us, therefore, is the rapid depression of the standard of life of the European populations to a point which will mean actual starvation for some (a point already reached in Russia and approximately reached in Austria). Men will not always die quietly. For starvation, which brings to some lethargy and a helpless despair, drives other temperaments to the nervous instability of hysteria and to a mad despair. And these in their distress may overturn the remnants of organization, and submerge civilization itself in their attempts to satisfy desperately the overwhelming needs of the individual. This is the danger against which all our resources and courage and idealism must now cooperate.

   –John Maynard Keynes, The Economic Consequences of the Peace

   Roosevelt had only intensified the practice of bailing out the banks that began under Hoover. But with Roosevelt it was a Faustian bargain (something Krugman seems to be in denial of), and the massive spending that was lavished on the banks to keep them afloat came with strings attached: regulation and supervision, and a humiliating public flogging.

   Frederick Lewis Allen explains in Since Yesterday:

   Under the existing debt structure Roosevelt had now placed, at many new points, the credit of the government itself. He had committed himself to recovery through rising prices and large-scale business expansion, rather than through falling prices and the writing-off of debts.

   It would be interesting to know if Keynes actually believed in his heart of hearts that public spending offered a way out of the deflationary debt trap, or if he was merely placing a scientific imprimatur upon policies that had already been decided by political exigencies. I ask this because of something Allen says in Since Yesterday:

   …Hoover was acting with a tory heartlessness in permitting financial executives to come to Washington for a corporate dole when men and women on the edge of starvation were denied a personal dole. What is certain is that at a time of such widespread suffering no democratic government could seem to be aiding the financiers and seem to be simultaneously disregarding the plight of its humbler citizens without losing the confidence of the public.

   along with something Robert Heilbroner said in The Worldly Philosophers:

   As a matter of fact, the cure had begun before its actual prescription was written; the medicine was being applied before the doctors were precisely sure what it was supposed to do. The Hundred Days of the New Deal had enacted a flood of social legislation that had been backing up for twenty years behind a dam of governmental apathy. These laws were meant to improve the social tone, the morale, of a discontented nation. But it was not social legislation that was designed to revitalize the patient. That tonic was something else: the deliberate undertaking of government spending to stimulate the economy…

   …Hence when The General Theory came out in 1936, what it offered was not so much a new and radical program as a defense of a course of action that was already being applied. A defense and an explanation.
5. 
   Steve Hummel

   May 18, 2012, 7:01 am | #

   What we have to get comfortable with is the idea that the one reality is everywhere and at all times……at least two fold in character. And that wisdom is both understanding that and taking responsibility for balancing oneself and the systems you’re a part of.
6. 
   Steve Hummel

   May 18, 2012, 7:20 am | #

   Keynesianism was in the final analysis the culturally allowable “solution”. The real solution is not a redistributive elitist economic and monetary system, but a Distributist SOCIAL credit one designed for the greater freedom of everyone AND the system. And the wise and rapid resolution of the current crisis is an acceleration of debt reduction by pay off thereof.
7. 
   RickW

   May 18, 2012, 1:10 pm | #

   If I were to describe this interview as superficial I flatter both the content and the knowledge of both interviewer and interviewee have on the topic.

   There is no mention of growth in private debt other than whatever could be implied by “bad loan practices”.
8. 
   OzLeroy

   May 19, 2012, 11:29 am | #

   Wow, I just found this. Regulators don’t want people to know the risks in the banking system in Australia, now this is interesting:

   http://www.smh.com.au/national/financial-institution-risk-list-kept-secret-20111226-1pahf.html

   I openly wonder, is this because, if this info were available:
   a – people would be able to make informed decisions about their investments and banking services?
   b – analysts such as keen and others would be able to suitinise the data and assess likely trajectory of the banking system, debt dynamics and broader economic implications with more accuracy?

   The response from both the RBA and APRA (laywer) are not exactly comforting in the current economic climate. Especially when Australia’s alledged net liabilities are factored in:

   “As at March 7, 2012, Australia’s gross foreign liabilities stood at $2.067 trillion….On the other side of the ledger, Australia’s gross foreign assets allegedly amount to $1.212 trillion. If that’s accurate, and if my maths is correct, our liabilities exceed our assets by about $40,000 for every man woman and child in the country.” from http://www.abc.net.au/unleashed/4017474.html. (note: I have not reveiwed the veracity of these figures).

   It seems, more and more, in the current climate it is too risky for financial istitutions to provide information to citizens.

   Thoughts anyone?
9. 
   jb

   May 19, 2012, 6:03 pm | #

   I agree with RickW. I heard it live and initially thought Paul Comrie-Thomson might as well have interviewed my elderly mother. On re-listening to it perhaps its not that bad. But Paul CT is no Lauren Lister and David Burchell is not pretending to be more than an educated man on the street. I hoped for a little more from someone from Steves own university.
10. 
    impermanence

    May 20, 2012, 2:47 am | #

    “It seems, more and more, in the current climate it is too risky for financial institutions to provide information to citizens.

    Thoughts anyone?”

    Pardon my cynicism, OzLeroy, but I believe it was Henry Ford who quipped,

    It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

    http://www.brainyquote.com/quotes/quotes/h/henryford136294.html#Q4dCsXMmAg1BM056.99
11. 
    TruthIsThereIsNoTruth

    May 20, 2012, 8:53 am | #

    OzLeroy,

    I would be more worried if immediately after the crisis the regulators did not have a list of risks to the Australian financial system.

    They are also right to keep it from the public, who in general receive their information from general media, who will always turn a small thread of information into an exciting story for the sensation hungry general public.