Didn’t see the Forest Fire for the Trees

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One of the beauties of the modern age is that documents that once would have been either inaccessible, or taken years of sleuthing to locate, are now readily downloadable from the Web. One such set of documents is the transcripts of the meetings of the Federal Open Market Committee (FOMC) in 2007, all of which have now been released.

Everyone who wants to understand why we’re now mired in a permanent economic slump should read these documents—not because it will explain the slump itself, but because it confirms that those who were supposed to ensure that such calamities didn’t occur were clueless about the approaching crisis. Jim Cramer famously ranted precisely the same message at the time, and copped a lot of flak about it, but he was dead right—and the transcripts prove it.

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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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11 Responses to Didn’t see the Forest Fire for the Trees

  1. Denis says:

    I wish I could read it… but I still can’t register on that site due to my incompatible postal code.

  2. Steve Keen says:

    Try making one up Dennis–just use 3000 or something. Australian postcodes are 4 numerical digits.

  3. Mich says:

    I can’t see the real economy for FIRE and Government borrow/print “economy”.

  4. Bhaskara II says:

    Dear Professor Keen,
    I thought this article reporting and analyzing the fall of college enrollment in the U.S. might be valuable information for you. It talks about the education market shifting related to the economy. I think this article is pretty good.

    The news in the U.S. might be sydney’s advance indicator if the facts on the ground are the same.

    Also, foreign student visas to study in Australia have dropped. I don’t know the significance compared to total enrollment.

    Yes, you are a very good economics professor. The best economics professor I know of. And, you have been very kind, patient, generous, and fair to critics of your work. Many universities and students will be glad to have you.

    1. “College enrollment shows signs of slowing”, Jon Marcus, May 31, 2012

    An other article liked from the previous one.
    2. “More campuses freeze or cut tuition as backlash continues”, Jon Marcus, October 5, 2012

    Found it googling: “college enrollment decrease.” So, the search might give skewed results.

    3. “International Students” http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features20Dec+2011

  5. Bhaskara II says:


    Chucle, chuckle.

  6. Steve Roth says:

    Steve: “the FOMC – which is overwhelmingly dominated by conventional ‘Neoclassical” economists'”

    True, but even more so, it is made up of, literally owned by, creditors. The neoclassical thing is the intellectualized justification for serving their own interests.

    One extra point of inflation transfers *hundreds of billions* of dollars in buying power PER YEAR from creditors to debtors. (All without moving a single dollar between accounts.)

    This effect on stocks and credit and debt is the fundamental and overwhelmingly powerful effect of inflation, utterly dwarfing the flow and incentive effects that economists constantly obsess about.

    It’s so fundamental that it almost doesn’t qualify as “economics.” It’s just arithmetic.

    A few hundred billion dollars out-of-pocket is enough to get bond-holders’ attention, dontcha think?

    The Great Moderation, explained. It’s just amazing they didn’t figure it out sooner.

    This is why I prefer an inflation solution to the debt jubilee idea. It effects the transfer without anyone having to decide which debts get written off, and by how much.

    Response to those who say that this transfer is only true for “unexpected inflation”: ALL changes in the inflation rate are unexpected.

  7. Steve Roth says:

    Oops: stocks *of* credit and debt

  8. Steve Hummel says:

    If the FED was really interested in solving the problem of debt instead of trying to lull us all through another 2-3 decades of the Divine Right of Zombie Finance Age of economic history is for the next 5 years issue everyone over the age of 18 a $3000/month citizen’s dividend and stipulate that $2000/mo. of it must be used to pay down debt or pay college tuition (if no debt it’s all yours).

    The crisis is over immediately and the debt overhang is eliminated within that period. Meanwhile the Banks are downsized and instead of debt forever equity blooms out all over the place. Oh yeah, you would probably be wise to institute a retail discount mechanism which would stop inflation for the consumer and make merchants whole on their overhead charges.

    Should our PRIMARY intention be the will to power of the financial, corporate and political powers that be, or the will to economic sovereignty and freedom for the individual?

    In other words do we want Man to be made for systems, or systems to be made for Man?

  9. Andrew Rabbitt says:

    If the financial markets and the real economy are so disconnected as the FOMC presume, then haven’t they all just talked themselves out of a job? I mean, what use are the financial markets in the real world? We should just have shut them all down and got on with real things…?

  10. TruthIsThereIsNoTruth says:

    Where is the incentive to work SH? Oh yeah I remember you saying something about the ‘cultural heritage’ of innovation and production automation. In reality you are right, and the cultural heritage roughly translate to a history of exploitation. It is indeed interesting that your cultural inheretance is oblivion to where all your little widgets that make up your $3000/month way of life come from. Ignorance veiled with self righteousness is your cultural inheritance.

  11. Steve Hummel says:

    Your post is kind of incoherent actually, but here’s a shot at answering it.

    Where’s the incentive to work?

    Additional gain, the same as it is now. Nothing would stop anyone from pursuing employment with the system I conceive. The only thing is, as technological innovation actually makes employment less needful having the Dividend and having it increasingly replace the wage is a necessity. How else would we make the economy function. For a profit making economy this is absolutely essential, in fact this must be the evolution of profit making economics otherwise abundant production and ever increasing technological unemployment creates an absurdity.

    Well, I suppose, for those who are workaholics or too unimaginative to conceive of a self determined purposeful life in nurturing a family, mentoring others, the arts, intellectual pursuits etc. etc. but instead having everyone required to do some nonsensical task to earn their rip gut wages despite the ability of technology to do it faster and better……worrying about work instead of self determined purpose would make sense.

    Production is not the major economic problem except for people whose head is stuck in the 17th or 18th century and who are likewise still hypnotized by The Divine Right of Finance Age of Economics where only self interested, private Banking corporations and the governments they dominate are allowed to monopolize the creation of credit. How dare I suggest that monopoly be broken up with an appropriately firewalled off from politics central monetary authority with a specific mandate to gift individuals with money and compensate merchants for their discounts to consumers so as to avoid inflation. Forgive me.

    Money is created ex nihilo…so what is problem. I’ll tell you what the real problem is, its market worshiping idiots too busy defending a system instead of being open minded enough to get around to fixing it, and/or iconoclasts who still are burdened by orthodoxy and so are looking for solutions in the wrong places. It’s also puritanical attitudes about work, failure to confront the realities of technology and consequently being unwilling/unable to embrace it in most instances.

    Instead of such stupidity and habitual thinking we need Wisdom. Real Wisdom, not its caricature that the habitual, the stupid or the sophomoric worry about. In fact all of our systems and their orthodoxies need to bow to it. You heard me. We need to base our systems on Wisdom….and THEN derive economic, financial and monetary policies that accurately reflect that Wisdom. Economic theories are ignorance and folly waiting to happen unless they are based on Human Wisdom. Get over it.

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