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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