End this Depression Never?

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Larry Sum­mers’ speech at the IMF has pro­voked a flurry of responses from New Key­ne­sian econ­o­mists that imply that Sum­mers has located the “Holy Grail of Macro­eco­nom­ics” – and that it was a poi­soned chalice.

Sec­u­lar stag­na­tion”, Sum­mers sug­gested, was the real expla­na­tion for the con­tin­u­ing slump, and it had been with us for long before this cri­sis began. Its vis­i­bil­ity was obscured by the sub­prime bub­ble, but once that burst, it was evident.

So the cri­sis itself was a sideshow. The real story is about inad­e­quate pri­vate sec­tor demand, which may have existed for decades. Gen­er­at­ing ade­quate demand in the future may require a per­ma­nent stim­u­lus from the gov­ern­ment – mean­ing both the Con­gress and the Fed.

Read the rest of this post here. (Health warn­ing: con­tains sub­stan­tial por­tions of irony. May exceed your daily allowance).

About Steve Keen

I am a professional economist 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 debts accumulated in Australia, and our very low rate of inflation.
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6 Responses to End this Depression Never?

  1. koonyeow says:

    I’ve received the omen to buy that ticket to Mars. Earth has become dan­ger­ous with Krug­man and Sum­mers around.

  2. Frank Reitzenstein says:

    I was just read­ing Tyler Dur­den. Whilst the US is print­ing $1 tril­lion, China is print­ing $3 trillion.


    My first thoughts were the Aus­tralian Hous­ing Bub­ble, as how to get the money out of China was dis­cussed. It also looks like there is no solu­tion but for these scam­mers to reset their sys­tems, because when they stop print­ing it appears that the shit will hit the fan. Per­haps that is the idea, to force a One World cur­rency after the crash?

  3. Steve Hummel says:

    It’s just exactly what I have been post­ing on here for well over a cou­ple years now. Inher­ent lack of demand and a tech­no­log­i­cally advanced/advancing econ­omy are the exac­er­bat­ing fac­tors of the prob­lem that vir­tu­ally every econ­o­mist has missed and/or dis­missed due to ortho­dox the­ory and habit­ual reliance on same.

    Dr. Keen, you need to get out in front of this, and not just in the cau­tious, sci­en­tific, plod­dingly inef­fec­tive way of sci­ence because that doesn’t work with either your “sci­en­tific” brethren or the pop­u­lace at large. The fol­low­ing is re-posted from my response to a post on Real World Eco­nomic Review here:


    See­ings how the “eru­dite” have finally kind of real­ized that demand is now a sys­temic prob­lem, and I, a non econ­o­mist have been say­ing this since for­ever here…perhaps you will see the Wis­dom of what I am saying.…because I beat the “eru­dite” to their “con­clu­sions” with the use of Wis­dom alone. Here is my post at the above link:

    Money, being mere fig­ures is basi­cally accoun­tancy. Eco­nom­ics is indeed the study of rela­tion­ships, emer­gent qual­i­ties, open sys­tems etc. Part of that process is under­stand­ing the rela­tion­ships between the datums to be found in the cost account­ing books of each and every enter­prise in the econ­omy. Cost after all being one of the absolute basics of eco­nom­ics as well. Exchange being one of the other basics and money being the tool for such.
    So money and eco­nom­ics already con­tain both a hard sci­ence (money/accounting) and a social sci­ence (eco­nom­ics). Actu­ally the ques­tion is, will we merge them in a wise man­ner so as to craft wise poli­cies. Wis­dom is the appro­pri­ate “tool” for that because after all it is the “sci­ence” of inte­gra­tive think­ing (phi­los­o­phy) AND act­ing (pol­icy). Fur­ther­more, Wis­dom in no way excludes sci­ence, but in fact includes (and merges) BOTH sci­ence And intu­ition fur­ther solid­i­fy­ing it as the appro­pri­ate means of reach­ing the goal of what Law­son posits. Not coin­ci­den­tally, the hall­marks of par­a­digm change, sci­en­tific break­throughs (social or oth­er­wise) and true and inclu­sive progress is when (good, thor­ough and not sim­ply ortho­dox) sci­ence is in fact aided/assisted by….intuition. This fact is often over­looked by those of a sci­en­tific mind­set.
    The final ques­tion need­ing to be asked is: What are the most pow­er­ful and human/humane con­den­sa­tions of Wis­dom itself? I have put forth my can­di­dates for these, and I’m con­fi­dent that they apply uni­ver­sally to all humans and all human sys­tems as well. “Upping the game” of eco­nom­ics and money sys­tems, and the pol­icy con­sid­er­a­tions of same, specif­i­cally, by mak­ing them reflect and align with the con­den­sa­tions of Wisdom…is the straight­for­ward and com­pletely ratio­nal task ahead.

  4. Steve Hummel says:

    Iron­i­cally the rea­son why most sci­en­tists, and sci­ence by itself is inad­e­quate for the for­mu­la­tion of the­ory and pol­icy is.….lack of Faith…as in Con­fi­dence. Of course if they had the com­pletely nat­ural expe­ri­ences of Con­fi­dence, Hope, Char­ity and Grace to guide and edu­cate them they’d undoubt­edly be on board for the align­ment of poli­cies that accu­rately reflected.….those very same experiences.

    Wis­dom and its con­den­sa­tions, the answer you can trust for both indi­vid­ual and sys­temic policy.

  5. peteryogman says:

    Leav­ing demo­graph­ics aside it seems they are get­ting a lit­tle closer to the answer even with a “loan­able funds” model. Too much pri­vate debt means less money cre­ation by banks, also due to bub­ble bust­ing with banks pulling in the reins. Fis­cal pol­icy just bor­rows money that already exists out of the econ­omy so no real ben­e­fit here either. Fed also just pushes money into the Ponzi econ­omy. Solu­tion is well known. First some mod­i­fied ver­sion of Keen’s debt jubilee idea that could actu­ally be accept­able accom­pa­nied by nation­al­iza­tion of the Fed so that money can actu­ally be spent into the econ­omy and not bor­rowed out of it. See work of Werner and Kumhoff. Let’s make this clear. Steve you are now pretty good buds with both these guys thanks to AMI. Just put it all out there.

  6. Steve Hummel says:

    Tech­ni­cally you wouldn’t even need to do a jubilee if you insti­tuted a suf­fi­ciently large div­i­dend, but yes the jubilee would still be the wise and fastest way to reset and return to a vibrant econ­omy., and yes a div­i­dend is the absolutely nec­es­sary pol­icy to insti­tute, that is if you actu­ally want to have an econ­omy in vir­tual equilibrium.

    Demo­graph­ics are just another fac­tor con­tribut­ing to the indi­vid­ual mon­e­tary scarcity which is the most under­ly­ing prob­lem of the econ­omy. Mon­e­tary infla­tion, out sourc­ing, wage arbi­trage, inno­va­tion on and on make the list longer and longer. But of course if all wages, salaries and div­i­dends are only on aver­age 20% of all costs for an enter­prise AND ANY enter­prise and yet all costs MUST go into price.…then how can the rate of flow of prices be ANYTHING but higher than the rate of flow of indi­vid­ual incomes??????????????????????????????????????????

    And how can there be an equi­lib­rium of total indi­vid­ual incomes and total prices?
    Veloc­ity of money’s cir­cu­la­tion? In the first place it doesn’t mat­ter what the so called veloc­ity of money is because no mat­ter how high it is when­ever money actu­ally re-enters the econ­omy that is, it goes back to some enterprise.…the rule of all costs hav­ing to go into prices is re-initiated. You’d have to get re, re, re, re, re-circulation in each com­mer­cial out­lay of finances to doubt­fully attain an equi­lib­rium. Not even under the best and most pros­per­ous of
    cir­cum­stances will you get such rates. And main­tain those ideal and still inad­e­quate num­bers for a sus­tained period of time? And even if you could why do so? All that would insure is the con­tin­ued dom­i­na­tion and pol­icy con­trol of things by self inter­ested elites…the same as now. Fagetaboutit! Let us have power placed in the “many hands” of indi­vid­u­als with their ade­quate pur­chas­ing power money-votes, and in a sys­tem that actu­ally func­tions and serves them…not that they slav­ishly must serve!

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