How rising debt causes inequality and crisis

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In a (for me!) brief pre­sen­ta­tion with 7 slides, I explain why ris­ing pri­vate debt nec­es­sar­i­ly caus­es increased inequal­i­ty, and leads to an eco­nom­ic cri­sis when the rate of growth of debt exceeds the rate of decline of wages as a share of nation­al income. Cru­cial­ly, the actu­al break­down is pre­ced­ed by an appar­ent peri­od of tranquility–a “Great Mod­er­a­tion”.

This was a short talk to a pub­lic audi­ence at ESCP Europe in Paris, which was pre­sent­ed in Eng­lish and also trans­lat­ed into French by Gael Giraud, Chief Econ­o­mist of the French Devel­op­ment Agency and the trans­la­tor of Debunk­ing Eco­nom­ics (so the sound­track is in both Eng­lish and French).

Click here for the Pow­er­point file

Right-click here to down­load a Min­sky file that has con­trols for (a) lin­ear or non­lin­ear func­tions; (b) Exis­tence or not of debt; ( c ) Prices or a non-price mod­el; (d) Exis­tence of gov­ern­ment; and (e) the capac­i­ty to con­trol the lev­el of employ­ment of the pop­u­la­tion that the gov­ern­ment is hap­py with (set at 65% ini­tial­ly).

You can down­load Min­sky from here and you can make a dona­tion to assist the devel­op­ment of Min­sky here:

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Here’s a sam­ple sim­u­la­tion of the debt-inequal­i­ty-cri­sis process from the Min­sky file linked above:


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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.