Tilt­ing At Wind­mills: The Faus­t­ian Folly Of Quan­ti­ta­tive Eas­ing

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As I explained in my last post, banks can’t “lend out reserves” under any cir­cum­stances, which under­mines a major ratio­nale that Cen­tral Bank econ­o­mists gave for under­tak­ing Quan­ti­ta­tive Eas­ing in the first place. Con­se­quently, the hope that Bernanke expressed in 2009 is “To Dream The Impos­si­ble Dream”:

To dream the impos­si­ble dream
To fight the unbeat­able foe
To bear with unbear­able sor­row
To run where the brave dare not go

For­mer Chair of the Fed­eral Reserve Ben Bernanke lis­tens while US Sec­re­tary of the Trea­sury Jacob Lew speaks at the Brook­ings Insti­tu­tion July 8, 2015 in Wash­ing­ton, DC. AFP PHOTO/BRENDAN SMIALOWSKI (Photo credit should read BRENDAN SMIALOWSKI/AFP/Getty Images)

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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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  • Bhaskara II

    A George Soros quote,

    The act of lend­ing can change the value of the col­lat­eral.”

  • Bhaskara II

    Two more Soros quotes,

    The con­cept of a gen­eral equi­lib­rium has no rel­e­vance to the real world (in other words, clas­si­cal eco­nom­ics is an exer­cise in futil­ity).”

    “Every bub­ble con­sists of a trend that can be observed in the real world and a mis­con­cep­tion relat­ing to that trend. The two ele­ments inter­act with each other in a reflex­ive man­ner.”

  • Bhaskara II

    By reflex­ive he means a dynamic sit­u­a­tion where at least two things effect each other. Not a one way cause and effect sit­u­a­tion.

  • Bhaskara II

    Here he uses an old account­ing term, to dis­count. To take a dis­count is to buy or value some thing at lower than face value. For instance to buy a $1000 bond or loan for $900. It is in old book­keep­ing books avail­able in google books.

    Mar­kets are con­stantly in a state of uncer­tainty and flux and money is made by dis­count­ing the obvi­ous and bet­ting on the unex­pected.”

  • twowith­inthree­thati­sone

    Those are actu­ally very good insights except for two things:

    A macro-eco­nom­i­cally dis­e­qui­li­brated sys­tem is nei­ther free nor free­ing, and 

    Con­se­quently not eth­i­cal.

    Now if you cre­ated a sys­tem where every­thing else was
    profit mak­ing and struc­turally basi­cally the same and was also free, free­ing and con­se­quently eth­i­cal for the individual.…you’d have a “the higher and har­nessed dis­e­qui­lib­rium” and a mod­ern solu­tion.

    You read it here first: wisdomicsblog.com

  • Tim Ward

    Above all, cen­tral banks have a respon­si­bil­ity to the rich…’ Can’t remem­ber where this came from, was it a quote in one of Mitchell-Innes essays on money? Any­way, Prof Keens hits all the tar­gets dead cen­ter.

    …and a mis­con­cep­tion relat­ing to that trend.” Do you think that per­haps Soros is talk­ing about mar­ket power? Con­tin­u­ally being con­fused by mar­ket pun­dits. Mar­ket power rules over supply/demand.

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