Prof. Steve Keen on pri­vate debt and his solu­tion people’s QE

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I’ve had some tough inter­views over the years (such as the BBC HARDtalk! inter­view ear­lier this year with Stephen Sackur), but I’d have to credit the stu­dent inter­view­ers at the Uni­ver­sity of Amsterdam’s Room for Dis­cus­sion event with giv­ing me the tough­est, well-informed grilling my ideas have had in pub­lic. I’m fol­low­ing up later today with a keynote speech at the Dutch Rethink­ing Eco­nom­ics event tonight, and I’ll post that here later this week.

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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  • Derek R

    Good inter­view. One minor nig­gle. It’s Ash­ley Madi­son, not Ash­ley Mar­tin. Oth­er­wise spot on as usual.

  • Karl


    At minute 59 you were about to address the sit­u­a­tion in Bel­gium, but cut short in the ongo­ing dis­cus­sion.

    Could you please com­ment on the Bel­gian case? What is the back­ground, the set­ting, and how and when are things likely to unfold? In par­tic­u­lar with regard to the hous­ing mar­ket?

    Any research, data source or fur­ther read­ing you would sug­gest?

    Thanks & Best regards,
    Karl (Leu­ven, Bel­gium)

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  • drew priest

    If we have a peo­ple QE / Jubilee / etc pro­gram that injects money into the econ­omy, then it will cause infla­tion, as dis­cussed in the video. To some extent that is desired. As a limit to that infla­tion, why wouldn’t we use increase inter­est rates at the same time? 

    The advan­tages I see of increas­ing the inter­est rates in pair with the cash injec­tion:
    1 — a tool to limit excess infla­tion
    2 — dri­ves the price of bor­row­ing up
    2a — nat­u­rally dri­ves the pri­vate debt down, with­out com­pli­cated & heavy handed inter­ven­tion into indi­vid­ual finan­cial choices
    2b — makes banks more cau­tious with loan risks
    3 — the value of sav­ings increases

  • Derek R

    Only money that is spent can cause infla­tion. Since the great major­ity of Prof Keen’s Mod­ern Debt Jubilee money goes into pay­ing off debt prin­ci­pal, it never gets spent before it is destroyed by the prin­ci­pal repay­ment action. Thus it does not cause infla­tion because it is never spent on phys­i­cal goods..

    The only risk of infla­tion comes from the peo­ple who have no debt when they receive the pay­ment. These peo­ple could spend the money and cause a bit of infla­tion. How­ever Cen­tral Banks have been try­ing to cre­ate a lit­tle infla­tion for some time, so I don’t see them hav­ing a prob­lem with that.

  • cavo­niuz

    The queen of Eng­land asked why no one saw the credit crunch com­ing. Mostly the answer was “it was an out­side shock”. But aliens didn’t invade Earth, there was no giant mete­orite, no Gozilla, no bib­li­cal flood or swarm of locusts. So you have to ask: did the shock that they talk about, hap­pen out­side the real econ­omy or did it hap­pen out­side their eco­nomic mod­els? Judg­ing by their track record the answer becomes obvi­ous.

  • Hi Karl,

    I don’t pro­vide much detail on Bel­gium in my next book Can we avoid another finan­cial cri­sis?, but on the met­rics there Bel­gium has a very high pri­vate debt level and extremely high credit growth right now. I’m too busy to answer in detail at present, but I’ll be giv­ing more detailed stats on all coun­tries once the sup­port­ing web­site for the book ( is up and run­ning.

  • Ah. That fox paw prob­a­bly reflects my short­age of hair then!

  • Dr Wirmussen

    A very inter­est­ing, well-thought through expla­na­tion of the mer­its of this approach and the rea­sons for it. I’m a big fan of the way you’re spread­ing these ideas to a new gen­er­a­tion that we’d thought lost to the cause.

    I must ques­tion, how­ever, your fail­ure to acknowl­edge the great debt we owe to the orig­i­na­tors of these ideas. Henry Ford was a great man and a great Amer­i­can, and although his rep­u­ta­tion has been sadly tra­duced these days we all owe him a great deal for set­ting out so clearly where the money is being sucked out of our sys­tem and who is doing the suck­ing.

    Your works are some of the most sem­i­nal in this field since The Inter­na­tional Jew was pub­lished, but that doesn’t jus­tify ignor­ing the intel­lec­tual debt you owe to Ford (and of course to the man he inspired, whose name can­not be men­tioned).

    Are you going to rec­tify this?

  • I owe Ford no intel­lec­tual debt, since I had never read him on this topic prior to your com­ment. I am now painfully aware of his anti-semi­tism: I found read­ing enough of that ref­er­ence to see his knowl­edge of money an extremely dis­taste­ful expe­ri­ence. Of course I was aware that Hitler under­stood mon­e­tary dynam­ics, which is why he wrote off so much Ger­man debt and ran huge deficits which built up Ger­man mil­i­tary might prior to the War. It is strange to now realise that he may have learnt much of this from Ford.

  • Bhaskara II

    @Professor Keen,

    Do you know why the gov­ern­ment bond inter­est rate cycle is so long? If so why or where is the answer?

    The gov­ern­ment bond inter­est rate cycle was on the order of 6o years for the last two cycles. The inter­est rate has been declin­ing for 35 years.

  • Bhaskara II

    I just saw this. Stanly Druck­en­miller sug­gested a tax change sug­gest­ing that it might bring jobs to the US and end Cor­po­rate lob­by­ing. I’m not sure that it would end lob­by­ing as the cor­po­ra­tions and their share hold­ers could still lobby. (The return on invest­ment for lob­by­ing seems to be >= 10 times.)

    For those out­side the US a cor­po­rate pays taxes on profit and then the stock hold­ers pay taxes on div­i­dends. The labor pay taxes on rev­enue.


  • Bhaskara II

    If the U.S. Won’t Pay Its Teach­ers, China Will”–12-19/if-the-u-s-won-t-pay-its-teachers-china-will

    Chi­nese young lady starts online tutor­ing com­pany start­ing with Eng­lish. That must have been one of the eas­i­est star­tups to get fund­ing for in China.

    Quotes from the arti­cle:

    Today, Mi is 33 and founder of a startup that aims to give Chi­nese kids the kind of edu­ca­tion Amer­i­can chil­dren receive in top U.S. schools. ”

    Mi is cap­i­tal­iz­ing on an allur­ing arbi­trage oppor­tu­nity. In China, there are hun­dreds of mil­lions of kids whose par­ents are will­ing to pay up if they can get high-qual­ity edu­ca­tion. In the U.S. and Canada, teach­ers are often underpaid—and many have quit the pro­fes­sion because they couldn’t make a decent liv­ing. Growth has been explo­sive. The three-year-old com­pany started this year with 200 teach­ers and has grown to 5,000, now work­ing with 50,000 chil­dren. Next year, Mi antic­i­pates she’ll expand to 25,000 teach­ers and 200,000 chil­dren.”

    Mi’s goal was to deliver not the cheap­est way to study, but rather the most effi­cient way to learn for the time and money invested.”

    VIP­Kid is already refin­ing its tech­niques by record­ing lessons on video and crunch­ing data on which strate­gies work best. They’ve found stu­dents learn more effec­tively if they can pick teach­ers that suit their apti­tudes and study exam­ples that cap­ture their inter­est. “It’s just now that we are able to see real gains in effi­ciency,” says Hut­ter, who also put money into VIP­Kid. “Depend­ing on the cur­rent choices for learn­ing, you could see 5x or 10x improve­ments in the time spent per unit of edu­ca­tion.” ’

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