What next after Brexit?

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A cliché—“Expect the Unexpected”—has happened. As I noted in “The Divisive Brexit Vote”, though I favoured Brexit, I took the opinion polls at face value, and expected that Britain as a whole would vote to remain in the EU. Instead, in the largest electoral turnout in twenty years, the UK voted 52:48 in favour of leaving the EU.

I’ll leave a post-mortem of the vote itself for later; the main interest now is what will happen because of it. Many pundits from the Center, Left and Right opposed Brexit in the belief that economic Armageddon for Britain and the globe would flow from it; we’ll now see how realistic their fears were. I regard them as seriously overblown, for a number of reasons.

The Divisive Vote Over Brexit

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Andrew Watt has written a passionate critique of my support for Brexit (“Progressive economists should support Remain not Brexit – a response to Steve Keen”), and it highlights a key feature of this peculiar referendum: people who normally find themselves on the same side in most economic and political debates have been divided by this referendum.

Andrew comments that he broadly agrees with my economic analysis on most issues, but vehemently opposes me here. Likewise, good friends like the heterodox economist Geoffrey Hogdgson; Ann Pettifor, who led the successful Jubilee 2000 campaign to cancel the debt of the world’s poorest nations; and Yanis Varoufakis, who knows a thing or two about the EU, all strongly support Remain.

There has to be a better way

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Note: This was published as my last column on Business Spectator on April 6th, but it’s now gone missing after News Ltd merged BS with its own in-house stable and changed all the URLs. Given the election and Elizabeth Farrelly’s excellent thought piece in the Sydney Morning Herald “The great tragedy of Malcolm Turnbull“, I thought it was a good time to revive it.

One of the disadvantages of growing up is finding in your old age that people you never took seriously in your youth are now running your country.

CERN Discovers New Particle Called The FERIR

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CERN has just announced the discovery of a new particle, called the “FERIR”.

This is not a fundamental particle of matter like the Higgs Boson, but an invention of economists. CERN in this instance stands not for the famous particle accelerator straddling the French and Swiss borders, but for an economic research lab at MIT—whose initials are coincidentally the same as those of its far more famous cousin.

Despite its relative anonymity, MIT’s CERN is far more important than its physical namesake. The latter merely informs us about the fundamental nature of the universe. MIT’s CERN, on the other hand, shapes our lives today, because the discoveries it makes dramatically affect economic policy.

Zombies-To-Be and the Walking Dead of Debt

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Using the dynamics of credit–which most other economists ignore–I explain why Japan, the USA and UK are among the “Walking Dead of Debt” and why China, Canada, Australia and South Korea are on their way to joining the Debt Zombies. This presentation is based on work I’m doing for a new 25000 word book for Polity Press entitled “Can we avoid another financial crisis?”, which should be published later this year.

Transcending the Lucas Critique & simple dynamic modelling with Minsky

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The Lucas Critique has ruled economics for the last 40 years, and led it into a dead-end as well. In this talk to the Economics for Everyone conference run by the Post Crash Economics Society in Manchester, I argue that micro-founded models fail because of the emergent properties that characterise complex systems. An alternative approach that transcends Lucas’s well-founded objection to ad-hoc model-building is to build models from strictly true macroeconomic identities. I show that three simple identities–the employment rate, the wages share of income, and the private-debt-to-GDP ratio–are sufficient to build a simple dynamic model that generates the possibility of a financial crisis. I also give a high-speed but I think comprehensible tutorial on using Minsky, the Open Source monetary modelling program.

Are we facing a global “Lost Decade”?

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This is an invited paper by the Private Debt Project, an initiative of the philanthropic organization the Governor’s Woods Foundation to raise awareness about the economic importance and dangers of private debt.

The era of low growth known as Japan’s “Lost Decade” commenced in 1990, and persists to this day.  While most authors acknowledge that the seeds for the Lost Decade were sown by excessive credit growth in the preceding Bubble Economy years, only Richard Koo (Koo, 2009, Koo, 2011, Koo, 2003, Koo, 2014) and Richard Werner (Voutsinas and Werner, 2011, Werner, 2002) have systematically argued that insufficient credit growth during the “Lost Decade” explains Japan’s now quarter-century long slump. Yet these arguments tell us more about the dilemmas facing today’s world economy than many more commonly accepted explanations of the current slowdown.

The Seven Countries Most Vulnerable To A Debt Crisis

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For decades, some of the most important data about market economies was simply unavailable: the level of private debt. You could get government debt data easily, but (with the outstanding exception of the USA—and also Australia) it was hard to come by.

That has been remedied by the Bank of International Settlements, which now publishes a quarterly series on debt—government & private—for over 40 countries. This data lets me identify the seven countries that, on my analysis, are most likely to suffer a debt crisis in the next 1-3 years. They are, in order of likely severity: China, Australia, Sweden, Hong Kong (though it might deserve first billing), Korea, Canada, and Norway.

Central Banking, Climate Change and Environmental Sustainability

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The Council on Economic Policies and the Bank of England are organising a workshop on this topic to be held at the Bank on November 14-15 2016. A call for papers has just been put out, with a deadline of June 30th.


Climate change and other environmental challenges are moving up policy agendas worldwide. Nonetheless, the potential implications of environmental risks and scarcities for central banking as well as the linkages between financial regulation, monetary policy and environmental sustainability remain largely unexplored.

Get ready for an Australian recession by 2017

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For the last 25 years, Australian politicians of both Liberal and Labor hue have been able to brag that, under their stewardship, Australia has avoided a recession. Those bragging rights are about to come to an end. During the life of the next Parliament — and probably by 2017 — Australia will fall into a prolonged recession.

Click here to read the rest of this post, and here to download the Excel file showing the link between a slowdown in the rate of growth of debt and a recession.