Thursday, July 8, 2010

Steve Keen Calls for Debt Cancellation, or Does He???

Steve recognizes the solution to our debt-deflation-depression is to cancel debt. However, he seems to dispair that the politicians lack the will to do it.

Darn it, Steve, grow a backbone! Instead of fatalistically resigning yourself to defeat, ADVOCATE FOR CHANGE. Use your prestige and popularity to initiate the process of systematic debt cancellation.

This apathy is soul-death, it disgusts me. If even the man who has identified and quantified the problem, who has built up a world-wide following pointing out that DEBT IS THE PROBLEM, simply lowers his head and licks his own balls rather than speaking out for the positive solution, good lord, what hope is there.

It is clearly not a failure of intelligence on Keen's part. It is nothing short than a failure of COURAGE. The choice is plain: Be a ball-licking dog dragging your head in the dirt, whipped and whining... or stand up to our banking overlords and DEMAND FREEDOM from their debt enslavement trap. Which is it, Steve???

From the latest article over at Steve's blog,

The motive force driving the crash is the ratio of debt to GDP–a key feature of the real world that the mainstream economists who dominate the world’s academic university departments, Central Banks and Treasuries ignore. In the model, as in the real world, this ratio rises in a boom as businesses take on debt to finance investment and speculation, and then falls in a slump when things don’t work out in line with the euphoric expectations that developed during the boom. Cash flows during the slump don’t allow borrowers to reduce the debt to GDP ratio to the pre-boom level, but the period of relative stability after the crisis leads to expectations–and debt–taking off once more.

Ultimately, such an extreme level of debt is accumulated that debt servicing exceeds available cash flows, and a permanent slump ensues–a Depression.

Its final stage emphasises a message that Michael Hudson, one of the very few others to see this crisis coming, puts very simply: “Debts that can’t be repaid, won’t be repaid”. As Americans now seem to be realising, the financial crisis has not gone away, because the debt that caused it is still there.

Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt–either directly by abolishing large slabs of it, or indirectly by inflating it away. I have very little confidence in the ability of the Federal Reserve to do the latter, while the former will take a level of political fortitude that is far beyond our current politicians.

1 comment:

wraft said...

Here is a comment I posted to Steve Keen's latest article


I just scanned you new paper for the first time and noticed that you intend to model policies for dealing with the coming depression. Aren’t the two main problems in a depression

1. Low investment in the real economy;

2. High and rising unemployment ?

It seems to me that the Keynesian prescription of inflationary money policy, while it helps the employment problem, works against the investment problem.

Would it be better to address both problems at the same time? I’m thinking along the lines of

A. Raise interest rates so that savers wouldn’t have to speculate;

B. Negative interest scrip money spent into circulation via govt salaries, contracts and benefits. Such money would have high velocity and would self liquidate without creating inflation.

Irving Fisher thought highly enough of stamped money that he wrote a small book about it. Brad DeLong brought it up recently as well.