by Summary:
This week on Real-Time with Steve Keen & Friends, we talk all things Monetary Policy with special guest David Fields. What does the interest rate, interest on reserves, open market operations and inflation expectations mean to central banks around the world. Links: https://www.patreon.com/c/ProfSteveKeen/home https://www.patreon.com/c/relearningeconomics https://www.planksip.org/ https://businessfilmbooth.podia.com/studio-set-up https://medium.com/@monetarypolicyinstitute
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This week on Real-Time with Steve Keen & Friends, we talk all things Monetary Policy with special guest David Fields. What does the interest rate, interest on reserves, open market operations and inflation expectations mean to central banks around the world. Links: https://www.patreon.com/c/ProfSteveKeen/home https://www.patreon.com/c/relearningeconomics https://www.planksip.org/ https://businessfilmbooth.podia.com/studio-set-up https://medium.com/@monetarypolicyinstitute
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Steve Keen considers the following as important:
This could be interesting, too:
New Economics Foundation writes Is the Labour government delivering on its promises?
John Quiggin writes Dispensing with the US-centric financial system
New Economics Foundation writes Whose growth is it anyway?
Matias Vernengo writes What is heterodox economics?
| This week on Real-Time with Steve Keen & Friends, we talk all things Monetary Policy with special guest David Fields. What does the interest rate, interest on reserves, open market operations and inflation expectations mean to central banks around the world. Links: https://www.patreon.com/c/ProfSteveKeen/home https://www.patreon.com/c/relearningeconomics https://www.planksip.org/ https://businessfilmbooth.podia.com/studio-set-up https://medium.com/@monetarypolicyinstitute |
I needed a break to make coffee, but you didn't have to stop the stream for it !!
We saw you leave and we just threw in the towel immediately. If we can't keep dregeye it's over..
@@HowtoBuildaWorldBrain 😲
(😉) dreg👁
Thank you! 👍
Money doesn't come from "thin air" any more than any law or other legal instrument does. Anyone can create money, as Minsky said. The problem is getting them to accept it. Same goes for laws. Money's value flows from the coercive power to tax of the central government as well as its full faith and credit as ultimate buyer or recipient of last resort. The government won't go broke unless the country itself fails or is conquered, so you know there is always someone who will take the government's money—in payment for taxes, fines, or fees if nothing else.
That is why the FED required Congress to pass the 16th Amendment. Private money backed by public policy and good for all debt public or private.
Steve says Neoclasical economists believe that money doesn't matter. It follows then that, IF money doesn't matter then regulating the control money (Monetary Policy) IS irrelevant.
Now, if Inflation reduces the value of money, that too is not a problem BECAUSE Money doesn't matter. 🤪
Lastly, the reason they believe money doesn't matter is because: Money is neither created nor destroyed, it just changes hands, and who has access to or control of it. Its a systemically fixed entity.
Pretty confident Steve is saying Neoclassical economists believe that money DOES matter. They want it to appear to be a commodity.
@@HowtoBuildaWorldBrain Fiat money is backed by taxes! Why do you think national debt is meticulously recorded, along with each individual citizen’s share? At present, the debt burden for every U.S. citizen sits at a staggering $323K.
Specifically Steve says Neoclassical economics does not think money matters because they still consider banks as intermediaries, so bank lending does not add to aggregate demand. So on that assumption Neoclassical econ fails to account for demand created by bank activity to its fullest extent.
Therefore when they suggest policies to the management of money, they don't exactly know what they are managing. If things go right they say look we know what we are doing, if they go wrong they say look it's because the federal government was spending too much.
Damn I missed the livestream again
Banks are private for-profit corporations that get interest-free credit as a multiple of their bank investor capital (as per BIS rules) to purchase assets. That's why when they create credit it goes on their liability side, they MUST pay it back, so to insure that happens they buy assets: loan contracts on people who purchase real assets like houses, cars, etc, and that's why loans for eduction MUST be paid back and borrowers can't declare bancruptcy to avoid paying. The only time banks 'loan' this credit is credit cards, and that's why they have high interest because those are not backed by any real assets, just future income from labor.
Banks create money out of thin air to buy government bonds, then charge interest on that very same money they conjured up. The interest is pocketed by private individuals who use it to bribe governments and enslave humanity. What you’ve described is simply the complex smoke and mirrors designed to obscure this blatant crime!
Absolutely, banks have a dilemma lend deposits to earn interest and keeping deposits safe in case of withdrawal. Technically those lendings are the Domestic Credit to might come across.
Why rabbit stew. In Australia we would have had hare stew instead or maybe even kangaroos Stew.
Nah mate kangaroo is best used to make Bolognese Sauce.
And being Australian I never heard anyone call them hares down here.
We call them rabbits, rabbits or rabbits.
@@tonywilson4713 https://www.lockyervalley.qld.gov.au/repository/libraries/id:2eccbxg5l17q9su8pzhy/hierarchy/our-services/environment-and-pest-management/documents/pest-management/rabbits/Rabbit%20or%20hare.pdf
Someone please tell Peak Prosperity that the US government is not going broke. The government needs to spend to keep the economy ticking along.
Once you understand money it's almost embarrassing to hear people worry that the govt will "run out of money"! 😂
@Jenks1 yes
@@Jenks1You are correct that the government won't "run out of money". But this makes no important point.
Government spending reduces supply, as the non-productive workers spend in the economy.
@@dialecticalmonist3405 On the plus side, you get electricity, water, roads, ports, airports, bridges etc. which lower costs for everybody. How is that for non-productive.
The crucial idea is to identify a bottleneck in an economy. You would be right if we were resource constrained.
But we are demand constrained.
@dialecticalmonist3405 The govt sector produces supply just as much as the private sector. It's a question of which sector should supply which things. If the demand isn't there then the potential supply won't be created or won't be used.
Is the fed effective at enslaving humanity? YES, it is very effective!
The central bank money-printing debt slave system is a crime, plain and simple. The only reason it’s not widely recognised or discussed as such is because the voices you hear speaking about it are paid by the very money-printing debt slavers to present it as though it’s perfectly legitimate and not a crime at all.
Great conversation and insight. I've recently started a deep dive into macroeconomics, aiming for dexterity. Steve Keen came across my Twitter(X) timeline and ever since then, I've been intrigued. I have zero knowledge of system dynamics, but I plan obtaining knowledge of it this year. Awesome episode!
Thanks! To get a handle on system dynamics (admittedly from my idiosyncratic perspective), check out this link: https://www.patreon.com/posts/basic-manuals-in-114228826. It covers both the modelling and data analysis aspects of Ravel.
@@ProfSteveKeen Thank you, sir.
Check out the DXY. US government has a long way to go yet.
Devaluation will continue until morale improves
17.30 Neoclassical jerks indeed! I remember when Milton Friedman and his mentor Friedrich Hayek were the darlings of Thatcher's ideology. Their smug conceit started the disastrous trade policies which lost all our manufacturing jobs and the "free trade" mantra did not notice that the countries who benefitted most maintained rigid protectionism. Great idea.
Is capitalism effective, efficient and fair?
That's a theme in Microeconomics. We have a way to judge alternate systems in our narrow economist way.
The people pushing GNP growth are possibly cool about the distribution, fairness criticism. Possibly see it as a just fair capitalist system.
Untied means GOOD
Stress-testing banks diverts capital from high-risk speculation and consumption lending, toward new production capacity and investments in future production capacity, which is a form of regulation. This complements targeting of those goals via selective incentives and direct investment where it is most needed to alleviate supply bottlenecks, which private capital may neglect in preference of fast gains.
Can someone explain why a central bank digital currency could potentially displace commercial banks?
I remember studying the concept of CBDC's in university and I couldnt ever understand what their utility is
On the contrary Steve, a quote from Michael Parkin, admittedly a monetarist, there's no rational argument saying the expected price level causes inflation.
But I'm happy to read the symposium in the early 70s on the Rational Expectations Theory. I started but didn't finish reading the papers.
I see what you mean Steve, the expected price is not allowed to be inconsistent with Inflation, but the Keynes model people were like clockwork mice.
It's the reverse of the proposition that Friedman gave to explain why prices will rise with a rising money supply, even though–in his model–the world is in long run general equilibrium:
One natural question to ask about this final situation is, "What raises the price level, if at all points markets are cleared and real magnitudes are stable?" The answer is, "Because everyone confidently anticipates that prices will rise." There is an old saying that difference of opinion makes a horse race. And so it is in any market involving the trading of existing assets. If there are wide differences
of opinion about the course of prices on the stock market, for example, there will be heavy trading, possibly with little change in prices. If there is
widespread agreement, then prices can be marked up or down with little actual trading. (Friedman, M. (1969). "The Optimum Quantity of Money" in The Optimum Quantity of Money and Other Essays, p. 10)
From Parkin textbook, it was an Inflation Psychology was the concept. Thanks for the reply, and interesting topic
I saw you on TV, might have been Russia Today or BBC Hardtalk, a while ago now
@@buserk Yeah. Russia Today, Al Jazeera and Turkish and Chinese TV used to give me a run: I could never get on the BBC, which I see as a propaganda outlet for The Tories, after my experience with it.
41:33 "Banks can create money because they're allowed to mark up both the assets and liability side of the ledger"
You are describing how banks have been ALLOWED to operate. But money creation does not define a bank. A bank is a business that takes deposits, lends money, and provides other financial services. Allowing banks to create money is a choice. Kulak is saying that we should choose to stop banks from creating money so the system can be stable. This is one of the frustrating points of MMT. MMT proponents keep saying that we have to keep banking the way it is, but they don't say why. Isn't the main point of MMT that the banking system is unstable? That allowing banks to create money creates bubbles that have to be bailed out with government deficit spending? Why not stop the problem at the root cause? I seriously don't get why so many MMT proponents love the status quo so much. On the one hand, they point out that the mainstream doesn't know that banks create money. But when someone suggests we stop that practice, MMT proponents say it just has to be this way. I watched a video where you supported the Vollgeld initiative in 2018 which attempted to stop banks from doing this very thing. Why did your position change on this? Should banks be allowed to create money or not? I wish you would talk more about this.
42:12 "what Austrians are telling us to do is we should stop doing what happened historically and do something that's magical in their vision of money is a a non money is a commodity. Funnily they think about money like gold, they think that's what money should actually be and it's just I'm afraid it's nonsense"
I'm afraid your characterization of the Austrian view of money is incorrect. Austrians define money as something that is commonly used as a medium of exchange. Historically, money evolved from commodities. Nowadays it's just fiat. According to the Austrian definition of money, the dollar is money, but gold is not anymore. The reason why Austrians encourage people to buy gold, is not that it's true money, but that it cannot be devalued through excessive money printing like fiat. The positive view of gold is not that it's "magically" money, rather that it's a protection against fiat inflation. Austrians would like the dollar if the money printer wasn't abused so much. If we stopped banks from creating money, as Kulak suggested, maybe Austrians would start supporting fiat money.
I think the most responsible way to handle money creation is to set it to a fixed amount that matches what we predict GDP will increase by, and dispense it via UBI. That might be about $1 trillion in today's money. If that was used for UBI, then it would be about $250 a month for every US citizen. If we start having deflation, then we increase the money creation rate. If we start to have inflation, decrease it. That way we keep inflation and deflation close to 0%. And I'm not talking about a yearly inflation rate. I'm talking about inflation since we implement this system. So if we start the program this year in 2025, CPI should be the same 100 years from now.
44:43 "[inflation] is an encouragement to spend now, if you don't have some way of depreciating the money supply then it's an encouragement not to spend and that actually undermines what people see is the strength of capitalism"
Why is 0% inflation not acceptable? What's so bad about not encouraging anyone to spend nor save, and just let people invest and buy when they see opportunities and value? Why do we have a target of 2% inflation PER YEAR? That's literally exponential inflation! It's not even linear! I'll tell you why. Because inflation is good for the rich, and the rich have the most influence in shaping the financial system. Why is it good for the rich? Because the rich have most of their wealth in assets and they take out the most debt. This systemic and exponential rate of inflation is purposely created in order to transfer wealth to the rich from the poor. This creates wealth inequality that is hard to fix, because taxing unrealized capital gains is unfeasible, and it defeats the purpose of purposely creating inflation to begin with. Why not have 0% inflation so the market can be fair and free from the start?
45:29 Graphs of historical inflation/deflation. "during the 18th century there were huge levels of inflation, that Peak there at about 23%. Then bang massive deflation of well well below 10% at various times. Prices falling that much and when that happened when you had deflation"
That's because we had the same problem back then, banks were allowed to create new money via loans. That's the same problem we have now. The only difference is the government didn't print money to constantly bail debtors out. Both inflation and deflation are bad.
45:10 "there's a fundamental split it seems in people's minds between this idea of of hard money and fiat which we've been living with for a long time that somehow deflation will fix all of our problems and it's just like well the last time we've seen that which is thankfully a long time ago uh wasn't pretty and it wasn't an easy way out of"
That's because debt based money (AKA banks creating money through loans) is unstable and leads to deflation when the population has been fully saturated with debt. The MMT solution is to have the government keep bailing out private debt holders with deficit spending (resulting in inflation and wealth inequality). The Austrian solution is to stop banks from creating money to begin with. If you choose to directly bail out private debt holders, then it has to be done with a policy change that stops banks from creating money, because otherwise the problem will happen again! I know Steve Keen has an idea of a debt jubilee, where the government pays off everyone's debt with $100k for each person. But that would only solve the problem temporarily. It doesn't address the underlying issue. At 55:57 Steve Keen made a reference to Richard Vague and his ideas of credit guidance. I don't know how that's supposed to work. How do you outlaw asset bubbles in a free market? I would love it if you would talk about it and why it would be better than just forbidding banks from creating money in the first place.
There's a lot to unpack there, so I'll be brief. I agree with much of what you say here. On banks being allowed to create money, that comes down to my wariness about whether banks would be profitable if all they could do was arbitrage government money creation, rather than being able to create money and lever off that. If that would not be the case, then you would also have to change the private payments system with a government-owned one, and find some way to decide which entrepreneurs receive investment funds.
Overall however, after 50 years of experience in economic policy, I'm wary of proposing alternatives to the current system–especially where that system is also misunderstood by the people who administer it. I'd rather get people to understand how it works in the first place, before any attempts and giant-scale reformation of the monetary system is attempted.
Where I do think those ideas have merit is in imagining what a post-capitalist system could be like. The reason I think this is a good idea is that I think we're going to find ourselves in such a system, thanks to the stupidity of Neoclassical economists on climate change. Firstly, if civilisation is to survive the ecological catastrophes we're about to experience, the private credit system will collapse anyway: a government one will be the only possibility. Then in that situation, you would have to guarantee survival: society would not survive if the poor were dying of starvation, or other ecological disasters.
Economics blows my mind with all the factors you have to consider. Something I have been thinking about is an economy based on lending or usery more our problem. Especially when you tie in environmental concerns. Human nature is always susceptible to greed and excess, I wonder if really the chaos of modern economies is when countries abandoned the prohibitions on interest lending. I would imagine the world would be more focused on needs, and not cluttered with as many wants. Technology growth would be slower or more publicly funded but it is a thought experiment I've had pop up while listening to all the different opinions on the issues discussed here.