Steve Keen’s Debt Watch

The mainstream economic idea that banks are just intermediaries between savers and investors is a fantasy, but given that fantasy, their argument that the level and rate of change of private debt are not macroceonomically significant (except at the "Zero Lower Bound" is correct. But in the real world, the role of the level and rate of change of private debt is crucial. I illustrate this by building a Minsky model of Loanable Funds and converting it to the real world of Endogenous Money. Then...

Like many commentators, I regard August 9 2007 as the start of the “Global Financial Crisis“. On that day, BNP Paribas declared that several of its funds were being closed because liquidity in those markets had completely evaporated: So I was particularly amused–in a sick sort of way–to see this brilliant info-graphic on The Fed on Twitter today: it plots the amount of laughter in FOMC meetings between 2000 and 2012. “Peak Laughter” occurred literally days before the crisis began:...

PERG economists are developing a macroeconometric model to track the evolution of the US economy over the medium term, which is 3-5 years: KFBM Macroeconomic Outlook Issue 1 February 2016 The model belongs to the family of “financial balances models”, an approach pioneered by Wynne Godley and collaborators at Cambridge University (UK) and then successfully developed by the macroeconomics team of the Levy Institute – led by Godley himself. At its heart, the KFBM (Kingston Financial Balances...

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...

I am a huge fan of Augusto Graziani, because I could never have developed my own monetary technology without his logical insights into the true nature of money. But he and the Circuitist School in general went wrong when they tried to move from philosophy to the mathematics of endogenous money, because they made numerous stock-flow confusions because (a) having been taught by Neoclassical economists, they fell back into inappropriate equilibrium thinking; (b) with only basic training in...

I began another post critical of Joe Stiglitz’s analysis with the caveat that I like Joe. I’ll add to that that I respect his intellect too, both because he’s very bright—you don’t win a Nobel Prize (even in Economics!) without being very bright—and because compared to some other winners, he is very capable of thinking beyond the limitations of the mainstream. But there are some mainstream concepts that are so deeply embedded in even highly intelligent, flexible thinkers like Joe, that they...

The great tragedy of the global economic malaise is that it is caused by a shortage of something that is essentially costless to produce: money. Click here to read the rest of this post.

Mainstream economists insist that macroeconomic models have to be derived from microeconomic foundations. However the microeconomics from which they try to derive macroeconomics is unsound. Firms do not face rising marginal cost, but constant or falling costs; and "well behaved" demand curves for the market cannot be derived from individual demand curves. Furthermore, the important phenomena in economics, like the important phenomena in many sciences, emerge from the interactions between...

The argument that banks originate loans and thereby create money and additional demand was once a commonplace position. But in the 1950s, American Neoclassicals in particular began to push the view that banks are effectively just intermediaries between savers and investors; the view that banks were uniquely important in capitalism became a fringe view. I cover this history and the revival of the endogenous money approach by Basil Moore, Augusto Graziani and others

I’m posting videos of lectures given by my Kingston colleagues to the introductory “Becoming an Economist” course, since the StudySpace software Kingston uses doesn’t support MP4 files. The first is Devrim Yilmaz’s lecture last week on “Data Collection and Presentation”. http://www.debtdeflation.com/blogs/wp-content/uploads/2016/01/Devrim.mp4