Keen Debunking Economics Oxford 2011 Monbiot Seminar

[JoanDenoo]

Of course not all debts should be forgiven, but the loans that should never have happened should be considered; the borrowers who claimed more income than they had and that could not have supported the loan should be taken into account. Truth telling on both sides should be the ones who should be considered. Oh dear, I can see an endless rounds of law suits ahead. Therefore, what options are available?

[KenMacMillan]

The link in the description doesn't work.

[whoo689]

Or people who say there's nothing wrong with letting all these foreclosures happen, "Because we have to let the housing market naturally correct itself."

What IS this "market"? IT'S US! WE are the market. We make the transactions, buy the products, invest, etc.

[KenMacMillan]

@whoo689 Those loans never should have happened in the first place.

[KenMacMillan]

Money Nuts

/watch?v=wPZNeMG79xA

[KenMacMillan]

@whoo689 Besides, what do you think we should do, just give all those people free houses?

[whoo689]

The main problem with most economic models that are popular today is that THEY DON'T INCLUDE PEOPLE in the equations (what they do, how they react, etc.). They just ASSUME the people don't really matter and treat them as secondary to all the data and figures. This is probably why so many neoclassicals and ideological conservatives say crap like, "Let the big banks fail! Who cares if it ruins the economy", even though it would've HURT the American people big time.

[justnotcricket]

Professor, if you're rather sceptical of the idea of bureaucrats of being responsible for the money supply how would you feel about the idea of turning the whole system into a mechanical process? I gather Hayek offered something similar. Also since it's essentially rich uncles (angel investors) & the like that now finance the most dynamic capitalist entrepreneurship (silicon valley) & govt science & tech research that funds most of the innovation, I feel it needs to be asked; Do we need banks?

[tcotme]

To my preceding comment I should like to add:

Just as you can't model the economy statically because it is inherently dynamic, you can't model the economy without a multitude of agents. So ultimately a complete model of the economy has to be a dynamic multi-agent model.

[tcotme]

Great lecture but a somewhat disturbing comment. I am a big fan of Prof. Keen but the first question or remark in the discussion should not be so easily dismissed. As a jurist I say "credit" is a legal relationship between two persons in which one person promises to deliver a payment in the future. If banks are involved there are simply more than one relationships. "One man's liability is another one's asset" is a true statement. Therefore the level of debt must be a question of distribution.

[DavidAKZ]

@tcotme Yes, it is a zero sum solution. However because asset values are debt baced, you are approach zero from below. Not above.

[ApocalypticAang]

Re: the Q&A at the end

Yes, Prof-- almost every talk on monetary systems ends up with people trying to DENY the “currency-money/credit-money” system we have.... and “explain” it as some kind of commodity-money or barter system (“just re-distribute/allocate it”).

Just direct them to David Graeber's book which shows that debt/money is basically a promise-- integral to an economy but NOT a tangible asset (hence debt-jubilee/restructuring), even if we can make up accounting rules for it...

[ApocalypticAang]

LOL, I love how economic theorists use the term "intuitively reasonable" whenever they CANNOT justify something "practically impossible"...

But to be fair, as Keen notes, they are often not trained or skilled in mathematics/engineering and often don't have the tools/techniques needed for systematic/empirical analysis of real-life economies.

Well, at least Greenspan/Bernanke came out and admitted that their modeling of the economy didn't fit the real world... after the damage was done.

[AnniesEggs]

That first question creases me. The second question killed me. Why is this so hard?

"I think need to come back for a longer session." - Classic.

[mrzack888]

u look at simple minded libertarians that want austerity and are gold bugs. you can't have both you fools. unless of course a total dollar default collapse where the world doesn't want US dollars anymore. Which is a stretch. In essence they base their entire portfolio based on a dollar default.

[jjcale1111]

@mrzack888 Some like Ron Paul's Gold heavy portfolio is up about 600% since 2000... how's yours been doing?

[mrzack888]

@jjcale1111 that's 2000, this is 2011. things are different now when it's more clear that we are about to have a massive deflationary scenario in the coming years.

[jjcale1111]

@mrzack888 but to be serious.. we expect a dollar collapse as a result of the govt's reaction to the circs that would otherwise case deflation.

We expect the govt to overprint, rather then underprint in response to the bursting of the debt bubble... it is logical that someone like keen expects deflation but he should apply "behavioural finance" to the govt and not just to private actors.

[mrzack888]

@jjcale1111 the govt is already overprinting. they printed over 11 trillion dollars worth of various bailouts. but still nothing. the govt can print and lower interest rates as much as they want but it's not going to spur private demand beccuz like Keen said, the Public sector is in debt over their eyeballs and will not borrow anymore. it's not govt debt that creates hyperinflation, it's US dollar default. It is private debt that was responsible for the growth of everything from 2000 to now

[heckler73]

@mrzack888 ummm, just a minor issue there, but I believe Prof. Keen was referring to the PRIVATE sector being leveraged to the tits, not the Public sector. (although you did acknowledge the private debt responsibility over the last decade)

Furthermore, if one conflates the influence of Exogenous money with Endogenous Money, then the matter becomes a little more complicated. I'm waiting for Keen's critique of MMT or his model of gov't money.

[mrzack888]

@heckler73 there is no savings and capital. it's been destroyed by speculation. it should have been saved into cds and bonds and savings accounts, but low interest rates and low bond yields destroyed those incentives. so pple put their savings into wall street. the banks know that a major deflationary correction will take place, that's why they are holding the money the feds printed to buy up assets for pennies on the dollar when the next deflationary causing wall street crash occurs.

[heckler73]

@mrzack888 Hmmm... When you say "capital" are you talking about machinery and buildings (i.e. hard-assets of production)?

Also, what evidence do you have to support that "banks" are hoarding cash for that purpose (or are you referring to corps that are sitting on cash?)

[mrzack888]

@heckler73 i mean savings. i have no evidence, jsut a gut feeling that the zombie banks such as bofa are doing something like this. they are diabolical like that. the wealthy elite make money buying assets on depressed prices, not during bubbles. the reason the mainstream media gives is becuz banks are hoarding becuz they are worried unsure about current unstable economic climate, but that's just half the story.

[heckler73]

@mrzack888 OK... It seems you are just speculating and letting your imagination run wild. Try to be careful with that line of logic.

Sure, pvt wealth will sit on cash to capitalize on cheap assets, but that doesn't mean banks are doing the same.

If anything, banks are still leveraging too much; they aren't sitting on cash at all (since that idea is antithetical to the general model of banking activity).

Have you looked at BoA's balance sheet?

[mrzack888]

@heckler73 from my guess is that bofa sits on some cash also for liquidity in cash of another crash such as in 2008 which caused money markets to freeze up, European crisis can cause such events to happen. to make money bofa and other banks gets feds funds rate at near zero percent and lends it for 26% in form of credit cards. i havn't looked at its balance sheet, why bother, will it tell the truth? just look at its stock is enuff, what doozy.

[heckler73]

@mrzack888 If you look at their balance sheet, you might be able to find out how much they have in RESERVES relative to their CAPITAL.

Along with their total Assets and Liabilities.

From there you might be able to see what their ROE is and do a gap-analysis on their rate sensitive assets.

At the least, you would garner evidence to support your fears instead of just speculating wildly.

It's just a suggestion, not a test. Be empirical... There are enough nutcases in the world already.

[mrzack888]

@heckler73 i see myself putting the puzzles together as detective work and not wild speculations. the opposite of what you wrote would be true. that it would be wild nutcase speculation to actually BELIEVE bofa's balance sheets and to use that as evidence to support any assumption. so much off balance speculative derivatives, and mark to model/fantasy numbers, how can u trust it? bofa got fdic backing of its 75 trillion derivatives the last few days. alarm bells should be ringing.

[heckler73]

@mrzack888 Ahhh now you're onto something... Off balance sheet activity is a problem, since that is where the derivatives action happens. But does that mean they are sitting on cash? No...

What you've just stated is that they have gotten backing (proof?) for 75Tn in NOTIONAL AMOUNTS of derivatives (What kinds of derivatives? Who are the counter-parties, etc?). That still doesn't mean much.

Dig deeper, and let me know.

[DavidAKZ]

@mrzack888 I agree with this, but can't for the life of see the FED stop monitising increasing amounts of debt.

[DavidAKZ]

@mrzack888 what do you mean by 'still nothing' ? The salaries and bonuses of investment bank execs for shoveling a ponzi derivatives based banking crisis into a sovereign debt crisis to be paid by the rest of use over 3 (?) generations are still in the zillions. You just need to be in the 1%

[mrzack888]

@DavidAKZ yeah, that's right, my bad, whut was i thinking. the 1% are the most important.

[ApocalypticAang]

@jjcale1111 "expect the govt to overprint, rather then underprint in response to the bursting of the debt bubble... it is logical that someone like keen expects deflation but he should apply "behavioural finance" to the govt and not just to private actors."

THAT is precisely Keen's contribution-- his endogenous money model reflects/explains the REALITY that money supply/creation depends on private actors... Fractional Reserve Banking/Modeling "fails" in practice cos it's NOT realistic.

[DavidAKZ]

@jjcale1111 Central banks have no choice but to monitise increasing debt = more QE. Otherwise the value of assets that are debt based in a deflationary environment would fall.