The 'Euphoric' Economy And Why 'They' Didn't See It Coming

Tyler Durden's picture

We are often asked for glossaries or background posts to help in the comprehension of how-we-got-here?, where-here-is?, and where-we-are-going? We hope that our posts, while diverse in nature, build upon one another and provide an educational platform for all levels of market/economy participant (active traders, passive investors, and working / non-working citizens alike) but as far as a succinct primer on how broken the status quo is and the 'euphoric' economy that very few could see through their Keynesian "debt doesn't matter" blinders, Steve Keen's introductory lecture at UWS is perhaps the most complete soup-to-nuts discussion we have seen recently. From the OECD's total ignorance to Bernanke's 'Great Moderation' miss; from economic 'religion' to science; and from Keynes to Minksy, Keen explains, in language even Chuck Schumer could understand, how more debt doesn't solve too much debt, how stability breeds instability, and why the US won't be finished deleveraging until 2025 (at this rate).

This brief lecture seems extremely apropos given we appear to be on the eve of yet another embarkation on the Keynesian 'stimulate' experiment - as everyone waits with baited breath for the next morsel of Fed/ECB/BoE/BoJ/PBOC juice...



Given the Australian audience, and the purpose of the clip, there is some 'selling' of his University course but quite frankly, his discussion of the various 'players' in the field of economics over time provides not just a 'reading' program but critically the concept that economics is not in equilibrium but is dynamic - as if common sense hadn't already persuaded you of this...



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fireangelmaverick's picture

So do we buy the fucking dip in debt?

Daily Bail's picture

AMBUSH VIDEO: Henry Paulson Confronted On The Streets Of NYC For Threatening Congress With Martial Law

This was recorded over the weekend.  Stalking Paulson and letting him know that some of the sheeple understand his crimes.

BooMushroom's picture

Hey, Tyler(s) are you admitting multiple writers, or switching to the royal we?

DavidPierre's picture


My inside guy, the friend of a MS fund manager appears to be growing in validity and intensity.

Morgan Stanley is the next failure.

Rick Wiles of TruNews is a Hat Trick Letter subscriber and sharp fellow.
He has his own contacts spread out over the financial community.

Morgan Stanley is going to the slaughterhouse, not the altar.

The part these guys miss is that MS has perhaps a few hundred thousand stock brokerage accounts.
MS merged with Dean Witter and Smith Barney to become the premier stock house.

MS has 200k stock accounts, maybe 300k or more.




Imagine the hue and cry from the ignorant sheeple masses who call us conspiracy nutballs.
When their stock accounts and IRAs vaporize in re-hypothecation made legal.


Cognitive Dissonance's picture

Say it ain't so Jim Willie.

Say it ain't so.

<But of course it is.>

Unwashed's picture

Morgan Stanley is also knee-deep in the Facebook crap.

I was wondering what friggin morons were supporting the Facebook price as it dropped. The momentum was downward, why would anyone buy before a bottom was hit? >billion more shares are scheduled to be unlocked in the next few months. There shouldn't have been enough buyers to support the price until it got close to $10-14.

Morgan Stanly and other bankers may have been supporting the price of that dog with their clients moneys through Mutual Funds.

Don't know if they were still buying, but Morgan Stanley' mutual funds were 9 of the 10 largest mutual fund holders of Facebook shares.


SmallerGovNow2's picture


Dr. Engali's picture

I've been shorting MS on and off. I hope I can short them to Zero.

GrinandBearit's picture

Sure you can short them to zero, but when you finally cover that short don't be surprised when your account funds have been frozen or raided.

e-man's picture

Did anyone else catch this story?

Morgan Stanley distressed assets fund lures retail investors

Dr. Engali's picture

Stupid ass "sophisticated" retail "investor".

There's a sucker born every minute.

~ P. T Barnum. ~

e-man's picture

I was reading it to be more of a thinly veiled fire sale, you know, a great "opportunity!" /obvious sarc

i.e., "sell the freaking office chairs and water cooler if you can, we need cash!"

holdbuysell's picture

Right on schedule according to Raoul Pal:

"The End Game: 2012 And 2013 Will Usher In The End" - The Scariest Presentation Ever?


spanish inquisition's picture

If MS goes it will be a controlled implosion, New York is good with those. All the assets will already be divided up and the losses will be going to the taxpayer. I can see TPTB needing to lock up case law with the Sentinal decision and derivative legislation.

web bot's picture

I've been hearing lots of chatter around JPM. Either it's a lie gone viral or something very series is brewing. Either way, it's going to be interesteing to watch the outcome...

HardlyZero's picture

Its probably the wind up for the grand real estate reset of 2013 or something like that, when all the banks have to "mark to market" all the bad real estate, and many banks and the derivatives based on the real estate 'value', will go poof !  ...and its gone !

q99x2's picture

Good article. I think he should have questioned publicly wether or not the central banking cartel knew about it or designed the collapse, blew up Oklahoma City, took down the WTCenters and conquered Europe. Their treasonous globalist leader passed carbon taxes on the fools for Christ's sake.

Goldilocks's picture

Clarke & Dawe

Clarke and Dawe - Sharing the Blame (2:37)

Clarke and Dawe - More Government Funding (1:59)

Clarke and Dawe - What went wrong? (2:43)

Clarke and Dawe - Improving Production Values in Politics (2:21)

DeFeralCat's picture

I am calling shenanigans. Calling what Bernake is doing as "Keynesian" is a stretch. The only stimulus he is providing is for the Viagra hard-ons the bankers and speculators get when he talks about easing.

SKY85hawk's picture

Agree, If Ben was Keynesian, he would focus on 'Paying down the Debt' on This upturn.  

His Chastising congress to get their house in order is an accurate statement, but does not clearly eviscerate the Hopium Holders!

Who will be the first politician to admit, IN PUBLIC, that we are in the same predicament as in 1970-1973?

Back then the BOB-HOPE-GENERATION had reached the end of their Spending-spree AND had begun to save for retirement. The 'maket' didn't recover until 1983!

Now we have the BABY-BOOM saving for retirement.  Some think the 'market' needs another 12 years to recover.


In both eras, the politicians made vacuous and long term promises about stimulating GROWTH. 

Very little happened until demographics pushed THE ECONOMY TO GROW BECAUSE PEOPLE WERE SPENDING MORE.


Start thinking & Stop BS'ing!


falak pema's picture

Keynes is the current bogey man of the Oligarchy clan. Period. Diversionary tactics to hide their own scam.

But historically, Keynesian logic is a byproduct of Central bank logic and fractional reserve private dictat.

In this world of 1913 concoction, all Keynes demonstrated was that GIVEN the PRIVATE oligarchy sector which runs the economy via MONETARY means, having gotten us into the 1929 collapse of capitalism, we NEED to stimulate the economy via FISCAL governement means, as the private sector monetary lever is bankrupt. That was the legacy of the banksta collapse of 1929 and laisser faire economics. So it was a NOVEL balancing act, whereby government interventionism BALANCED an economic system totally run in BIg Business USA mode by the private FED monetary pump; that was multiplied tenfold by fractional reserve banking mechanism.

Keynes imposed on the monetarists a US gold exchange standard at BW as COMPROMISE after they tore down his BANCOR neutral money proposal. The oligarchy then, to keep the Greenback as the political reserve currency (after all USA was top dog in 1944 and intended to stay that way so why compromise on having a neutral money line), imposed the greenback as counterparty to the gold bullion as monetary component. It started the race of Greenbacks debasement as the US economy went from powerhouse to overstetched empire in 1971.

If the world were to move away from a central private banking cabal system, as well as from fractional reserve banking that loots the economy to the benefit of the happy few, Keynesian logic will become a sterile philosophy as its raison d'etre will have disappeared. We lose the need for the antidote if we remove the original posion from the system. 

History tells us the WHY of things. Lets keep that in focus. If we change the initial premise of the Godgreenback-FED concoction and its private militia of TBTF fractional reserve money pumpers, we could change the whole playing field of economics. And liberate mankind from institutionalised debt serfdom in arithmetically compound interest mode. 

PS : the worst of both worlds would be a system where the monetary component is at WAR with the fiscal component in a CB run pure fiat construct. Which is exactly where the USA is currently heading...

Umh's picture

I really hate videos. There are sometimes when a video or picture is needed. The problem is that I read so much faster than people speak. It seems like everyone wants to give me a video. Is everyone to lazy to produce a transcript. I'm sure that that I'm not the only one would prefer read than listen through many umhs and ahs. What really kills me is the lack of pictures when a picture would clear things up quickly. Hell; I probably type faster than people talk.


khakuda's picture

The one part which didn't look right was the chart near the end showing private debt way above govt debt as a percentage of GDP. The US public debt is way over 100%. The stated 16 trillion is over 100 trillion if you put things like Freddie, Fannie, Social Security, etc on the balance sheet and stop using Enron accounting.

Dr. Engali's picture

Yeah I caught that too. That whole part turned me off, he sounded like a Keynesian through and through right there.

LibertarianX's picture

i think that was the Aussie economy that chart and it looks right - still not much federal public debt  in Australia - although it is probably ignoring state debts

Ancaeus's picture

Pardon me Tyler, but Keynesians most definitely do not say that debt doesn't matter.  And, certainly, none of the prominent economists who are "new Keynesians" say anything like this. 

However, one person who did say exactly that, and very publicly, is former Vice President Dick Cheney, in extoling the policies of our recent, Republican administration.  Do  you think, perhaps, that Cheney and Bush were Keynesians?

Inquiring minds want to know!

moldygoat's picture

Dick Cheney probably let the cat out of the bag. That evil mutha-fucka orchestrated 9/11 and the looting of liberty and wealth. Go figure he has no heart of his own.

DanDaley's picture

Not to defend Dick Cheney, but you are quoting him way out of context.  He said that debt doesn't matter as long as you cut spending and have adequate growth to offset and reduce the debt.  Get it right!

sadmamapatriot's picture

Hmm, where were Mises, Milton Friedman, Adam Smith, et al? His broad overviews of schools of thought did not look that broad to me. Of course what do I know? I went to flipping law school instead, LOL.

Monk's picture

Actually, "debt doesn't matter" isn't just a Keynesian blinder but part of free market capitalism.


slewie the pi-rat's picture

well!  ya sure do wanna be a reliable source for others who, unlike you, are MSM!

b/c there IS a lotta disinfo around and sabre-rattling and fear mongering;  especially about the FED!

let's see what the chairstatan sez and whether tyler or slewie has been shooting straight on zH;  will he talk about the FED's charge under dodd/frank = stability?  and the need to do what is necessary to keep the checks in the mail?  and that to go too far beyond that at this point may not be advisable b/c it might detract rather than add to the probability of doing 1 & 2 successfully?

and that if congress wants him the FIX anything else :> just write the LAW and he'll try to keep the system stable and the checks in the mail?  but congress need to lead BEYOND what he is doing if they want more;  of course "jobs and growth are still VERY important, tooooo...

the pols will not want to do this now;  so there will be a lotta propwash about:> non-legilative stuff we could try like:> just print and do inflation-gradient adjusting?  then the mofos can just keep lining their pockets and indebting us too?

i've been outa debt for over 25 years'  and it certianly wasn't b/c i made much MONEY;  but i was able to find work, which is really a big help if you're young and don't know what that means yet. under 30

what if i actually researched what the FED's job is under the new law and it was really that simple but took all that boilerplate to "work"?  however many thou +++ pages mostly boilerplate isn't it?  some kinda "operations manual" that the chairsatan wanted and collaborated on so he could attempt to fix what the FED broke?  and now, it is the law and he's simply doing his job?

that's "bad"?  evil too?  not sure why banking with systemic stabilty a priority is a "bad" idea right now

or why keeping the checks in the mail while we are actually insolvent but still have "credit" (unlike piigs) and getting the pols to do a little fiscal lifting here is a "bad" idea

i actually did the research and advised others to do the same over several months.  read my posts

but:  we need to kill people?  war is inevitable;  the crash is inevitable; we are not sheep?

tyler may have a bit of egg on his pretty little pig-face, but i threw the whole carton at him and then re-loaded 15 times!

and now, my dear friend and college room-mate, the chairSatan, is getting the eggs he has been preparing FOR THESE TWO YEARS out, too

fun, huh?

got disinfo?  er... this info?  try a web search about the FEDs job description under dodd/frank? anybody else?  what did you find? 

or isn't thinking allowed here?

slewie the pi-rat's picture

oh i'd better include the rest of my spiel;  there seems to be so much...  misunderstanding...  about a job description...

the sites i relied on were:

  1. the FED
  2. the CFR
  3. law reviews by "kids" in law school who may have actually read the fuker, too!  {i have not; it has "recovery" in the 'title' maybe?}
fuu's picture

"it has "recovery" in the 'title' maybe?"


Would you mind sharing links to the law reviews you read? I have the CFR and the Fed. Just curious about the reviews.

TerraHertz's picture

OK, he gets a gold star for being one of the 12 individuals who predicted the crisis. But for believing the official US unemployment figures (under 10% - as if) he deserves a raspberry.

Unfortunately that error is symptomatic of his whole belief system. Apparently there's no place for real conspiracies of the Elites in his theories.

And so he falls into the ultimate economic nativity - assuming that the powers that be would never *want* to produce an economic crash. When in fact the boom-crash cycle implicit in a fractional reserve, fiat currency private banking money origination scheme is a *deliberate* intent. Its usual purpose is to repeatedly transfer ownership of private assets to those at the top of the power pyramid. *This* time its purpose is to enable the global population cull.

It is inaccurate to say 'few saw this coming'. The truth is those at the top not only see it coming, but always planned to bring it on. They just pretend for the public charade that things are otherwise.

University of Western Sydney. He's not far from where I live. Should I hand deliver a hard disk full of decades of archived conspiracy and gold/silver market rigging articles to him, do you think? At least he'd learn about shadowstats.

What the hell kind of audio encoding was that? Sounds like talking through an underwater tube.

davidgdg's picture

Keen is a weird mixture. I'm reading his book. Half of it is a brilliant attack on neoclassical economics. Half of it is mad nonsense. Definitely a clever guy with lots of interesting things to say but needs to be taken with a shovel full of salt.

GreatUncle's picture

They did see it coming, they just kicked the can, new mechanism to pretend the problem did not exist until the problem got so big you have no way to cover the debt mountain.

If debt is for arguments sake say 16 trillion dollars in the US. For those that have the power to inflate the price of everything else 16x the % debt has fallen and how they will see it. That is the game they have played for decades and the question was never "is the level of debt a problem".

The rate the system will inflate to keep this debt serviceable is going to be the real issue. So at some point they will deflate / inflate the debt away but how you see it will depend only on the side of the fence you are standing on.

Deflate is for the wealthy, inflate is for the poor, but no economist or politician will tell you this.

Good luck to everyone when it starts and I do not think it has even begun yet, why?

The % level of debt is if anything still increasing so the "GREAT DEFLATION" has not started yet!

All the current actions have been to buy time, find hope where there is no alternative, etc. etc. but in the end the deflate game has to happen or you telling me it is acceptable for debt to no longer be serviceable.

At that point I will laugh as the system tears itself apart through that reason instead.

Mr Politician / Banker, no way out of this one and to all intents and purposes we know the path you will take anyway it is flaming obvious.

swabeyjw's picture

I support Steve Keen's approach. In my opinion, economists will behave like random sheep with power assigned by controlling interest until there is a public math model to force alignment.

My gut sense is he has a math model that qualifies as a working foundation for an open source development. There is a tool called "git" for open source development. I would like to see Steve move his work to this platform to facilitate building a public critical mass and innovation of practical solutions. Elections based on economic policy that has some hope of success would give me some motivation place a vote.

On a purely selfish note, I would like to model off the wall ideas. For example anyone interested in "debt exempt money"?