Steve Keen On Parasitic Bankers, Deluded Economists, and Why “We Are Already In The Second Great Depression”

Tyler Durden's picture

Everything that 'deluded' orthodox economists have done so far has been designed to aid the creditors (who remain the problem) while Steve Keen, the most familiar face of the non-orthodox economists, sees the only solution to this crisis as aiding the debtors. His interview with BBC’s HardTalk this week covers a great deal of ground from modern debt jubilees (and how they should be structured), the Tea-Party and Occupy movements (and his growing fear of historically repeating the endgames of previous economic and social disenfranchisements), and the parasitic nature of our existing financial sector.

He is unequivocal on the outcome of the status quo, as he has been for many years, citing politicians as reactors not leaders with the view that the youth movements we are seeing will force change of leadership to enable non-orthodox solutions to our simple problem – too much private debt. “Write off the private debts, nationalize the banking system, and start all over again” is his starting point but his ideas on implementation warrant some attention as he attempts to promote creative instability and reduce the destructive instabilities of capitalism – recognizing that our world is not in equilibrium as every Keynesian economist would believe but inherently cyclical and unstable.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
GeneMarchbanks's picture

Keen has continually stated the problems correctly but offers an unworkable solution due to the incredibly dark and shady workings of the industry he claims to 'analyse'. I've always had the feel that he resorts to an academic sounding argument because if he were to simply state the crooked nature of the people in question, he'd be visited by the hush police.

 

I hate that cunt, she was worse with Bass.

theMAXILOPEZpsycho's picture

agree with the assesment on keen. The best people to listen to (like Faber, Rickards, Casey and so on) can basically come out and say things about the financial state of affairs that a child could undertand. Academics however need to shrowed everything in mystery, or else their livlihood is under threat. There's a limited market for all out shills like roubini so keen goes for this wishy washy predictable middle ground third way crap, and all the while floggs off saying "no one predicted this but me, only I can undersand this yadda yadda bullcrap... and aside from being just coplete pie in the sky, a deby jubilee, really?? so he's advocating more fiat printing then, more currency debasement, less incentive to wrok and save, free houses for free loaders... unless you gave every citizen equel money with those in debt having no option but to use the money to pay down the debt, creditors losing everything (so deflationary pressures equal out the money printing)...nah even then this sucks what needs to happen is that governments just die and what should happen be left to happen...VOILA!

DormRoom's picture

nah.. I think he's a realist.. He's saying there's no way we can pay off our debt, so why live 20 years in denial, and economic depression, when we could jave a grand program to get rid of it at once.

 

Although China will not be happy, if there is a debt jubilee, so it may may want America to annex most of its empire to it, possibly through war.

 

So perhaps the Syria-proxy Iran war--is to front run a debt jubilee, by controlling most of the world's oil supply, so the BRICs can not wage total war, once a debt jubilee is announced.

theMAXILOPEZpsycho's picture

No, the realistic option is defult, governments just come out and say, sorry but this shit obviously aint getting paid, so lets stop borrowing from the unborn and just admit it. Creditors get burned, debtors dont get free shit. Thats what should happen, and it involves no pie in the sky money printing

sqz's picture

In a sense, Steve Keen's ex-post "solution" does not go far enough or is only half a solution. Maybe he could have said more if the presenter let him ever finish a point...

A debt jubilee for household and corporate debt combined with printing would indeed wipe the slate clean but it would also remove the incentive for the system to change to prevent this state of affairs ever happening again.

For some reason policymakers from academia to politicians to regulators and central bankers seem to completely ignore the perverse incentives present in modern capitalism:

1. Corporates have enormous incentive to take on debt and minimise corporate investment due to shareholder value maximisation, MBA ideology, large free floating shareholdings within limited liability who care only about short term profit, weak corporate governance unable to challenge executive compensation or re-align decision making for long-term benefit, and no long term stakeholders. Also, often it is easier for corporates to make a return from investing in financial assets instead of focussing on their core business strategy (look at what happened to GM and GE).

2. Household property ownership is increasingly considered virtually a public right and, even worse, a minimum asset to secure further borrowing for most individuals. Talk about monetisation of the "American Dream"! What happened to working for your dreams instead of having them handed to you on a plate at extraordinary long-term risk? Why do you need to own a house now so badly on the worst possible terms, e.g. zero deposit, interest only mortgages when rates can only rise? You could be using your funds to build on top of your current productivity or setting aside funds for inevitable bad periods plus your real dreams (even if they are eventual home ownership at least they will be on your terms).

3. Intermediaries have huge incentives to create debt and stoke up financial assets. TBTF/G-SIFI entities, deregulation, political capture, tax havens, the efficiency of the global capital markets all combine to make it trivial to increase not just leverage limited to individual markets or sectors (i.e. bubbles in traditional sense), but systemic leverage. This type of leverage cannot be easily removed due to interconnectedness.

Some of these features are specific to "Anglo-American capitalism", e.g. for corporates. However, all types of modern capitalism are failing mainly due to the last point - intermediaries and interconnection.

Steve Keen on HARDTalk interview did not offer any insight as to how to solve these causes that have existed and grown for 40 years. Without a solution there, it can and would happen all over again with or without a "debt jubilee".

trav7777's picture

writing off the debt fucks the people who lent real capital into the blackhole.

I mean, we're talking about "saving" the type of people who shouldn't be saved.  Profligate spenders and deadbeats.  So what then, so we can have those same people lever up all over again due to moral hazard?

We ALREADY SEE THAT.  the people with poor FICOs who happen to be the right skin color continue to get "lent" money.  JFC, has 30 years of welfare not proven what happens when you just give handouts to people?  I mean, look at Africa- why should they bother trying to feed themselves or their children when whitey will just give them a famine jubilee every single fucking time?  And, their population has doubled in the last 30 years.

Jubilee has to come with a symmetric cost, not a get out of jail free pass for the imprudent.  And yes that means spay and neuter bankers as well...everyone in the loop.

GeneMarchbanks's picture

To suggest that an outside impartial mediator can step up and pick 'winners' & 'losers' amongst the debtors and creditors on a global scale is absolutely the height of absurdity. At best it's intellectually dishonest. What allows this level of indebtedness is fiat. Change the monetary system or at least start a coherent discussion instead of this nonsense. A theoretically infinite money supply in a finite world seems a bit ridiculous, no? Never mind, I just saw the light... you're right... eliminate Africans. Then we'll all be happy and merry... Wow ... those Africans mooching off of the system... how did I miss it? So obvious...

Max Fischer's picture

 

 

Your white supremacy, KKK mentality is ridiculous.  Chumbawamba is a forum friend of yours, right?  He openly admits (proudly) that he defaulted on his debts, which, by definition, makes him a deadbeat.  Are you suggesting he should be neutered?

Max Fischer, Civis Mundi 

Michael's picture

Everyone will default anyway no matter what. Get over it. Here you can buy a hundred trillion dollars for $247.50, so far.

 Ron Paul Signed Zimbabwe One Hundred Trillion Dollar Bill

http://www.ebay.com/itm/ws/eBayISAPI.dll?ViewItem&item=250939520993#ht_500wt_1334

myshadow's picture

He was writing with a sense of irony.  Get a grip.

sgt_doom's picture

"...writing off the debt fucks the people who lent real capital..."

Real capital????  Even a whackjob troll such as yourself, can't be that unholy ignorant, dood? 

Since when does phantom wealth or fictitious capital equate to "real capital"?  So you believe the 100th layer of securitized debt equals real capital, sonny?

The only profligate spenders here, lowbrow, are the banksters who sold hundreds of trillions of dollars of worthless credit derivatives, earning them billions of billions of thieving, illgotten "profits" --- while now lying through their greedhead, sociopathic and rotten-smelling teeth, proclaiming that everyone else must now adopt "austerity" to further underwrite their perfidy?

 

saiybat's picture

"We ALREADY SEE THAT.  the people with poor FICOs who happen to be the right skin color continue to get "lent" money"

Trav7777 you're deluded. Have you never heard of urban decay? There's no credit in the ghetto.

JungleJim's picture

"There's no credit in the ghetto."

   Apparently not so ... I've heard that you can get "a nickle bag" on time, the hoe's, not so much.

FranSix's picture

So what Keen's saying is re-fuckulate the frammistan at the jiim-jam, frippin on the krotz?

Oh regional Indian's picture

instant classic! Thanks for the laugh.

ORI

FranSix's picture

Its basically called:  'pushing on a string.'

You have to, instead POOL DA STRINK!!!

 

http://www.youtube.com/watch?v=L7Dw60SVXQ4

Manthong's picture

CRAP!!!!

I knew he was a little off when describing OWS but..

I listened to this moron for 24 minutes to hear him wrap up with “If Obama had been elected in 2012 instead of 2008 ,,  he could have seen... somebody with his charisma,, "

It’s been a while since I last projectile vomited like I just did.

Sopra Tutt1's picture

Steve Keen could've very well said: 'With his charisma, if Obama was to be white, we would all be out of this mess by now. Unfortunately I see no white boy comming along to save the day, other than me, of course.'... as this makes as much sense as what he actually said.

 

CRAP indeed. I need to borrow, not only because I'll help to kick start the economy, but I will benefit from the debt jubilee too. Moronic.

myshadow's picture

'With his charisma,
Unfortunately I see no white boy comming along to save the day, other than me, of course.
'

No, It was more with his charisma, and had ne not totally remained sold out to the MOTU and would still refuse to prosecute the thieving bastards......It had nothing to do with race and everything to do with being totally bought and paid for.

Sopra Tutt1's picture

Charisma and complex economic designs have nothing in common, just as race has nothing in common with who solves the "problem". TPTB will select the "solution" that suits their needs,  just like they did when they selected keynesianism, looking for a free lunch. Keynesianism gave them the free lunch, as it allowed governments to borrow from the unborn. Now they had their lunch, and they are looking for the dinner. It will mean printing, but printing in small enough doses so the host doesn't feel that the parasits are sucking the wealth away. Being the first with the access to the printed money, TPTB (gov and bankers) will gain. This can't end without a revolution.

myshadow's picture

'With his charisma,

Unfortunately I see no white boy comming along to save the day, other than me, of course.'

 

No, It was more with his charisma, and had he not totally remained sold out to the MOTU and would still refuse to prosecute the thieving bastards......It had nothing to do with race and everything to do with being totally bought and paid for.

Element's picture

Never forget Keene is an academic. He fundamentally trusts the system to self-correct, if you nudge it the right ways. Determining the right way is his personal taskmaster. He seems rather ignorant or out of touch with almost everything that goes on outside his own blog and his circle of economics pals.

I new he was a "bit off" when I heard him taking an absolutist UN 'consensus' position on greenhouse warming, and claiming all the evidence supported that view - which it clearly does not.

--

AUDIO: Ian Plimer - Heaven and Earth: Global Warming, the Missing Science - October 24, 2009
Financial Sense NewsHour
http://www.netcastdaily.com/broadcast/fsn2009-1024-2.mp3

--

Keene's great at what he does, modelling the economic system and gaining insights via extending that research away from the usual memes, but he has little clue how to fix things, so that the many on the street, will decide it's worth putting their energies and creativity and decades of patience into investing (real investing that is) in a viable economic future.

Where somethings remains something, and nothings remain nothing, rather than where we are now, where the nothing stores all the value - very badly.

The silly comment he made that OWS protesters should really be occupying all the economics departments, tells you how he's oriented, and what he thinks matters.

He's a theorist. 

He is not a small business man, nor a wage slave - HE DOES NOT UNDERSTAND.

The real world isn't academic theories and papers Steve. It's people doing things for each other, en-mass, and thereby becoming deserving of a crust, and a place at the table, and to take a real part in policy to add guidance for the society towards things that enable that process.

We don't have that Steve.

What we actually have is PROFOUNDLY FUCKING SICK AND IRREDEEMABLE.

 

Other than that, I read him.

JungleJim's picture

He has been talking to Obama !

Voodoo Economics's picture

Amen! He talks about not putting his thoughts of solution in a cartoon! His solution is a cartoon. I've worked for 20+ years, invested my money, didn't buy a big ass house I couldn't afford, and now he wants to create some long-term social policy for all these idiots that says:  oops the contract I signed aint worth shi$*, but I get to keep all the stuff I have. If we go to that demonic democratic mobish progressivism, I say we take our chances and revert back to a Monarchy.

 

The Monkey's picture

Steve Keen is a good analyst who has made some compelling observations.  On the solution side of the fence, he's smoking crack.  A debt writeoff of the kind proposed would inevitably lead to additional capital misallocation (bad businesses would flourish, and there would be no real incentive to save).  Good luck with that.

Seer's picture

Just curious... do you really think that you're going to be able to hang on to what you have?  Do you think that there's going to be a system that, although completely flat-assed broke, is going to protect YOUR stuff FOR YOU?

I understand Keen's points.  If one is going to play that game of infinite growth on a finite planet then his makes about as much sense as TARPS, QE etc...  MY POINT: IT'S ALL GOING TO FAIL- in which case it's really kind of silly to expect that which only seems to exist under this system that's collapsing to continue to exist.

Statements such as yours seem a bit out of place given that 2/3 of the world's population (of which folk in the Western world have lived off of) earn the equivalent of $3/day.

You fucking bet the farm on a Ponzi system.  Get over it.

Sudden Debt's picture

Nop, the only realistic sollution is inflation, and in todays situation that would need a hyper inflation. I don't believe in giving money away to everybody, that's communist and would create a even bigger hyperinflation. Inflate away in as much as possible a controled way.
15%a year for the next 7 years should do it and could still be viable for business.

WhiteNight123129's picture

Well that is correct, Romney wants to do that, that is light up the multiplier by attacking Iran (all his LBOs investment would be acquired for free, in a sense he would what Hugo Stinnes did in the early 1920s in Germany, as Hugo Stinnes even had his own printed Mark with his names. He built a fabulous conglomerate at some point, Romney is the present day Hugo Stinnes. I guess Romney is psychopath, they are all, but I am suspecting he wants to be the inflation king as Hugo Stinnes. If he does that Romney better not delude himself that popular justice will never happened to him...Psycopathsalways delude themselves than nothing can happen to them hence the self confidence that help them lead other people!!

Seer's picture

So, you over-inflate the crap out of everything, then what?  In case you haven't noticed, the USD has already been made dirt cheap yet where is everyone paying shit off?

Supposin' that things magically zero out, how do we then operate?  Remember: NONE of the systems currently operating can exist without growth; how do you check them such that they don't over-draw from the future?  Demographics suggest that our "productivity" will continue to decrease and that increasingly more energy will be required to obtain the resources that we consume.

Once again: economies of scale in reverse.  Hitting zero isn't far enough down... and once we blow past zero (either debt jubilee or via inflation [or anything else]) there's no stops.

JungleJim's picture

Inflation is nothing but goverment run theft.

Money is supposed to represent "VALUE"

countupir's picture

@theMAXILOPEZpsycho

Exactly, just admit the debt won't be paid and the creditors who didn't do their due diligence learn the lesson that every one with loose standards learns.

You forgot the other part to that solution which is sound money backed by something (gold and silver).  If anyone can just print up money it lessens the risk to the lenders who make money by printing (debt).  

Risk is very important.  The ability to win is just as important as the ability to lose.

narnia's picture

what he is saying is that HIS central plan is preferable to our existing central plan.  how about NO central plan?

we dont' need the government in the currency business, the science business, the education business or the "doing good" business.

Seer's picture

Great news: govts are going to implode.

Bad news: you're likely not going to like what's coming.

NOTE: I don't approve of governments (not even for "property rights" [code for "I've got mine and my 'limited govt' will see to it that it stays that way"] which comes with the added baggage of State violence).

eblair's picture

The professionalization of the universities has been a disaster for this ugliest and most dangerous of fields.  Economics has more need of people looking at its basic assumptions than any other.  But because our best and brightest are segregated in their own narrow (minded) departments, that doesn't happen.  Good to hear Keen calling for occupying economics departments.  They really do need to be humbled, humiliated and shamed.  And now.

kaiserhoff's picture

Economists should be treated exactly like astrologers.  Keen is just another arrogant Marxist, with zero respect for contracts or the rule of law.

Waffen's picture

if all contracts are based on a ponzi scheme, then they are invalid, and to enforce them is immoral

Max Fischer's picture

 

 

If you truly believe what you've just posted, then you need to return your house to the homebuilder and you need to return all the goods you've purchased using fiat money to the original sellers. Otherwise you're guilty of theft for having paid with your "invalid" ponzi money.  Furthermore, if you've ever worked and were given US dollars (ponzi money) in exchange for your labor, then you're an idiot by your own argument.   

Max Fischer, Civis Mundi

Seer's picture

Huh?  Home-builders and "original sellers" ALREADY WERE PAID OFF! (unless you have a private contract with them, but the majority rely on financing via banks)

I've said it before and I'll repeat myself: I won't do business with ANYONE who has intentionally defaulted on ANY contract (when he/she didn't have to); if we want to restore proper behavior then we've got to act like that which we're demanding. (so, in a way I kind of agree with what you're trying to say, but how you said it sucked)

eblair's picture

Good thing for contracts to be broken from time to time.  You believe in divorce don't you?  If it is OK to divorce your wife, why isn't it OK to divorce a bank?

Seer's picture

There's a difference between "broken" and "mutually agreed-upon premature termination."  The later provides for clean dissolution, the former clashes with law.

SteveT's picture

Here's a hypothetical for you then:

 

What would you do if you were born into debt slavery?   Your father, grandfather, great grandfathers and so on had piled up so much debt that you and your progeny would have to work it off in slavery for 150 generations.   

Debt jubilee sounds pretty good then, huh?   Besides, it's inevitable.

kaiserhoff's picture

Business law 301 for god sake.  You are not bound by the debts of your forebears, unless you accept that assignment as part of some inheritance.  Mom's basements must be getting awfully crowded.

BigJim's picture

...unless the debt is government debt? Because as it stands, you, as a taxpayer, are liable for the debt run up by previous generations.

Piranhanoia's picture

silly,  the contracts were based upon fraud, and there is no rule of law.  Where have you been?   And what do you have against the Marx Brothers?

markar's picture

Curly was not a Marx Brother. He was one of the 3 Stooges. Kinda like the troika running things here in the US- Obama, Geithner, Bernanke