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.

 

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WageSlave's picture

Every society has it's witch doctors. I propose we roll this generations' eco-clima-nomists back a few thousand years and get some shamans:

http://en.wikipedia.org/wiki/Ayahuasca

It'd be more fun!

 

Seer's picture

Shamans have more respect/understanding of the physical world.

The Peak Oil Poet's picture

 

 

Give the guy a break. He's just a wonk after all. How often does a total wonk get to get a bit of limelight? As for the claim he was the only one to see it coming - well in little ol' Australia he was indeed one of the few (though anyone who was reading the net knew - ie basically anyone who bothered to look). It does get on one's nerves i must admit but having poor social skills is part and parcel of being a wonk.

 

pop

DormRoom's picture

lmao.. the show is called Hardtalk, not Softtalk

OutLookingIn's picture

Agreed - 'piss poor' interviewer. Dumb as a dull axe! Lots of chopping - saying nothing!

Keene attempts to explain very complex economic interactions in a simple way, to a simpleton, that just won't shut her motor mouth off long enough to listen properly! 

"Hardtalk" ??? Hardly!

Optimusprime's picture

Hmmm.

 

I find it strange that so many find the interviewer excessively obtrusive or even a "simpleton".

 

She seemed to be intelligent and permitted Keen to make his case, while asking mostly pertinent questions.  Why the hostility?

Advoc8tr's picture

Well for starters her continued repetition of "you claim that you were the only one to see the GFC...." seems to have worked - as much as he tried to refute everybody on this board is bashing him for apparently saying it?  Also note how she kept on about giving money to debtors was not fair to prudent savers etc.... while he clearly stated and clarified at the start and many times over that it needed to be systemic I.e same amount given to everybody and those with debt HAD to pay debt with it while the others got to keep it thus maintaining the relative difference.

 

Still it is just more of same. Printed money. Banks lending money that they create and charging interest on it. Governments taking the central role.

 

Not a single mention of a hard currency, competing currencies, less government and central control - the things we need to keep the system honest in a long run.

saiybat's picture

I thought she just parroted what he said. Should have just been a speech.

JungleJim's picture

I must totally disagree, she was trying to clarify points of his thesis that were incredulous.

ElvisDog's picture

I agree. It really sounds like raw, unbacked money printing to me. It's hard to see how this approach doesn't cause an immediate explosion of commodity price inflation.

GiantVampireSquid vs OWS UFC 2012's picture

Bang on GMB, I always wondered how he can see the problem so clearly, and offer such bullshit solutions.  There is no way my labour should be used to either pay for the banks malinvestments, or the speculators who borrowed from them.  Pay for your own mistakes, and the mistakes of your staff, thats what I have to do, just about every fucking day.

That Bitch needs a good dose of Pb.

GeneMarchbanks's picture

Comedy. More than half of this interview is verbal diarrhea. The name of the game is avoid responsibility through obscurantism and creditors can't lose as we all now know.

JungleJim's picture

A little Pb in the right places solves an awful lot of problems.

WhiteNight123129's picture

What are going to do with our Gold, is he going to nationalize it?

AbelCatalyst's picture

Are Steve Keene and Charles Hugh Smith twins separated at birth??? Brothers??? And their demeanor and message are about the same too!! Uncanny!!

BigJim's picture

And you never see them together in one place... coincidence? I think not.

WhiteNight123129's picture

Unworkable Voodoo you are right, here is the proof.

I want to know when I should borrow money just before the jubilee and buy 15 units in Florida just before the jubilee : SPECULATION.

I am a saver! what is the point? Wait for the jubilee and borrow more, do not save! what is the point? People and capital would move in an another country where they have the right incentive.

What is the incentive for the guy who is quitting his job and putting his capital on the line to build a business, forgo leisure and re-invest his capital to make sure he has overtime an actual increase in comfort and standard of living better than he had not done so? Imagine if his neighbor borrowed himself to the neck betting on jubilee actually ends up with a larger home courtesy of government money jubilee. This is welfare for the lazy. As much as I hate the fiat malinvestment and cronies, this Jubilee removes all incentive that make society move forward.

NOW if you want to be fair and not remove the problem as it is proposed you give money to both the guy indebted and the guy without debt WHAT IS THE DIFFERENCE WITH HELICOPTER MONEY?

 

Seer's picture

I suspect that your problems are deeper that you would think...

1) Buying property ("units" sounds like condos) in Florida?

2) A Saver?  You like fiat That much?

On point #2, businesses invest money/fiat for good reason: money is a tool; it somehow morphed into this thing that can "create" on its own.

No comment on point #1.

"This is welfare for the lazy."

LOL.  Yeah, we've had that already with all those bank bailouts, haven't we?  I think that maybe Keen is just saying to these folks that unless they want their heads to end up on pikes that maybe they might consider doing the same (yes, stupid "solution") thing for debtors.  And, really, if you had looked at the state of the financial companies' books you'd have seen that they WERE (and probably still are) big debtors.  It's all a circle jerk...

JungleJim's picture

Talks well, but is full of crap. His argument is basically if you run up too much debt you just don't pay, what the hell is so "revolutionary" about that ?

To compare his economics to physics is specious, a physics theorem can be shown repeatedly to "work", where as his economic ideas will never work.

Djirk's picture

This guys is insane. Agreed that they should have an orderly right down of debt, but it should come in the form of liquidation. Savers and investors in real assets should be rewarded not punished. People who bought houses at bubble prices with no down payment assuming the price would go up forever should feel the pain of reality. Yes the banks were greedy and should have had tighter capital controls (not to mention regulated derivs) they should feel the pain too.

Punishing the smart ones who cashed out and savers is the wrong message. Lock this guy up before he does more damage.

tradewithdave's picture

This concept of a "modern jubilee" most likely will gain traction.  It's a structured approach, so it is not at its core a jubilee in my opinion. 

Nonetheless it allows for an East-West oriental/occidental solution to reconciling the concept of a currency based on "In God We Trust" simultaneously offloading Fannie Mae onto the Chinese with the second half of Mervyn King's "divorced currency" solution.

My gut is that this will gain traction.  My gut is also that this is strongly backed by George Soros.

http://tradewithdave.com/?p=8518

http://tradewithdave.com/?p=8507

Dave Harrison

Optimusprime's picture

Keep trying, Dave.  Your approach is one of the more thoughtful and informed responses to what is transpiring that I have encountered.

 

In fact, I call on you to work up your perspective into a full ZH posting.  The short "teasers" you put out on your own blog are suggestive and often illuminating, but the overall "thesis" has to be inferred from multiple readings of scattered texts.  This "snippet" approach is exacerbated by your ellipical postings here at ZH.  I never would have realized how valuable your perspective was if I had not been persuaded to actually read your blog.  After several days of steady reading, I was hooked. 

 

I think you have something valuable to contribute.  I hope you soon feel ready to make a more detailed and comprehensive statement.  Consider yourself challenged.

 

Regards

BigJim's picture

I think you're right, it will gain traction.

For a start - it's free shit!* And not just for a bunch of bankers... but for EVERYONE! What he appears to be arguing is that central banks give (say) $100k to everyone with a pulse. If you were a prudent saver, you're $100K richer. If you are up to your eyeballs in debt, this money is given to your creditors. This money is 'written off' via fractional reserve lending's reverse process. It disappears from the banks' balance sheets altogether. As Keen says, they now no longer have the debt outstanding, meaning they are no longer getting interest from it, so their positive cashflow shrinks. Most banks would go under, he proposes they are nationalized so the underlying payments system we have all come to rely on for all our economic transactions will continue to function, while the banks' bondholders and shareholders get a massive haircut.

Yes, he doesn't mention implementing a sound currency, and he wants government control of the money supply, but... what he is suggesting here as a way of preventing a vast near-term implosion of our economies is probably the only politically-acceptable solution on the table. Once banks are nationalized, we can push for the implementation of free-market currencies, but as it stands, as long as the banks are in private hands, they will wield too much power over the political process to ever allow this to happen. Crash them, and we might have a fighting chance.

*Yes, I know his solution is inflationary... but frankly, I think one, massive spike of inflation, whereby the prices of non-credit-bought items (wages, fuel, clothes, etc) come back in line with credit-bought items (houses & financial instruments), is probably better than decades of monetary gyrations as TPTB get bailed out time after time.

Reptil's picture

 ;-P

first second of that video: "  oh it's that awful woman again"

he still argues for printing money, but then giving it to the debtors. Wouldn't this create inflation in the short run?

Max Fischer's picture

 

 

We already had the Jubilee.  It was for Wall Street, the creditors.  All the non-paying, toxic debt that bogged down Wall Street was transfered to the taxpayer's balance sheet in exchange for cash.  Now they've got all this cash, and no one to lend it to.  LOL.

This is what a Wall Street Jubilee looks like:

http://research.stlouisfed.org/fred2/graph/fredgraph.pdf?id=EXCRESNS

When do the debtors get to exchange the crap on their balance sheets for cash?

Max Fischer, Civis Mundi  

disabledvet's picture

WRONG! They have the government to lend to. And the government is trying to get the banks to write off all the crap that's STILL on their balance sheets. In other words "the banks got the cash from the taxpayer to maintain solvency" otherwise as i think we all would agree they would have been obliterated in 2008. Now the problem is "zombie banks" who only lend to the the Federal Government (which is not a State by the way--those are in fact "the Fifty" and they're the one's the Federal Government is in fact bailing out and by forcing the banks to lend to trying to rescue.) The long and short is this: how much longer can the current usurious interest rate policy be continued such that consumption is obliterated and the economy double dips until SAVERS are finally rewarded with soaring interest rates as the Sovereign level? I say we have but days to wait courtesy of "Europe" which "has not gone down this path" of dictat interest rates. Of course i'm a believer that should BofA drop below 5 bucks a share it should be delisted and all its holdings liquidated at auction--if under the Fed's supervision so as not avoid a disorderly collapse so much the better. In other words your "debt jubiliee" comes in the form of governments having to pay the cost of all those "freebies" they've offered over decades without concern or consequence about how they are paid for and who earns an income with which to pay for them. the "Final Solution" is upon us. ALL OF US. RIGHT NOW.

trav7777's picture

you're effing crazy.

You think this interest on your money comes from magic.  The economy has to pay it.  GROWTH has to pay it.  There is no growth.

Fucking rewarded with high interest rates?  News flash, genius, you can get that RIGHT NOW on greek bonds.  Go buy some and enjoy your magic coupon

Seer's picture

And this is the crux of the issue: insufficient growth to pay off past debts, carry current loads (sustain existing functions) AND to pay off mounting interest (which is money that never existed and isn't really accounted for).

Max Fischer's picture

 

 

And that insufficient growth has absolutely NOTHING to do with energy supplies.  There is absolutely NO EVIDENCE that the world is lacking in energy right now.  NONE!  The Peak Oil argument will work one day.  Not today though, nor with this present crisis.  

Max Fischer, Civis Mundi

equity_momo's picture

So whats the cause of insufficient growth? Lack of demand? Debt overload? Misallocation of capital? Compounding interest ?
These are more symptoms than causes , no? All enabled through a population and credit boom caused by easy oil.
Oil production is plateuing , the first leg of the stool thus wobbling. The credit leg started wobbling very soon after and later the population leg will wobble before the 3 snap.

AE911Truth's picture

Dear Max Fischer, ref: "And that insufficient growth has absolutely NOTHING to do with energy supplies. There is absolutely NO EVIDENCE that the world is lacking in energy right now. NONE! The Peak Oil argument will work one day. Not today though, nor with this present crisis."

So the price of oil increasing from $30/b to $100/b sucking hundreds of billions of dollars of wealth out of the rest of the economy has nothing to do with lack of growth in the economy? Go study the effect of dropping EROEI on economic growth.

Snakeeyes's picture

The second depression debate rages on. I say that we are stuck in a rut (slow growth, 9% unemployment. house prices flat to declining STILL,)

New Home Sales and Existing Home Sales Still Stuck in a Rut - Needs A Jump Start In The Economy

http://confoundedinterest.wordpress.com

The losses at the banks and GSEs are massive and are blocking growth.

sjdude's picture

"9% unemployment"... what planet are you from? Actual unemployment is a lot more like 20%+

Fred Hayek's picture

Thank you. It's infuriating that the gov't puts out a number that everyone knows is bullshit but which still supplies cover to people who want to pretend that things are better than they are.

Rip van Wrinkle's picture

That's if you believe Government and Government shills. A 'rut' the best they can come up with.

20% REAL unemployment in the US AND the UK. Inflation running at much, much more than is being admitted in both countries. And by under-estimating inflation, it's amazing what it does to give a positive spin on retail sales, GDP and general economic well-being.

trav7777's picture

JFC, you act like this PAPER shit that they can just ignore is inhibiting REAL economic activity?

You people are going to have to figure out what IS causing the lack of growth.  Banks can lend what they don't have whether they are insolvent or not.

There is NOBODY TO LEND TO.  The economy ITSELF is demonstrating CONTRACTION.  The reasons for this have been explained many times by me and others.  Learn them.

WhiteNight123129's picture

Scrapping the bottom.... the can is kicking back and any attempt to lever is pointless the money does not find animal spirit, in historical terms it is a classic secular debt saturation point, debt will have to be destroyedeither by inflation orbankruptcies, but Iran and Bernanke are giving us the answer....

 

Seer's picture

"debt will have to be destroyed"

It's not a matter of having to be destroyed so much as it is that it WILL be destroyed.  We can blame Mother Nature, but I suspect that that's not going to get us very far.

Slinky down the staircase.

Economies of scale in reverse: shit will become increasingly (non-linearly) less affordable.

WhiteNight123129's picture

Another difference with Japan which had a good external context: Japan had very low unemployment during their  18th hundred-squared- like deflation (deflation adjustment where shorter in the 18th hundred thank to limit imposed by gold), how politically can this be sustained in the US. It already creates problems. If inflation does not come from demand it will come scrapping the bottom multiplier or through unrest shock, mass movements can create clogs and cost increases if they are disruptive enough, wars, oil supply shocks, we have a pile of dynamite, any fuse of cost-push nature can lighten it up.

 

 

rocker's picture

I guess we will have to pepper spray our way to prosperity. Per NYPD, it is harmless and effective.  LOL  

Franken_Stein's picture

If I use it on my steak, will it taste better then ?

slewie the pi-rat's picture

i've found it tastes about the same on everything, dr frankenfurter

except anchovies, of course

besnook's picture

his solution is a utopian dream. if this depression was left to shoe shine boys then there would be a shoe shine palace on every atreet corner charging 50 dollars per shoe shine with 45  dollars of it subsidized by .gov that also forces every man and woman to get a shoe shine every day.

 

the banks are in charge here, therefore, protecting the interests of the banks is the solution to the problem.

Seer's picture

Hard to beat the long-running utopian dream that we've been in: living as though the planet weren't finite.

strongband's picture

Look who's listening to him now...

Mr. E's picture

I know - it's funny.  Last year it's the gold standard, this week Steve K. Plus making fun of "Keynesians" about equilbrium is lol worthy.  

Keen is a post Keynesian, who happens to have more in common with MMT than the gold standard.  One day people will learn that money cannot and should not retain its value over the long run.  Is $1 in the time of Christ worth $1 today? Should it be?  No frakin' way.

 

 

MFL8240's picture

Why cant this lady shut the hell up and listen.  She is an idiot.

Bam_Man's picture

That's why the BBC calls the program "Hard Talk".

She makes it hard for the guest to talk.

WhiteNight123129's picture

Hard -TO- Talk ... that should be name you' re right