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.
LawsofPhysics's picture

Still ignoring the energy issue.

trav7777's picture

DUH of course they are!

Because that CANNOT BE FIXED.  So they fart and kvetch and pontificate endlessly about paper edifices and imaginary bullshit like credit and debt and leverage.  NONE of it matters an IOTA.

They are ALREADY ignoring de jure insolvency, lack of reserves, breaking every fucking rule in the accounting book, all of which were nonsensical and arbitrary to BEGIN WITH.  Why is it sacrosanct that a bank need to have 10% reserves instead of 1% or 50%??  It's all pulled out of the ass.  Banks now have zero or even negative reserves...the US is $15T in debt.  There's not a person on the planet who believes any of it can be repaid in what we think of as a dollar today.  Nobody.

But yet, somehow if we go imaginary squared or untie this artificial gordian knot, the "growth" and happy times will come back.  one of the things I have consistently said for years was that Peak Oil was going to show us all how utterly silly and stupid economics and finance are.  They are utterly impotent in the face of this.  Try lending at 0% to stop a hurricane.

eblair's picture

Every person who runs their mouth for a living comes to believe they are intelligent.    She is a fucking moron.  Watch French news shows.  They manage to not interrupt each other constantly.

Bam_Man's picture

Yes, the French are extraordinarily polite.

But only when you are conversing with them in their language.

eblair's picture

Not about being polite.  It is about not being a fucking constantly interrepting moron.  It is embarassing to watch.

WhiteNight123129's picture

Pardonnez moi Messieurs et Mesdames, allez tous vous faire enculer!

IN ENGLISH NOW

I beg your pardon Ladies and gentlemen, go all sod-off!

See, very polite huh?

 

css1971's picture

The show is called hardtalk for a reason and she is frankly a bit weak compared to Paxman.

 

TheSilverJournal's picture

Anyone who has solution that is to "print money" doesn't understand money. Increasing the money supply doesn't help anyone. More money doesn't create more purchasing power. 

Pumpkin's picture

You sir are obviously not cut out for government work or Banking.

disabledvet's picture

"the debt dies with the death of the bank." I don't see what the big deal is. Decommission the banks and the media monopolies that support the edifice and see what the real problems at the State and local level are. Otherwise it's just a shell game played endlessly until everyone is bankrupt.
http://www.youtube.com/watch?v=w7YSXCp8tpc&feature=player_detailpage

css1971's picture

He's talking about changing the proportion of money which is credit/debt based vs printed paper/credit.

In the EU, about 98% of money is bank created credit/debt based, if you reduced that to a sane level, say 50% the total amount of money wouldn't change, the total money supply would remain constant but you would reduce the debt.

Simply, increase bank reserve ratios and simultaneously create enough money to cover for the resulting deflation. I would personally be inclined to go all the way to 100% reserve ratios; full reserve banking.

 

TheSilverJournal's picture

Why set reserve ratios at any number? All that needs to be done is to stop the government from backing depositors and whala..problem solved. Because depositors would then actually care how the bank operates.

css1971's picture

Why set reserve ratios at any number?

Reality.

We started with gold & free banking and over the centuries we ended up with central banks. That process has already happened.

How long do you think the process would take this time after the first bank collapse?

 

TheSilverJournal's picture

How long do I think what process will take after the first bank collapse?

I'm not quite sure of your question, but I'll take a stab.

If you're referring to how long it would take for the western world's monetary system to collapse after the first bank collapses if there were no reserve ratios, I would say that the banking system is already behaving as if there are no reserve ratios. Banks are not practicing mark to market on mortgages and if they did, they would be bankrupt immediately. Reality doesn't matter to the banks and the only reason is that reality doesn't matter is that depositors don't give a hoot if their bank goes bankrupt because the government will back their deposits.

Fred Hayek's picture

You seem to have understood him well. What is his position on people who didn't foolishly festoon themselves in debt? I've got almost no debt. Does my buddy get a check for $50,000 that he's supposed to use to pay off debts but I don't anything?

He never quite got to that wrinkle of it.

swampshagger's picture

He did say that both would get the same money.,,just that the debtor would have to pay down their debt first...so windfall for savor as well.

She was speaking over him as he was telling that point. 

WhiteNight123129's picture

Well it is question of choice .If you have a debt saturation point you can either destroy it by inflation or hyperinflation or you destroy it with bankruptcies. If you are Japan in the 90s you look like you can kick the can because the rest of the world is ok and is importing from you, but if 62% of the world has too much debt (GDP of US+CANADA + EU+ JAPAN AND SOUTH), and if China is facingnot a secular debt explosion but a necessarilydebt restructuring and a growth more like 3%, well the Japanese expeiment can not happen, unlessthe indebted countries export toanother planet.

 

Jeronimo's picture

I can't wait for this to come to pass - ha.  It's only fair from my perspective; I need the money and have too much debt. Really now, who could believe such advocacy given the TPTB - not I.  I just can't believe that the whole scheme would be accepted by the Bank of International Settlements so we can all become equals. I'm so conditioned that I don't even believe I deserve it - who does?  

Franken_Stein's picture

The right honorable member even mentioned my name in minute 20.

We are living in a Frankenstein system.

GoodMorningMr.VanRumpoy...'s picture

This guy does a good job pointing out the problems. But his solution is nonsense.

 

 

The only person I’ve seen come up with a workable solution to get out of this nightmare is Dr. Edwin Viera.  Here is a lecture (sponsored by Ron Paul)   that’s  on all the history of U.S. currency and banking systems. Why some systems failed, why some didn’t but were ended anyway. Overall an excellent lecture his solution appears at the 47 minute mark.

Along with ending FRB, his solution involves something that already exists: Digital gold and silver currencies.

http://www.youtube.com/watch?feature=player_embedded&v=k6gMkKmQSW4

TheSilverJournal's picture

Very good stuff. Perhaps the best history lesson on money that I've watched.

Sudden Debt's picture

Tyler, can you paste the link to those video's in your articles? They're always offline when i want to look and have to look for them on youtube myself. And i'm a pretty lazy kind of guy so..... PLEASE :)

Franken_Stein's picture

You are not allowed to watch that video in your country because your government doesn't want you to know the truth.

Reptil's picture

click on the title of the video when it plays, or the little "youtube" button on the bottom right.

saving youtubes (or any .flv format videos), to watch them later, can be done with plugins (Firefox - Downloadhelper).

Smiley's picture

"Mumbo Jumbo! Mumbo Jumbo!"

 

Boris Balkan

XRAYD's picture

 

They should rename this program “Stupid Talk” when this woman is the host. She is out to destroy her guests ideas, rather than enlighten her audience by letting intelligent people talk and lay out their ideas in full! There is something to the idea that every American Household be given $100,000 say - instead of the banks being given money to surf the bond curve as they are now doing. Those who owe money could use it to pay if off (to the bankers who lent it to them in the first place). The bankers would have money to lend, instead of writing off bad loans as they are doing - offset by the "income" they earn from the above bond surfing, and accounting tricks. Those who are NOT in debt, could use the $100,000 as they wish .. to spend or to save. Buy gold, stocks, bonds, TVs, vacations, pay off education loans, whatever ... which would be an honest boost for the economy instead of shovel ready projects designed by politicians. Sure, it could create inflation (which is what Bernanke wants), but it might be better than another great depression! With no debt over hang, sensible financial regulation, and a balanced budget amendment, we would have a real instead of a ponzi economy again.

 

css1971's picture

A classic hardtalk moment. The show exists in this format because of politicians like this:

http://www.youtube.com/watch?v=1KHMO14KuJk

 

WhiteNight123129's picture

There is no easy way out of debt, Krugman and Bernanke are prponent of Santa Klaus economics where noone has to bear the brunt of endless increasevin leverage. This monetary Santa Klaus is on the payroll of a few and is a bastard because he is robbing the little ones to make the cronies fatter. No easy way out of debt someone will pay unless scientists and engineers save the ass of everybody on a historic scale (since we are not living caves anymore obviously -at least I am not-), but the time scale is too short for the debt reduction to be orderly (inflation or bankruptcies is the choice).

topcallingtroll's picture

Mark to market everything.
Write off and sell nonperforming loans to the vultures.
Zero out stockholders of the banks.

Give the banks to the senior bondholders. Surprise! You are no longer a lander but an owner!

Rinse wash and repeat every 60 years as people forget and go nuts on the credit expansion again.

Georgesblog's picture

People believe that everything is good and right, as long as they can go places and guy things. Their mouths say one thing, and their commercial actions say the exact opposite. This is why it is impossible to force a slave to be free. The foundation of the economic system is hypocrisy.

http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/

SheepleLOVEcheddarbaybiscuits's picture

i dont like this guy.....maybe after they had Kyle on, they needed someone who fit their regular program better.

theXman's picture

I have the similar idea as Steve Keen. In fact I came up with the idea three years ago. Now I call it 10-10-10 plan. It's basically the way to recapitalize the population instead of the banks. Here is the idea:

- Each household can apply a special "loan" from the Federal government up to $10K per head (US citizens only).

- The household will have 10 years to pay the loan back.

- The interest rate on the loan is 1% annually, i.e., 10% over the 10 year period (hecne the 3rd "10" in the name).

- Since the US population is 330,000,000, the total loan amount will be about $3.3T (assuming 99% of the population will take advantage of the program), which means it will increase national debt by $3.3T; since increasing debt is counter-productive, that $3.3T shall be monetized by the Fed.

This program, once implemented, will cause inflation to rise; hence Fed should raise interest rates quickly back to normal level of 4-7%. But even with rising inflation the program will benefit the low-income people far more than the high-income people. More importantly, it will greatly reduce private debt and unleash pent-up consumer demands. But because of higher interest rates, it will not result in excessive consumption. 

trav7777's picture

JFC, what an idiotic idea.

GENIUS, WHERE IS THE MONEY GOING TO COME FROM TO PAY THESE LOANS PLUS INTEREST BACK?

You don't GRASP how creditmoney works, please shut up.

And fuck low income people.

linrom's picture

Where did all the money sitting in pile called Private Debt of $44 Trillion come from?

honestann's picture

Sheesh, another central planner.

This crisis lives until the last central planner dies.

Chartist's picture

GM is offering no interest loans for 7 years on certain model trucks.....Is this an indication that interest rates will stay low for 7 years at a minimum?

disabledvet's picture

it's definitely a statement that Wall Street can maintain pricing at obscenely high levels thus forcing you to use credit in order to purchase said item.

Elwood P Suggins's picture

It's an indication of how desperate GM is to unload the shit they make.

 

GMC - Government Motors Crap

Ted K's picture

What you call "Keynesian" really has nothing to do with John Maynard Keynes truly prescribed ideas.  It is the Republicans who are the real cause of this fiscal miss starting with Republicans' spend more and tax less Reaganism in the early 80's.  I might also add it was the "boogeyman" Jimmy Carter who nominated Paul Volcker, not the senile Alzheimer's victim Reagan standing in front of the Irish pub with his fist up as the precursor to idiot "W" Bush telling the world audience "bring it on" and then declaring final victory on a Navy carrier before thousands more young Americans would be killed in the same war.

See if you can spread more lies Tyler about John Maynard Keynes' true ideas, the propaganda of telling toothless Teabaggers with Hitler mustache posters, and ditto head ZH commenters "the sky is red, the sky is red" ad nauseam has worked wonderfully so far. In their minds, the sky is now red. Congratulations to Republicans for your "victory" of trashing this country into the toilet and then blaming it on "darky". Masterful job.

brew's picture

i was waiting for someone to get a little sarcasm going... thanks ted k!

rufusbird's picture

"He is going to pay my mortgage off!"

CrazyCooter's picture

Retard.

Every president since EISENHOWER has spent more money, annually, than the previous year. How may years/decades of exponential growth is that by the way?

There was huge inflation drama in the 70s BEFORE Regan for a reason.

Both parties overspend.

Regards,

Cooter

Greenhead's picture

This guy is another pinheaded central planner.  Instead of a jubilee, let those who can't pay lose the asset.  If the bank made too many bad loans, they should fail.  If the borrower can't service the debt, they should be foreclosed on.  Keen wants to create another bureacracy to determine who wins and who fails.  If history and human nature are any guide, I'm pretty sure the friends of the deciders win. 

 

css1971's picture

His point is, your solution will take 20 years and deflate everything back down to 1980.

honestann's picture

It will only take 20 years to deflate IF:
1:  They keep printing more debt-money.
2:  They continue to avoid "mark to market".

Troy Ounce's picture

No, that is not what Greenhead says.

You clean the system, like capitalism is supposed to work. Any other solution, like Keens' monetary interference, will have unintended consequences, you know, the unintended consequences we're living in right now. Right, says Keen, let's have more interferenc, more unintented consequences, more civil servants who know it all.

In Japan, capitalism is not allowed to work, hence the 20 year stagnation. It can work there because it is, according to Keen "a coherent society", another word for zombies.

What's wrong with a good old civil war?

 

 

Advoc8tr's picture

So the bank that lent money it created out of thin air at no cost or effort gets to take the real asset because the person who borrowed the created money and payed the bank interest on said created money for 10 years with actual labour all of a sudden can't afford the repayments because of inflation caused by said money creation by the banks and government.

 

Sounds like an outcome that was planned / desired by the banking elite all along.

 

Agree that less central planning / control is the answer but we need to understand that a debt to bank that created the money out of thin air and then sits back and charges interest it on does not constitute an contract that entitles them to reposses the underlying real asset when the debtor can't service the loan anymore?  I mean the only person in the whole sordid example that has done anything productive is the debtor who has paid regularly for X years with money exchanged for his/her labour/efforts.

QQQBall's picture

 

You are overlooking the Depositors who saved their surplus productivity.

pvzh's picture

The person who took the debt is an accomplice in the crime of creation of fraudulent money. Without borrowing by said person, the money in question would not be created by bank. Moreover, that person willingly pledged his/her assets for the money provided. Based on that, I do not see any problem in the confiscation of the assets of the debtor to pay down the debt. These money that has been extended were theft of the savings of other peoples that have been "priced out" due to extension of credit. Paying down the debt, and extinguishing these fraudulent money only serve to restore justice.