[dissident]

Here is an interesting talk given by Steve Keen:

https://www.youtube.com/watch?x-yt-ts=1 ... r_embedded

It is a bit too short, but the main point is that the notion that debt has no effect on the economy is utter nonsense. And inequality is not some aesthetic issue but fundamental to economic activity. Both rather obvious facts that are routinely ignored.

[ohanian]

http://www.amazon.com/Debunking-Economi ... ref=sr_1_1

Steve Keen's "Debunking Economics" is a thorough and most challenging document

[Peak_Yeast]

I think that the pbs documentary putins way - shows how economics worldwide functions today. - Not just Russias.

When all the systems has been perverted to serve the few with endless greed - what economic theory would work?

[evilgenius]

What Keen is really addressing in the video is not how debt, especially private debt is so wrong, but how private debt used as a substitute for wages is wrong. There is a difference between debt used as a substitute for wages and debt used as a lever in order to gain return. The wise use of debt would look at debt as a means to achieve gain, when you can't afford to exercise an opportunity because your wages are too low, as a good thing. Since a house is not really an investment, the wise use of debt would not look upon borrowing too much to get one as a wise use of debt. It especially would not look upon the expansion of that debt in order to buy a big screen TV or an RV as a wise investment. Now, if you could borrow in order to set up a situation where you could start a business or something which would actually bring in a greater return than the interest rate you paid to get into the business, that would be different.

In another thread I got into an argument with Ralfy, amongst others, trying to point this out. Ralfy kind of said that capitalism requires growth and that if everyone exercised the use of debt solely as a means to achieve gain, that is that they used debt wisely, then capitalism would fail. I don't think it is like that. I think that it is more like this, that using debt wisely is like a parking space with a roof over it. Most of the time it is no different than a space without. When it snows, however, you can easily tell the difference. Here, in this example, you see the difference in that debt used wisely would always cut off demand at the point where employers were not raising wages to keep pace with inflation. The unwise use of debt does not send that message. In fact, it simply goes further into debt in order to make up the difference.

[Keith_McClary]

Today's Dilbert

Steve Keen has a website.

[evilgenius]

Keith, thanks for the link to Keen's site. After watching one of his videos I came away with a slightly new perspective, to expect markets to be fully volatile. Maybe not over a day or two, but certainly over a year or more. Previous to this I had expected volatility, but had not given credence to the effect of curmudgeons like me. I have to be a curmudgeon because I don't have the resources to average my losses over many goes. Watching Keen I've discovered that I am not alone.

[Keith_McClary]

SEPTEMBER 28, 2015
Bubbles Always Burst: the Education of an Economist
by MICHAEL HUDSON

The topics that most interested me – and the focus of this book – were not taught at New York University where I took my graduate economics degrees. In fact, they are not taught in any
university departments: the dynamics of debt, and how the pattern of bank lending inflates land prices, or national income accounting and the rising share absorbed by rent extraction in the Finance, Insurance and Real Estate (FIRE) sector. There was only one way to learn how to analyze these topics: to work for banks. Back in the 1960s there was barely a hint that these trends would become a great financial bubble. But the dynamics were there, and I was fortunate enough to be hired to chart them.

[JV153]

Today's Dilbert

Steve Keen has a website.

There you go, Keith. Actually I think the Chinese were using paper currency several thousands years B.C.

[Pops]

What Keen is really addressing in the video is not how debt, especially private debt is so wrong, but how private debt used as a substitute for wages is wrong. There is a difference between debt used as a substitute for wages and debt used as a lever in order to gain return. The wise use of debt would look at debt as a means to achieve gain, when you can't afford to exercise an opportunity because your wages are too low, as a good thing. Since a house is not really an investment, the wise use of debt would not look upon borrowing too much to get one as a wise use of debt. It especially would not look upon the expansion of that debt in order to buy a big screen TV or an RV as a wise investment. Now, if you could borrow in order to set up a situation where you could start a business or something which would actually bring in a greater return than the interest rate you paid to get into the business, that would be different.

Great post, Evil.

Tie this back to Piketty pointing out that while wealth for centuries was held in productive capital—farmland, nowadays most wealth is held in housing.

[ralfy]

I can't recall referring to debt being used "wisely."

I think my argument was an amount borrowed is either spent or re-invested. Either way, it leads to growth because for the first someone profits and for the second someone has to earn in order to pay for the return on investment and eventually profit (otherwise, there's no reason to accept an investment).

That's why capitalism requires growth.

Of course, there are periods when businesses and even economies lose, but in the long term they or others continue growing.

That's why global GDP keeps rising. And since all that credit has value only as long as more goods and services are available, then it's not surprising that material resource and energy production and consumption keep rising as well.

All of which cannot be sustained in the long term given a world with physical limitations:

http://www.theguardian.com/commentisfre ... g-collapse

[ralfy]

Great post, Evil.

Tie this back to Piketty pointing out that while wealth for centuries was held in productive capital—farmland, nowadays most wealth is held in housing.

From what I know, many consider credit as wealth. That's why much of the assets of the rich consist of numbers in hard drives rather than houses.

[Cog]

once you confiscate all of the wealth of the wealthy then we will have true justice in the world and things will be perfect

[Cog]

You sound jealous pstarr. Envy is unbecoming of an alpha male.

[kanon]

I think Keen is in favor of QE for the public. His idea is to give a sum to everyone where anyone with debt must use the sum to pay their debts. Biological persons without debt would receive somewhat of a windfall. The banks would receive the payments but, I imagine Keen would include less prospects for future lending.

This is not confiscating the loot of the wealthy, but I can certainly understand Cog's consternation. After all, there is no real justification for government intervention to benefit ordinary people. Otherwise, what is the point of being wealthy and powerful? Depression crisis -- no such thing -- the only true crisis is if the banking cartel does not have the government at its near exclusive beck and call.

[ralfy]

That's not true. Some of those $100 million homes have lots of bathrooms and fantastic views. You can see the hoi ploi down on the beach. Or sometimes (if you strain really hard) you can see a mountain peak through the smog. And they are filled with $100 million Picasso doodles.

If that is not productive I don't know what is.

I was reminded of the liquidity pyramid found here:

http://www.creditcontraction.com/

That is, residential real estate valued at around $80 trillion, and together with other non-monetary assets making up around $125 trillion, but a fraction of credit levels.

[Tanada]

I think Keen is in favor of QE for the public. His idea is to give a sum to everyone where anyone with debt must use the sum to pay their debts. Biological persons without debt would receive somewhat of a windfall. The banks would receive the payments but, I imagine Keen would include less prospects for future lending.

This is not confiscating the loot of the wealthy, but I can certainly understand Cog's consternation. After all, there is no real justification for government intervention to benefit ordinary people. Otherwise, what is the point of being wealthy and powerful? Depression crisis -- no such thing -- the only true crisis is if the banking cartel does not have the government at its near exclusive beck and call.

If I wanted to search back about 5,000 posts ago this is exactly the plan I was hoping for. Pay off the bank debts by routing the money through the average persons accounts in 2009 instead of just giving it straight to the 'too big to fail' banks and the economy would have recovered quite quickly while still protecting the banks. The real foundation of the USA economy is small level consumer spending, dumping money in the giant banks accounts directly did zero to fix the problems caused when the housing bubble popped. I wanted to sell my house for years because of my financial situation but property values were so low I couldn't even refinance it. It was pure luck that prices recovered just enough that at the time of foreclosure I broke even between remaining debt and then current sale price, but I lost my entire life savings and all the money I had invested in the house and I got seven years bad credit reports.

All those same things happened to tens of millions of other average people, and all of it would have been avoided if the bail out money had gone to pay down my house debt to equal the value in the post bubble market. I could have then refinanced my house and I would still own it, or be able to sell it today without losing my life savings or destroying my excellent credit rating.

[dissident]

I think Keen is in favor of QE for the public. His idea is to give a sum to everyone where anyone with debt must use the sum to pay their debts. Biological persons without debt would receive somewhat of a windfall. The banks would receive the payments but, I imagine Keen would include less prospects for future lending.

This is not confiscating the loot of the wealthy, but I can certainly understand Cog's consternation. After all, there is no real justification for government intervention to benefit ordinary people. Otherwise, what is the point of being wealthy and powerful? Depression crisis -- no such thing -- the only true crisis is if the banking cartel does not have the government at its near exclusive beck and call.

If I wanted to search back about 5,000 posts ago this is exactly the plan I was hoping for. Pay off the bank debts by routing the money through the average persons accounts in 2009 instead of just giving it straight to the 'too big to fail' banks and the economy would have recovered quite quickly while still protecting the banks. The real foundation of the USA economy is small level consumer spending, dumping money in the giant banks accounts directly did zero to fix the problems caused when the housing bubble popped. I wanted to sell my house for years because of my financial situation but property values were so low I couldn't even refinance it. It was pure luck that prices recovered just enough that at the time of foreclosure I broke even between remaining debt and then current sale price, but I lost my entire life savings and all the money I had invested in the house and I got seven years bad credit reports.

All those same things happened to tens of millions of other average people, and all of it would have been avoided if the bail out money had gone to pay down my house debt to equal the value in the post bubble market. I could have then refinanced my house and I would still own it, or be able to sell it today without losing my life savings or destroying my excellent credit rating.

Words of wisdom that will fall on deaf ears. Your solution smacks of "socialism" and that is blasphemy in the land of Uncle Sam. But corporate socialism is what you have instead and that is vastly worse.