Today we feature a longish (23 minutes) interview with Australian economist Steve Keen (hat tip, Tim Iacocno). I'm not much of a Max Keiser fan, but what can be done? I mean, he's broadcasting on Iranian TV for chrissakes. We already know the United States is the Great Satin. That's not news. Iran is run by religious fanatics, by the Mullahs. That's not my idea of how a country should be run.
Keen is the author of Debunking Economics (Zed Books, 2001) and a new version covering macroeconomics is coming out this year. His "contrarian" views on how economies actually work are well-articulated and make sense. Keen has little patience with the Krugmans or Bernankes of this world, as I described in my post Dude! Where's My Recovery?
Keen first makes the point that banks only make money by "persuading" people to take on huge levels of debt. This is done by inflating asset values and handing out credit as though it were Halloween candy. During the Housing Bubble households took on enormous amounts of un-repayable mortgage debt. Keen then makes the point that conventional economics does not take private debt levels into account, presuming instead that all private debt is good!
The discussion seems almost quaint in 2011 because the Wall Street banks effectively run the Congress with respect to policies affecting them. See my post The Bankers Have Won Completely. This renders the discussion academic, and Keen is an academic economist. If we lived in a sane world, here are the sane things we would think and do.
Still, it is useful to contrast sanity with the brain-damaged economic policies that the United States has adopted over the last 30 years. Perhaps it is just a coincidence that widely accepted economic theories which were largely divorced from Reality sanctioned unrestrained theft by predatory banks
The video is long, but it's worth watching all the way through. At the very end—spoiler alert!—Keen says that "any neoclassical economist who takes a look at [the second edition of Debunking Economics], where I show them the literature they have ignored, and show them how totally hollow their theories are, if they don't jump off the edge of a cliff after reading the book, they're intellectually immoral."
Just reinforcing Dave's message. Steve Keen is one of the few economists in the world that understands how the system actually works. And he predicted the 2008 crisis. There is some great stuff on Steve's web site including this course "Behavioural Finance 2010". Skip to lectures 11 & 12 if you are short of time.
http://www.debtdeflation.com/blogs/lectures/
Posted by: RobM | 07/15/2011 at 11:12 AM