Posts Tagged ‘Neoclassical economics’

One you doesn’t need to be a Professor to realise that we’re in deep sh*t. But if you ever needed it explained just “How Deep”,  Prof. Steve Keen is the guy to do it. Empirical data trumps theories built on sand any day, however, the economies of the western world are based on a failed neoclassical model, and the ideology of austerity is a busted flush!


Prof. Steve Keen – Published on Sep 23, 2016

Some papers that are remarkably critical of mainstream economics have been published recently, not by the usual suspects like myself, but by prominent mainstream economists:
ex-Minneapolis Fed Chairman Narayana Kocherlokata,
ex-IMF Chief Economist Olivier Blanchard, and
current World Bank Chief Economist Paul Romer.

I discuss these papers in a tongue-in-cheek introduction to another key problems of unrealism in economics — the absence of any role for energy in both Post Keynesian and Neoclassical production functions.

I also address Olivier Blanchard’s desire for a “widely accepted analytical macroeconomic core”, explain the role of credit in aggregate demand and income, and identify the countries most likely to face a credit crunch in the near future.

I gave this talk to staff and students of the EPOG program at the University of Paris 13 on Friday September 23rd.

5 years ago spoke at Occupy Sydney. The day before terrorists attacked the Occupy Protestors.

The Modern Debt Jubilee

Bill Buckler, author of The Privateer 

The modern “debt jubilee” is characterised as “quantitative easing for the public”.

It has been boiled down to a procedure where the central bank does not create new money by buying the sovereign debt of the government.

Instead, it takes an arbitrary number, writes a cheque for that number, and deposits it in the bank account of every individual in the nation.
Debtors must use the newly-created money to pay down or pay off debt.
Those who are not in debt can use it as a free windfall to spend or “invest” as they see fit.
This, it is said, is the only way left to restart economic “growth” and finally get the spectre of unending financial crisis out of the headlines.
It is the latest of a long string of “print to cover” remedies.

The major selling feature of this “method” is that it provides the only sure means out of what is called the global “deleveraging trap”.
This is the trap which is said to have ensnared Japan more than two decades ago and which has now snapped shut on the whole world.

And what is a “deleveraging trap”?
It is simply the obligation assumed when one becomes a debtor.
This is the necessity to repay the debt.

There are only three ways in which a debt can be honestly repaid.

  • It can be repaid with new wealth which the proceeds of the debt made it possible to create.
  • It can be repaid by an excess of production over consumption on the part of the debtor.
  • Or it can be repaid from already existing savings.

If none of those methods are feasible, the debt cannot be repaid.
It can be defaulted upon or the means of “payment” can be created out of thin air, but that does not “solve” the problem, it merely makes it worse.

The “deleveraging trap”, so called, is merely a rebellion against the fact that you can’t have your cake and eat it too. So is the genesis of the entire GFC.

Debt can always be extinguished by means of an arbitrarily created means of payment. But calling that process QE or a Debt Jubilee doesn’t (or shouldn’t) mask its essence, which is simple and straightforward debt repudiation.

(A “debt jubilee” is the latest attempt to make a silk purse out of a sow’s ear. It is the latest pretence that we CAN print our way to prosperity, but only if we do it in the “right” way.)

Glossary of economic terms: