In a relatively brief (23 min.) and somewhat wonkish presentation, economist Steve Keen...


In a relatively brief (23 min.) and somewhat wonkish presentation, economist Steve Keen continues his assault on Paul Krugman and neoclassical economics. Keen says economists' obsession with public debt is a mistake, and that only private debt - whose bubble has yet to burst - matters.

Comments (12)
  • bbro
    , contributor
    Comments (11217) | Send Message
     
    Household debt service plus Government debt service to GDP is at
    a 31 year low...the lowest since the 4th qtr 1980...
    21 Apr 2012, 06:23 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4291) | Send Message
     
    Time to party?
    21 Apr 2012, 07:14 PM Reply Like
  • icandoitdon
    , contributor
    Comments (626) | Send Message
     
    a 31 year low...thanks to financial repression. it's an utterly meaningless indicator.
    21 Apr 2012, 08:07 PM Reply Like
  • Wildebeest
    , contributor
    Comments (778) | Send Message
     
    WTF!

     

    And if interest rates are zero then an infinite amount of debt is serviceable. Would that make infinite debt advisable?
    21 Apr 2012, 08:23 PM Reply Like
  • bbro
    , contributor
    Comments (11217) | Send Message
     
    Please believe it is utterly meaningless...
    22 Apr 2012, 03:50 AM Reply Like
  • IncomeYield
    , contributor
    Comments (3700) | Send Message
     
    Yes, it is advisable if you have a strong enough "FICO".

     

    Look at the recent debt issued from some of the so-called investment grade corporates. Who's to say that MickieD will even be around in 20 years, and they went out 30 around 3%.

     

    Truly schock 'n awe stuff.

     

    The US should lend at <2% for 10 years every penny they possibly can to anyone dumb enough (or smart enough, who knows) to take the paper.

     

    What the US Gov or McDonalds does with the cash is another matter.
    22 Apr 2012, 03:26 PM Reply Like
  • Ohrama
    , contributor
    Comments (568) | Send Message
     
    Which GDP? Eventually folks will start looking at coveted (by foreigners such as aircraft) GDP Vs the hamburger and the banksters part and vote accordingly on our currency. I can bet this ratio has come down a lot from the 1980 (or any time in the past) figures.
    22 Apr 2012, 09:40 PM Reply Like
  • dneedle1
    , contributor
    Comments (109) | Send Message
     
    Geoff-- yes, this news is good. Until interest rates rise. Because, if the above stat is true, the MAIN reason is the super low interest rates, not the reduction of debt, which has come down some but remains much too high.
    21 Apr 2012, 07:41 PM Reply Like
  • spald_fr
    , contributor
    Comments (2814) | Send Message
     
    "Keen says economists' obsession with public debt is a mistake, and that only private debt - whose bubble has yet to burst - matters. "

     

    That's like stating it's better to die from a heart attack than cancer.
    21 Apr 2012, 08:59 PM Reply Like
  • Wildebeest
    , contributor
    Comments (778) | Send Message
     
    spaid_fr the reason Keen makes the distinction is because private debt as a % of GDP is so many times larger than public debt as a % of GDP. By obsessing with public debt when private debt is multiples larger the discussion is missing major aspects of what the underlying problem(s) are.

     

    So Keen isn't saying it better to die from a heart attack than cancer, he is saying that it is not helpful to obsess about a heart attack if you have a short time left to live from (undiagnosed and untreated) cancer. i.e. you might want to focus on treating the cancer.
    22 Apr 2012, 11:19 PM Reply Like
  • gspriv
    , contributor
    Comments (4) | Send Message
     
    I don't know who Keen is. But I did look up his presentation. He makes a huge fuss about better known names and comes up with some blindingly obvious conclusions, which any market practitioner would know like the back of his hand. I am surprised he even found a mention in this forum!
    22 Apr 2012, 12:20 AM Reply Like
  • AllStreets
    , contributor
    Comments (1464) | Send Message
     
    Steve Keen is a professor in economics and finance at the University of Western Sydney. His book "Debunking Economics" has recently been one of the most popular books about economics. He has significantly advanced the social science of macroeconomics by developing equations to account for the effects of the growth or liquidation of debt on equilibrium output and asset prices (bubbles). His theories are fairly easy to understand and well founded in a common sense understanding of how changes in debt among the public and private sectors affect flows of income and investment in the economy. However, he develops those ideas with a complete set of ordinary differential equations comprising a complete dynamic macroeconomic model that well describes the actual dynamics of deleveraging in various economies that we have witnessed.

     

    As early as 2000 he began predicting the extreme economic contraction that would occur inevitably due to debt deleveraging based on his understanding of the limiting role of debts to incomes in economic sectors. He predicted that bursting of the dot.com stock price asset bubble would begin that process and later predicted that the real estate bubble would worsen it. Interestingly, he points out that the recent so-called "black swan" events, including bursting of the dot.com bubble and the real estate bubble, should have been entirely predictable "white swans" if economists had included the role of debt in their economic models, an omission of which he has rightly stated is astonishing (however, he rightly credits Keynes and others with suggesting such an important role without having developed the mathematics to elucidate it).

     

    I highly recommend that serious students of the economy or asset price markets become acquainted with his fascinating work.
    22 Apr 2012, 10:57 AM Reply Like
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