Steve Keen — We Need a Private Debt Jubilee

Published on
June 19th, 2020
Duration
59 minutes

A Sleeping Giant: Opportunity in Fannie Mae


Steve Keen — We Need a Private Debt Jubilee

The Interview ·
Featuring Steve Keen

Published on: June 19th, 2020 • Duration: 59 minutes

In these unprecedented times of economic stress, the mainstream playbook has been tossed out the window as fiscal and monetary authorities continue to throw everything but the kitchen sink at the problem of synchronized global economic downturn. In this interview with Ed Harrison, heterodox economist Steve Keen argues that, although some of these policies are headed in the right direction, many are completely missing the core issue – ungodly levels of private sector debt. Together, Keen and Harrison discuss common misconceptions about private debt, MMT, and the circumstances where ballooning public debt led to hyperinflation. They also break down Keen's argument that the exogenous nature of the COVID crisis might improve the palatability of a much-needed private debt jubilee. Filmed on June 16, 2020.

Comments

Transcript

  • CH
    Charles H.
    26 July 2020 @ 02:29
    This was one of the most interesting interviews I've heard on RealVision. Ed really showed his breadth and skill in interviewing Steve here. Thanks.
  • RA
    Robert A.
    24 June 2020 @ 21:11
    I don’t see how Ed has the time to reach the level of preparedness required to make these interviews work. First he has to understand the material in general and then the nuances and bias (I’m using this term in a good way) which the Guest brings to the discussion. If he “generalizes” or “pigeonholes” the Guest too much he will get Guest push back and the interview will stall. Ed has to have almost the same level of understanding of the material as the Guest in order to have that “light hand” with each Guest. I know Ed is super bright and a quick study, but I simply don’t see how there are enough hours in Ed’s days for him to continually operate on this high interviewing level with so many Guests of various backgrounds and areas of expertise. To be honest, watching Ed interview is like watching a Magician perform magic acts that seem easy, but require practice and a level of dexterity that we the audience just can’t relate to. Whether viewers agree with the subject matter of this interview or not, I do think each of us can take away something of value from what Ed was able to tease out of Professor Keen. Vintage RV curation with a dollop of Ed’s sleight of hand—bravo!
  • GB
    Gold B.
    23 June 2020 @ 11:35
    I know Steve personally and I think he is a great human being and a great economist. However, please stop misrepresenting Austrian economics (AE) !!!! Here are a few pointers and Ed, can you please pick up and read a few Rothbard books to be able to provide some push back to the "money printing creates prosperity crowd," I know you want to ! 1) Private credit creation out of thin air would be impossible under a free market Austrian system because fractional reserve banking and overissuance of notes is fraudulent and there would be a free market profit opportunity under the "law of reflux" to punish overissuance. 2) No Bailouts !!! If bankers go and "lend money like crazy" like my other friend Richard Vague says, they only do that because they know they will get bailed out by the government as it has been the case throughout history. Try not doing that for a little bit and you will see some restraint. 3) Rule of Law: Try also to put some bank manager in jail for committing obvious fraud like in 2008 or at least gross negligence and this will also work wonders for banks' risk taking. 4) No government guarantees for banks and their deposits, no FDIC, no legal tender laws making bank credit money acceptable for the payment of taxes and you will also see a reduction in this artificial demand for this type of un-backed money. Finally, while correctly pointing out that this bastardized system of a "market" run in collusion of the banks and the bureaucrats (ever wonder where the other parts of QE end up?) has caused numerous credit bubbles and crises, let's not forget that money printing by the government on a fiat currency has ALWAYS and without fail lead to the collapse of said fiat currency in hyperinflation, even the dollar is down 90% since the creation of the Fed. There are more than just the two examples Steve mentions here, and we all know them: Yugoslavia, Hungary, Austria, Germany, USA Greenbacks, John Law's Mississippi company, the list goes on but .... ... as just one example and an instructive reference for how this whole process works is "History of Fiat Money in France." Read it and you will understand why the whole concept of "Let's just have those guys who gave all this power to the banks print up money without limits and it will all be swell" is logically inconsistent and naïve. PS: Why do all those smart guys like Keen and Werner pretend they were the first ones finding out about fractional reserve banking and bank credit creation? I know I pointed this out before but please read some Rothbard and Mises before making that claim.
    • NA
      Naiem A.
      23 June 2020 @ 22:16
      fractional reserve banking is a myth http://econintersect.com/pages/opinion/opinion.php?post=201901200002
  • JF
    John F.
    23 June 2020 @ 21:39
    Would love to see Ed interview Michael Hudson.
  • RR
    Ryan R.
    23 June 2020 @ 01:16
    New territory for me. The comment about mortgages sizes and credit in relation to housing market prices is one that is sticking with me. Headlines and short articles I encountered about MMT lead me to dismiss it, but now I am curious to learn more and challenge my assumptions. Gives me a lot to look into / thanks!
  • JR
    Jeremy R.
    22 June 2020 @ 23:24
    I'd offer a critique of Steve's approximation of the "Austrian vision" for a free market in banking. Free-market thought says industries self-regulate and learn from bad experiences. After the oil market crash in Texas, the lessons there were - be cautious and don't get caught up in the mania of speculative lending, and don't go all in. Don't make as many large loans as possible. Because if a bubble collapses, we're out of business. The problems we have with our current system is not the free-market, but of moral hazard created by governments that will bail out these bad decision makers when things go wrong. Who cares if some banks fail? We only care when we're on the hook for their bad decisions as taxpayers. Remove the implicit government backstop, remove the moral hazard, and watch banks become much more cautious and stop manias and speculative bubbles in their tracks.
  • CC
    Charles C.
    22 June 2020 @ 22:40
    This is a fascinating and mind bending interview. Kudos RV. This and other RV interviews about MMT have made me rethink what increased government debt really means. It would be very interesting to have a traditional economist like Lacy Hunt in discussion with Steve to see where there are points of agreement and if they can reconcile differences in any way. This deserves a lot more attention please
  • DR
    David R.
    19 June 2020 @ 06:37
    Obviously, one person's debt is another person's asset. For some, their sole asset and livelihood. What a mess!
    • PQ
      Peter Q.
      19 June 2020 @ 12:00
      Well said.
    • mt
      mitchell t.
      19 June 2020 @ 13:32
      It seems that this proposed version of a debt jubilee would be good for creditors since, as you say debt = assets. This way you're going to get paid back instead of defaulted on when the debtors can't repay their loans.
    • DS
      David S.
      22 June 2020 @ 20:09
      I thought the risk of default was Capitalism way of funding productive investments. Why reward to losers? You will just give them incentives to make bad judgements and still win. DLS
  • DM
    Don M.
    22 June 2020 @ 18:20
    So the more irresponsible you are with debt, the more you profit from this? Just like the banks. Hooray.
  • IH
    Igors H.
    20 June 2020 @ 04:02
    Is it right to say that bank reserves consist of savings, and not from money created through lending?
    • SP
      Stephen P.
      20 June 2020 @ 06:30
      There are two kinds of money. M0 reserves that you and I are not allowed to touch, only banks and the central bank. And M2, etc. regular money. The reserves are part of the bank’s equity capital from retained earnings etc. and are accounting entries at the Fed. Banks can lend reserves to one another and can sell treasuries and agency paper to Fed to get more reserves.
    • sm
      sam m.
      21 June 2020 @ 11:07
      No it is not right. The only way bank reserves can be created is by the central bank buying assets from the private banks. THERE IS NO OTHER WAY. And the converse argument is ... private banks have NO CONTROL over the $ value of reserves. Just work out the basic accounting entries between the Central Bank and Private Banks and it is obvious.
    • IH
      Igors H.
      22 June 2020 @ 12:26
      Thank you, Stephen.
  • MD
    Matt D.
    22 June 2020 @ 05:10
    Thanks for the interview RV. I believe there needs to be more discussion about this - serious critical thinking - seems like magic pudding stuff. There were days when money was connected to a productive asset (eg seeds - provide food and a means to reproduce) and debt reduction meant debt forgiveness. Interesting where we are at the current moment in history. I would question the moral hazard so to speak of some of the ideas presented here. Obviously those more advanced in knowledge about this subject would have done that already. Yet good work Ed, and I appreciate someone who is non-conventional. Yet in practice...? Surely there is some sort of arbiter ?
  • sm
    sam m.
    21 June 2020 @ 11:35
    If RV is deteriorating to this extent I am out. And I am a day 1 (came here because of Grant williams). To hear the interviewer (and I only rate him as an interviewer) mention rentier ... and not mention Chapter 24 of Keynes General Theory. Why the #### are we paying for this?
    • DH
      Dale H.
      21 June 2020 @ 16:53
      Anyone can call a "debt jubilee" at any time - it's called bankruptcy. One way to step away from the debtor/creditor carnage is to just buy gold, which is no one's liability. But Keen has always advocated 'stimulus': https://goldstandardinstitute.net/2012/05/17/open-letter-to-steve-keen/ A true debt jubilee would be to set the date of the jubilee 25 years in advance so lenders would know to reduce lending in anticipation of the jubilee year. To just steal from creditors with a blanket surprise jubilee is just dirty. Keen is a charlatan, and a lot of people on RV already know it and stay TF away from his "ideas".
    • MD
      Matt D.
      22 June 2020 @ 05:04
      Hi Sam, I am like you in that I have been watching RV for a long time (Grant connection) - recently subscribed - I don't mind the conflicting views, as there are people like yourself that call out the BS. Thank you. I think there were a few interesting ideas from Prof Keen, but something seems totally shonky! I am not an economist to argue the detail, but believe that his idea would crack under serious scrutiny. I think Ed was pressing him on a few of the weaknesses of his idea, while letting him make his point, and respect that he (Ed) knew enough to do this. He didn't get a chance to mention currency risk. Whether clipping coins or inflation (hyper) - empires (governments), countries, kings, and private citizens have all fallen in the past regardless. Surely there is a common element to this? RV could perhaps tweak the comment section so that we could have serious debate over these ideas. Yet appreciate your comments Sam.
  • SS
    Steven S.
    22 June 2020 @ 03:47
    Visualization would be helpful in Keen's explanations. I'd suggest a few slides regarding the flow of money/debt and the role of banks next time. Excellent interview, Ed, and always a delight to listen to Steve.
  • MP
    Mitchell P.
    22 June 2020 @ 00:59
    I used to believe that ideas like this - a Debt Jubilee - were the stuff of Voodoo Economics. But the debt burden has become so unmanageable now in Western Countries, as some of the charts showed , that to simply let the private sector slide into some sort of uncontrolled insolvency is probably unthinkable. For may nations it would rip apart the social fabric of those countries. We can see the US tearing itself apart in front of our eyes. The staggering level of personal debt that "main street" struggles under must be playing some underlying role in all of that. I'm now slowly coming around to the belief that unconventional approaches like this are entirely possible and will be some part of our future.
  • Mv
    Martijn v.
    21 June 2020 @ 03:45
    With the Household and Corporate sectors at “Peak Debt” and with the Banking System at “Peak Leverage”, it would be great to be able to wave a magic wand and allow for a fresh start via the reduction in credit money, ie. the debt jubilee. The proposed solution implies an increase of the Government Debt to even more unsustainable levels, supported by the Central Bank, being forced to monetize all the debt being issued. The speed of monetization would be even worse if the market is able to determine interest rates of the highly-indebted government debt going forward. Deficits will explode due to interest rate payments. In effect, the Central Bank can’t balance its books anymore, as it should make massive allowances for bad (Government) debt. Ergo, the value of the issued currency will quickly decrease, resulting in inflation. What is the limit of debt monetization? What Public Debt / GDP ratio would trigger hyperinflation? 200%? 250%?
    • AA
      Andrew A.
      21 June 2020 @ 10:19
      The central banks can't balance their books anymore? Did you even watch the interview?
    • sm
      sam m.
      21 June 2020 @ 10:40
      The Govt owned Central Bank could buy all Govt Issued Debt ... and interest rate payments = dividends paid back to the Govt by the CB (ie costless). The money has already been spent. The only inflationary impact can be "do they do it again"? If all countries do it for the same % of GDP how does it affect inflation/fx rates?
    • Mv
      Martijn v.
      21 June 2020 @ 16:25
      That wasn’t clear, allow me to correct. I meant that “the Central Bank can’t balance its books anymore, without entering into negative equity”. In an extreme situation, if a central bank has trillions of Treasuries on the asset side, trillions which are de facto un-payable given the indebtedness of the government, that implies that equity turns negative. At what point does this trigger hyperinflation? IMHO This question remains relevant, even if the total amount of money is maintained the same, with the substitution of Credit Money for Fiat Money. What this proposal entails is passing the risks in the household sector, in the corporate sector, and in the banking system to the government and central bank. The currency holders have to foot that bill.
  • JV
    Jan V.
    21 June 2020 @ 14:32
    Once this is all done we will end up with a central bank balance sheet that runs negative equity. Since central banks create money they are immune to insolvency (assets < liabilities). Interesting thought. Wondering what the market reaction will be towards this phenomenon (impact on the currency)? The only problem i see is when you get inflation. The central bank should sell assets in that case to shrink the monetary base. If their assets are impaired who will be the buyer and at what price? In that case it might be time to revalue the gold...
  • SB
    Stewart B.
    19 June 2020 @ 17:31
    Great interview. A few quick points - Ed was on fire! What a difference a good interviewer makes. You'd never hear Bloomberg staff ask questions like that. Steve is certainly right regarding broad money being lent into existence, and creating aggregate demand. We can justify this to ourselves with an example. Consider you have $50k. You are trying to choose whether to renovate your kitchen, go on an amazing holiday (like really amazing for that money), or buy a new luxury car. Which ONE do you choose? Now, enter the world of banking and credit. You can now have all three by borrowing $100k. There is now an extra $100k of broad money in the system, ie $100k loans, as well as $100k of deposits, as the money ends up in someone's account. We have now spent three times as much and created three times as much economic activity. This is more aggregate demand as we are now employing three people instead of one before. And as Prof Keen points out, the problem arises when this tries to go into reverse. IMHO higher interest rates was the correct way to prevent private debt getting out of control to begin with. Imagine yo are looking to buy a house with a mortgage. Clearly higher rates discourage excessive private borrowing. In contrast to Prof Keen's view, I believe both the equity (assets - liabilities) of the private and public systems can increase at the same time. This is because not all assets are created with corresponding liabilities. For example if I dig a gold nugget out of the ground, write a song, or my cat gives birth to kittens, we now have more assets, without liabilities. One thing to be very careful of is that higher inflation tends to lift corporate borrowing costs. If you are looking to lend money to a corporate, and you would be reluctant do to it at an interest rate much below the rate of inflation. So, central bankers sitting a highly indebted economy wishing for inflation, is much like a fool sitting on a pile of gelignite wishing for a spark. A little may erode the real value of the debt. A lot may create a catastrophic rise in borrowing costs. Eg if inflation rose to say 20% as money was printed into the hands of people who would spend it, then it is likely sovereign rates would be near 20% and corporate debt rates higher again. Imagine if you are Nestle happily rolling debt at near 0% and suddenly you are rolling debt at 25%. Imagine you have a mortgage paying 2% and it goes to 20% when you roll your debt. I hope you see the problem. Letting creditors know that the debt jubilee is coming in advance would also exacerbate the problem. Thank you Ed and Prof Keen (a fellow Aussie).
    • sm
      sam m.
      21 June 2020 @ 11:27
      None of this message is true and it is a reason that "beliefs" are ... "beliefs". I am also an Aussie and this ... is shit (not shite as English/others might say it). If we ignore credit creation (yes it is a thing ...) then if private saving does not equal public dis-saving then you are arguing (by definition) that the external sector is dis-saving. And wtf are are you arguing - to be honest this is a dog's breakfast/mad woman's leftovers. Come back with a coherent argument that is worthy of a reply. What you served up is just what when I get a little "sick" in the back of my throat.
  • PQ
    Peter Q.
    19 June 2020 @ 17:47
    Comment and Question: Debt jubilee is a default. The owners of those bonds, mortgage bonds, obligations are wiped out in that default. Where's the net benefit never mind rule of law. What I heard in the instance of the PIL suggestion where mortgages are capped by the income potential of the property, is a govt managed market price. Just remember how objective and reliable government officials are in governing the FED, that's how honest they would be about valuing the income (by extension the value) flow of a property.
    • CB
      Caroline B.
      19 June 2020 @ 20:52
      Exactly. A debt jubilee isn’t possible. Someone’s debt is another’s asset. Have to inflate, no other way out.
    • JR
      Jacob R.
      20 June 2020 @ 01:45
      A debt jubilee is not actually defaulting on debt, it is inflating your way out. Printing money and giving it to people to pay down debt and it you don’t have debt then you get cash. That is inflating away debt. It’s also fair if you don’t have debt because you get to keep the additional cash instead of paying down your existing debt.
    • sm
      sam m.
      21 June 2020 @ 11:16
      People just don't seem to understand 1) the money's already been spent 2) we haven't seen inflation 3) We have just seen lower inflation/less deflation
  • DM
    Douglas M.
    20 June 2020 @ 03:29
    He mentions a few times how people are "trying to reduce government debt". Who is he talking about? When has govt debt gone down? Who is ringing the bell, and getting results, at "reducing gov't debt"? Hey, great interview and I've been following Keen for 2 years now, but c'mon. NO ONE is doing anything about "government debt".
    • DC
      David C.
      20 June 2020 @ 06:23
      Agree he seems to be disconnected with reality.
    • sm
      sam m.
      21 June 2020 @ 11:09
      I was a Govt Bond Trader in Australia in the 2000s and there was a debate when the Govt sold Telstra (phone company) ... we had the opportunity to 100% retire the Govt bond market and it was a REAL debate... not a phony debate. Australia had a real debate about 100% retiring Federal Govt debt.
    • sm
      sam m.
      21 June 2020 @ 11:11
      But I also used to sit next to a guy that made a bet with Steve that made Steve walk from Sydney to Mt Kosciusko with a t-shirt that said "I was wrong about Aussie Housing ask me why".
  • BA
    Bruce A.
    20 June 2020 @ 04:56
    Someone please check/ correct my understanding of Private Debt Jubilee as explained in the video: 1. Treasury issues debt in amount equal to the 'desired private debt reduction'. 2. Treasury uses its General Account at FED to credit funds to private bank accounts for debt repayment or corporate share purchase (to be used for retirement of corporate debt) . 3. FED buys equivalent Treasury debt in secondary bond market (this ensures that money supply doesn't fall with the extra treasury issuance). 4. Result is a reduction of debt in private sector, increase of govt debt, increase in FED balance sheet, and no change to money in circulation. 5. With less need to service debt, the private sector does not need to undertake balance sheet repair or default and there is thus less risk of economic output falling as happened in great recession. thanks in advance.
    • SP
      Stephen P.
      20 June 2020 @ 06:27
      Sounds about right, in line with what I heard. They could also do something similar to shore up pension funds, particularly state and local, most of which are short of needed reserves and will hold corporate and municipal bonds. That seems easier than sending money to all personal bank accounts. The Fed buying corporate bonds feels like a small step in the jubilee direction.
    • sm
      sam m.
      21 June 2020 @ 11:04
      This is not a new idea. It was called the "Chicago Plan" and was re-visited recently by the IMF and they agreed it ticks all the boxes. This is not a conspiracy theory this is just basic double entry accounting. https://www.imf.org/en/Publications/WP/Issues/2016/12/31/The-Chicago-Plan-Revisited-26178
  • RM
    Russell M.
    20 June 2020 @ 15:26
    If you follow his debt jubilee solution, you must allow interest rates to rise to market levels and stay there to discourage re-inflation of private debt.
    • sm
      sam m.
      21 June 2020 @ 10:33
      Rates are practically at zero along the entire frigging curve. The IMF agrees we can take rates to zero and then we can issue cash to replace previous debt ... https://www.imf.org/en/Publications/WP/Issues/2016/12/31/The-Chicago-Plan-Revisited-26178 This is not a new idea ... this was discussed 90 years ago.
  • TN
    Tim N.
    19 June 2020 @ 10:34
    Thank you Ed and Steve - a fantastic interview. I think Ed is a very skilled interviewer. Often experts who have studied their subject so deeply assume too much knowledge in their audience and race ahead in their thought processes. Ed's question's really helped to control the direction and pace so that a layman (such as myself) could understand the concepts. Bravo gentlemen.
    • AR
      Anthony R.
      21 June 2020 @ 04:02
      You bring up a good point: interviewing for the audience, not the guest or the interviewer. Sounds obvious once I wrote it, but often lost in most interviews. Ed clutches nicely between the expertise of the guest and the needs of what is probably a wide range of audience knowledge.
  • JS
    Juraj S.
    20 June 2020 @ 11:11
    Keen's biggest problem has always been that he just starts with the current system as an immutable given, just like MMT. Basically, now that government points a gun at people and forces them to accept their currency, let's think about how we can tweak it so that we don't change the fundamentals, just tweak who gets bailed out and centrally plan the banking through regulations, calling it a public good. Dig at Austrians misrepresenting their view. Saying their view supports private banks credit creation and bubbles when actually their entire charge is about FRB and credit creation causing bubbles. Jesus. Government debt good, private debt bad, we get it, how boring. Why create money to bail out private debt? Why not let them go bankrupt and let those that saved take over? Keen is a shallow thinker.
    • RM
      Russell M.
      20 June 2020 @ 15:33
      Keen's approach is all about how to find a politically acceptable way to re-balance things to eliminate the excess debt created by government suppression of interest rates for decades. I like the Austrian approach better but there is no way to get from here to there without a collapse and possibly anarchy that I can see.
    • AM
      Abigail M.
      20 June 2020 @ 20:21
      Not to mention advent of bitcoin. Wild cat banking not an issue with decentralized, permissionless currency. Wildcat also not as much of a problem as is commonly portrayed - 19th century was greatest period of growth and dynamism in US history.
  • CD
    Christopher D.
    20 June 2020 @ 19:24
    Agreed with Prof Keen, Ed is a most brilliant interviewer.
  • DS
    David S.
    19 June 2020 @ 21:39
    Corporation buybacks were not bad in themselves, only to the extent that they were used to give excess executive compensation. If the corporation does not have any more projects that meet its investment criteria, then you can make the company more resilient by increasing savings. Recent corporate borrowing at low interest rates is an attempt to establish more resilient balance sheets for use during the COVID-19 pandemic. If it stays on the balance sheet, this liquidity is cheap. If I were a treasurer of a corporation, that is exactly what I would do and pray no one wants to spend it. DLS
    • JR
      Jacob R.
      20 June 2020 @ 03:24
      It seems an odd practice to issue corporate bonds, one form of debt, to buy back stocks, another form of debt. Instead of focusing on R&D and product development that will result in increased earnings and then using that to buy back stocks.
    • DS
      David S.
      20 June 2020 @ 16:39
      I think we were in a world of technological disruption that made it difficult to plan on productive long term corporate investments. Now it is just surviving cash flow problems until the pandemic is over for businesses and families. DLS
  • AD
    Abhijit D.
    20 June 2020 @ 16:20
    Brilliant interview! Even if I do not agree wholeheartedly, Steve is an excellent thinker, and very articulate. One of Ed's best interviews thus far!!
  • RM
    Russell M.
    20 June 2020 @ 15:21
    I like his debt jubilee approach because it is relatively fair. But I see two problems with it. First, if you are injecting money into bank accounts what about people who don't have bank accounts? Second, if you have a rule that the injected money must first be used to pay down debt, how do you mechanically enforce that? I suppose there could be a tax penalty on any money not properly applied.
  • NK
    Nick K.
    20 June 2020 @ 15:06
    Hi Steve, I'm genuinely curious and fairly open minded regarding different solutions. What alI am trying to workout is, how a debt jubilee will really help the younger demographic populations (those building families and accumulating things) and therefore increase general demand for goods. If you hand out money to everyone to cancel private debts, won't that be very inflationary for real assets. Those who borrowed privately, mostly did so to pay for education or home purchases. Those with low debt have not had income to borrow enough to afford the assets they have otherwise borrowed to buy. (I'm all for the cancellation of student loans, BTW, huge drag on the economy and effectively a perfect rentier example of 'pay to play' higher income access control). If you cancel individual's private debt through a one off payment and then give others (those without debt) an equal amount. 1) won't the house prices or others assets rise as everyone has more money or credit to start buying again? 2) Those without debt will be back at square one, because they still won't be able to afford the larger items they need/want (if prices inflate), and won't have the incomes over and above the one off distribution. Another point you made: Forcing those without debt to exchange that cash distribution for shares/equities, essentially helping bond holders avoid a haircut on their corporate bonds. This is like an additional finger in the eye for those who had done the right thing (not overly indebted) or worse, puts them in the firing line when those equities return very little because there has been so little investment over the last 10 - 15 years... just buybacks. Surely what is necessary, is for those who have invested in bonds or equities, without truly understanding the risks (or where managements have 'performed poorly'/defrauded shareholders), to take the haircuts they deserve. Those banks that have lent money to individuals who can't afford their debts need to take their medicine... Asset prices should be allowed to fall and those working, might be able to afford to buy a home without crippling debt... If we fix the disparity between returns on capital and the return on labour.
  • PF
    Pedro F.
    20 June 2020 @ 11:53
    "Pleasure to be back, wise man. Very, very enjoyable to have somebody who asked questions who actually really knows what he's talking about to begin with." I imagine the frustration; also: so very true indeed!
  • BB
    Ben B.
    19 June 2020 @ 08:08
    Where does the interest come from? In a simple system of 1 bank, 1 business and 1 customer its impossible?
    • RS
      Rob S.
      20 June 2020 @ 09:30
      Exactly, that's why more credit creation is required in the form of new loans, otherwise the money to pay the interest does not exist.
  • TZ
    Tibor Z.
    19 June 2020 @ 18:45
    I hope that there won't be any debt jubilee because I am a saver. I wanna be able to buy assets cheap. Let the overleveraged be in pain!
    • JR
      Jacob R.
      20 June 2020 @ 01:41
      You would still get the cash injection, and be able to do something with that (ie add to savings) while other people are paying down debt
    • JL
      Joseph L.
      20 June 2020 @ 08:51
      While the current social unrest in the United States and around the developed world has many complex causes -- one of them is surely is the unrelenting pain felt by a huge segment of society that is over leveraged by absolute necessity rather than by choice: The forces at work that compel excess leverage are far beyond the power of an individual family to control. Do you want to risk your longevity and the well being of your children by living near the power plant / industrial site whose pollution is often unregulated due to regulatory loopholes? If not, then you'll need to borrow a lot to live in a healthier environment. Repeat for crime /safety concerns. Repeat for education -- a nearly mandatory and increasingly expensive insurance policy for social and economic advancement It's probably inevitable that the over leveraged will experience much more pain in the months ahead, and there may well be opportunities to buy cheaper assets, but consider that on balance the pleasure of buying at a discount may be greatly offset by the growing disorder and shared misery. The quantifiable price of the shared misery will likely exceed the individual gains from buying a few assets at a discount. Several thousand years of human history suggest a jubilee of some kind will eventually unfold. It's better that we do it before the long term damage becomes impossible to solve.
  • JL
    Joseph L.
    20 June 2020 @ 08:24
    Great conversation! Thank you very much Ed and Steve! Real Vision has recently featured two erudite thinkers both of whom have clearly articulated the central role of private banks in money creation and proposed remedies to correct the tendency of the current system to create financial asset bubbles and wealth inequality as opposed to financing productivity enhancing endeavors that also alleviate wealth concentration. The two speakers are: Richard Werner a few weeks ago in an excellent interview with Hugh Hendry, and here with Steve Keen in an informative discussion with Ed Harrison. It seems that although there is broad agreement between Richard and Steven on many issues, there might be some important differences in their thinking too that could be worth exploring to gain a greater appreciation of the reform policies that will be needed in the years ahead. While I might be mistaken, it seems to me that there is a difference between Richard and Steve in the possible remedies offered by the central bank money creation, and centrally controlled vs. distributed small bank money creation in general. Steve seems more sympathetic to the role of the centrally created (central bank) money to finance the private debt jubilee, while Richard seems to be wary of power concentration in the central bank and rather favors the proliferation of smaller private banks. Both men seem to favor greater regulatory oversight of banking to require productivity enhancing investments vs. financial asset speculation, but there might be interesting differences in their approaches to this regulatory structure too that would be worth exploring. Thanks so much to Real Vision for featuring both Richard Werner and Steve Keen, and I'd really look forward to a discussion involving both of them together.
  • AS
    Ash S.
    20 June 2020 @ 07:10
    Love the modern debt jubilee concept!
  • SF
    Simon F.
    19 June 2020 @ 07:57
    A master class in interviewing from Ed. Steve is consistent in the articulation of his perspective and, as usual, always on top of the facts and math, but what made this exceptional was the quality of Ed’s preparation and understanding of the issues, history and competing theories. He navigated the interview to cover the important stuff in a logical sequence that made the conversation really incisive. You could see Steve’s combination of surprise and pleasure in being up against someone of Ed’s calibre.
    • SW
      Stephen W.
      19 June 2020 @ 10:03
      Agreed, as a relatively new subscriber I am coming to the conclusion that Ed is the man.
    • TP
      Timothy P.
      19 June 2020 @ 16:41
      Ed is a boss, and I've always enjoyed his interviewing skills. Steve is a guest I'd like to see more of - his understanding of debt and banking mechanics is unparalleled. It also backs up a few of the thesis that we have heard on RV before, that govt will not fix the problem and we'll have some kind of solvency event. Good stuff.
    • CH
      Christopher H.
      20 June 2020 @ 05:32
      Yes, a brilliant interview. I’ve see Steve on several channels and this was the best articulated discussion by far. Well done to the interviewer and interviewee.
  • DW
    David W.
    20 June 2020 @ 04:54
    Very interesting interview.
  • DM
    Douglas M.
    20 June 2020 @ 02:52
    He seems to have ignored the fact that British now speak an interesting dialect of Arabic.
  • JM
    Justin M.
    20 June 2020 @ 02:24
    I see Ed Harrison therefore I watch Ed Harrison.
  • JR
    Jacob R.
    20 June 2020 @ 01:47
    Interview of the highest quality! Thank you.
  • PT
    Peter T.
    19 June 2020 @ 23:04
    What the fuck this guy is a lunatic like the rest of them. Good luck when oil is at 300 bucks a barrel and a loaf of bread cost 30 bucks. Ill take BTC and leave the morons to devalue the living shit out of fiat
    • KS
      Kathleen S.
      20 June 2020 @ 00:24
      HE tells the TRUTH about how the system Works -- this is a guy who has predicted all of the crisis -- because he realizes that is is PRIVATE DEBT that matter, not the FED balance sheet.
  • KS
    Kathleen S.
    20 June 2020 @ 00:14
    Steve Keen is Brilliant --- wish I had know about him in 2015.
  • DS
    David S.
    19 June 2020 @ 23:41
    Many economists can agree on the current problems – some accurately. It is much more difficult to prescribe solutions – no single solution works on a complex system. In addition, each solution impacts other solutions – synergy is tough. The rock/economic group The Moody Blues got it right in the title of their sixth album “A Question of Balance.” You need feedback loops on any legislation to see how if it is helping and in balance. The nexus of economics and psychology is simply risk/reward of investing. Both risk and reward are necessary and need to be in balance. If you eliminate the risk – short or long run, it just does not work. A debt jubilee eliminates this balance. If we follow Professor Keen’s prescription, the restraints on banks and corporations will not work either. Banks have lobbyist called Congress and attorneys to find work arounds. Money will flow into hard assets and the stock market; rich win, poor lose. If you eliminate my debt, I will borrow more up to the limit allowed hoping that it will be forgiven again and again and again. This works for the rich as the poor have a hard time borrowing for some banking reason. In the US we need to put the money into everyone’s hands by supporting the real economy with jobs like infrastructure and proper support of those who actually “cannot” help themselves. Even charity needs to be done more at the local level not handing out money at the federal level helter-skelter. It incentivizes the same bad behavior. The biggest part of any problem is understanding it. Then try to deal with it on a practical basis – real economics is common sense; pollical economics is theoretical. You need feedback loops on any legislation to see how it is working. Just looking at the numerator and denominator of a fraction, is a wee bit too theoretical for me. DLS
  • AA
    Aymman A.
    19 June 2020 @ 23:40
    Simply brilliant!!
  • WM
    William M.
    19 June 2020 @ 23:18
    Outstanding!
  • JG
    Jordan G.
    19 June 2020 @ 23:04
    The simplicity of this solution blows my mind. Awesome talk guys!
  • JH
    Joseph H.
    19 June 2020 @ 22:37
    Brilliant, thank you both Steve and Ed
  • MJ
    Mark J.
    19 June 2020 @ 22:27
    "is is is". Love it
  • DS
    David S.
    19 June 2020 @ 20:53
    Before I watch, I thought that bankruptcy is the capitalistic preferred method of reducing debt – reinforcing the risk level of loaning capital. At the fiat government level, FX markets were the preferred method of punishment for too much fiat debt. It might be better if the word jubilee was not used in debt jubilee as it indicates a recurring event every 25 or 50 years. It will be interesting to see how the interview changes my mind. DLS
  • BT
    Brian T.
    19 June 2020 @ 20:38
    Have been a big fan of S Keen for nearly 12 years. Someone whose models actually work and are predictive of how real economy will behave. Krugman needs to step down and give up his Nobel for a series of failed theories and untruths. Bravo for bringing on The Man.
  • gj
    gail j.
    19 June 2020 @ 19:29
    Interviews like this are the reason that I subscribe to Real Vision. Here are two men who know their own minds, are knowledgeable of the work of others, can riff off one another's thoughts, and always maintain a pleasant respectful discourse. It's quite a contrast to some other venues which are little more than egomaniacs slinging mud at every ideas except their own. Good job Ed, good job Steve.
  • MT
    MICHAEL T.
    19 June 2020 @ 18:14
    Pretty wordy.
  • MM
    Matthew M.
    19 June 2020 @ 12:37
    You limit the size of private loans for properties based on rental income... everything is good... x years later it is decided that this regulation needs to be lifted in order to support housing prices :)
    • JM
      John M.
      19 June 2020 @ 17:32
      Sounds good in theory but sometimes developers create new uses for old buildings so current rental income is irrelevant. Also, poor neighbourhoods have low rents. So if lending is limited by rental income does this mean lending policy helps to entrench depressed prices in poorer neighbourhoods?
  • TJ
    Terry J.
    19 June 2020 @ 17:26
    That was truly a top drawer discussion. Thank you Steve and Ed for some truly insightful food for thought. I really hope some of the world's key policymakers get to see this and act on Steve's innovative suggestions! Doing so might actually save an otherwise doomed capitalist system which has been suffocated by the bankers and greedy elite.
  • MT
    Mark T.
    19 June 2020 @ 17:17
    I think I heard Mr. Keen say that corporate debt is better than individual debt because corporate debt generates cash flows. While this may have been the case in the past, haven't we seen corporate debt being used to finance share buybacks and that CapEx spending has been decreasing since 2012? These debts aren't generating cash flow at all, except for the lenders via interest payments. Maybe I understood him incorrectly though.
  • AT
    Andrea T.
    19 June 2020 @ 16:20
    1) Speaking of the credit economy and of capitalism as if they were the same thing is utterly misleading. There cannot be capitalism when central banks and banksters control money. Central planning is the opposite of the market economy. 2) "We" didn't allow too much private debt. The government and central bank controlled economy did. 3) Human beings can create money from nothing as Santa can create free gifts. 4) I don't understand why people loving the government spending money don't use real names. It's not "the government" that spends money. It's Trump, or Biden, or Clinton, or Romney. I wouldn't give these gents one cent. It blows my mind that people trust them with managing trillions of dollars. 5) Patents and copyrights laws are a violation of private property rights because they don't allow you to use your physical property as you like. See Kinsella on that.
  • PG
    Philippe G.
    19 June 2020 @ 15:45
    Enjoyed this conversation!
  • SW
    Scott W.
    19 June 2020 @ 15:23
    Mr. Keen articulates his arguments extremely effectively - convincingly perhaps - if one takes as a given that there MUST be fiat money. And his arguments for more regulation and restrictions in the private banking system are spot on under that premise. It would be exceedingly cool were RV to get someone like Robert Murphy to argue the Austrian perspective, especially contra Keen and perhaps Mossler/Kelton as well. Mr. Keen argues for a better way to create "money" out of nothing (quotes are a nod to the currency v money distinction/debate). There is still the argument that creating money out of nothing is the real problem - irrespective of the means by which one does it. @RV - this interview is of the highest quality.
  • KP
    Kaushal P.
    19 June 2020 @ 13:40
    I’m surprised there is no mention of moral hazard. Even if this would work as far as reducing debt and increasing GDP, what would stop the slippery political slope of more and more handouts to win elections and a final hyperinflation?
    • MW
      Max W. | Real Vision
      19 June 2020 @ 15:11
      He did address hyperinflation risk. He said it is overblown in the mainstream. To give an analogy, he is essentially saying those who focus on government debts are like people who don’t wear seat belts because of a few anecdotes of people being saved by fluke ejection when the data says hitting your head on the steering wheel is the big problem.
  • TN
    Tim N.
    19 June 2020 @ 10:34
    Thank you Ed and Steve - a fantastic interview. I think Ed is a very skilled interviewer. Often experts who have studied their subject so deeply assume too much knowledge in their audience and race ahead in their thought processes. Ed's question's really helped to control the direction and pace so that a layman (such as myself) could understand the concepts. Bravo gentlemen.
    • RK
      Robert K.
      19 June 2020 @ 15:01
      Agreed re Ed's interviewing skills. He's become my favorite RV personality, though the others are good, too. In the minor leagues, I've grown to look forward to Jack Farley's enthusiastic intros. More Jack!
  • ms
    matthew s.
    19 June 2020 @ 11:14
    what is the equation they mention in the video, talking about trying to control the denominator versus the nominator? great interview and discussion!
    • MW
      Max W. | Real Vision
      19 June 2020 @ 13:11
      Debt to GDP is a ratio. You can either grow the GDP (denominator) or shrink the debt (numerator).
    • mt
      mitchell t.
      19 June 2020 @ 13:16
      Debt/GDP, Debt/Income, etc. I believe.
  • NL
    Nick L.
    19 June 2020 @ 12:25
    Fascinating! Thanks RV for providing these perspectives.
  • NF
    Neal F.
    19 June 2020 @ 12:01
    Not a fan of Mr. Keen's ideas but I applaud Ed for conducting an excellent interview that offered Mr. Keen a chance to express his view while being challenged on certain points as well.
  • FN
    Frans N.
    19 June 2020 @ 11:44
    Hey RV, please remember the transcript. Its not yet available. Thanks for the invaluable work!
  • JB
    Jamie B.
    19 June 2020 @ 11:13
    I really appreciate the diversity of guests on RV. It makes me truly appreciate the many different angles one could look at all this from. However Richard Koo, Richard Werner & now Steve Keen are the interviews that I've found myself nodding my head in agreement and really aligning my thoughts with. To hear Ed mention those interviews in one bundle, made me realise the synchronicity of the three guests and the common thread. Thank Ed, your DB's and interviews are my favourite! (but just by a little bit cause the other guys bring their A-game too). Keep up the amazing work.
  • jg
    jesse g.
    19 June 2020 @ 10:52
    Thank you Ed and Steve!
  • VW
    Voytek W.
    19 June 2020 @ 10:51
    Some interesting points but is he basically advocating UBI (“put money in people’s checking account”)? What about the international debt denominated in hard currencies, eg USD - are they getting debt forgiveness as well in form of a check from from uncle sam?
  • RJ
    R J.
    19 June 2020 @ 09:04
    Great to seen Keen discussing his views. He copes a bit of flack from commentators Down Under and the economic fraternity. Economics will always be an ongoing discussion. From a fellow Aussie, keep going SK!
  • SS
    Steven S.
    19 June 2020 @ 08:58
    Spectacular! thanks for bringing Keen on
  • TG
    Terry G.
    19 June 2020 @ 08:26
    Back to the sausage fest
    • AB
      Alastair B.
      19 June 2020 @ 08:30
      What do you mean by this comment?
  • FN
    Frans N.
    19 June 2020 @ 08:12
    Was waiting for him to come on. Bring on Michael Hudson please. Roubini round 2 would be nice, specifically to hear about his (strong) alternative view on BTC ("shitcoin").
  • BB
    Ben B.
    19 June 2020 @ 08:08
    Where does the interest come from? In a simple system of 1 bank, 1 business and 1 customer its impossible?
  • WA
    Wissam A.
    19 June 2020 @ 07:39
    "We have always found, where a government has mortgaged all its revenues, that it necessarily sinks into a state of languor, inactivity, and impotence." - David Hume taken from his essay on "Of Public Credit"