Renegade Economist Addresses Permanent Crisis

Featuring Steve Keen

Professor of Economics Steve Keen, well-known within the new school of “post crash” economics, presents an alternative to endless CB stimulus – a variation on helicopter money that reforms private debt and deflates financing bubbles.

Published on
10 October, 2016
Topic
History, Fiscal Policy, Monetary policy
Duration
78 minutes
Asset class
Real Estate, Currencies, Bonds/Rates/Credit
Rating
34

Comments

  • DS

    Dan S.

    23 11 2016 13:35

    1       0

    Keen is blind to glabal war. Where is Risk in his model? Helicopter Money will create an explicit Currency War that will lead to massive logistical supply problems and war. In economics for some constant 'a' and variables x, y, we have F(x+y) <> F(x) + F(y) and aF(x) <> F(ax).

  • DS

    Dan S.

    23 11 2016 13:28

    0       0

    Did we forget about the mplodingof : Japan 1990, Mexico 1994, LTCM 1998, Dotcom 1999-2001? Oh, and the S&L Crisis!

  • DS

    Dan S.

    23 11 2016 13:23

    0       0

    I like Keen's basic premise: banking must be included in economic models of the real economy. However, he then thinks helicopter money will work for the current end game of Nixon's 1971 Shock. This has been tried over and over since Ancient Rome and China. A well written small book to learn about this is "Fiat Money Inflation in France". So if one wants the US to be a former empire then surely print away! Never say Never, ask France and England!

  • HF

    Hans F.

    2 11 2016 12:13

    2       0

    In the Austrian tradition we learn that money created ex nihilo transfer real resources to wealth consumers from wealth producers. This can only be sustained with continued increases in money and credit. I like his initial analysis, but I do not think a helicopter drop to relieve the public of their debt burden is the right solution to the problem of too much debt. I understand that a write-down will hurt "asset" holders, but this approach will be both more sustainable and equitable.

  • BC

    Burton C.

    26 10 2016 06:36

    5       8

    Good interview until Steve Keen revealed he is a climate change fanatic. Science shows climate change is being driven by solar activity NOT mans contribution.
    This point does not justify polluting the world however.

  • BC

    Burton C.

    26 10 2016 06:31

    2       0

    Truman??? Jeesh...How about Herbert Hoover, who by the way wrote the only Presidential memiors worth reading besides US Grants.
    PS. Raymond, best not to mention Doug Noland and Steve Keen in the same sentence. I believe Steve kicked Doug out of his PHD program.

  • RW

    Raymond W.

    25 10 2016 22:07

    1       0

    For those of you who really liked this interview you would like Doug Noland,s weekly Credit Bubble Bulletin and Richard Duncan,s last book .... "The New Depression". As long as new credit keeps coming into the system we will be OK. Once credit growth stops… Houston we have a problem.

  • RW

    Raymond W.

    25 10 2016 22:00

    1       5

    One more thing… I have read several books on climate change. The man-made global warming theory is based on computer models which they keep updating when reality does not match their model. You can model anything you want and get the results that you want by continually turning the knobs on your model but like the economic models that the central banks have been using these models do not work. Economics and climate are both too complicated to model accurately. Increased carbon dioxide levels may raise the earths temperature to some degree but then at some point you get increased evaporation which causes increased cloud formation. These additional clouds reflect incoming radiation. In other words there is a negative feedback mechanism that helps to keep the earth's climate stable Otherwise we would've had runaway global warming long ago.

  • RW

    Raymond W.

    25 10 2016 21:49

    0       0

    This is definitely one of the best interviews that real vision has had. I put it as one of my top five favorites. I also agree with the comments below regarding helicopter money and moral hazard ... in the end we would end up arriving in the same situation that we are in now ... just a lot quicker. The part on Australian housing was really interesting… I was not aware that they have gone to such extremes to keep their housing bubble alive. I live in the Toronto area and the price of my house has more than doubled in the past 10 years. This is in spite of the government taking some steps over the years to try and cool things off. Like Australia we also have a lot of Chinese money coming into Toronto and Vancouver.

  • JD

    Jonathan D.

    21 10 2016 19:13

    1       0

    Is it just me, or has no economist other than Thomas E Woods, heard of US 1920/21?

  • SS

    Sam S.

    21 10 2016 15:33

    5       0

    Climate change is well documented as being caused by natural forces of the universe, the sun, solar system, magnetic field changing etc. Pollution and the destruction of the earths mechanisms which protect many aspects of life on earth are not climate change but the change in health of living environment. Climate change policy a taxing mechanism, but it's impossible for human to control it. We should and can clean up our environments, which would create an enormous economy of jobs and business worldwide. Tax revenue from such business growth will benefit government and people. The current USA administration has looked into making it a crime to speak out against climate change policy---WTF. I hope this is not the case.

  • LV

    Luís V.

    20 10 2016 12:54

    1       0

    What I would give to have SKeen and James Grant in a debate here at RV! To listen to Keen about the forgotten depression (book by JGrant) would be enlightening.
    The escape from the question about currency is nor good.
    Great interview, nonetheless.

  • MB

    Matthias B.

    19 10 2016 12:36

    2       1

    great great interview, together with R. Koo's. very valuable & eloquently diagnosis of the core issues. But while I feel much smarter now, the solutions of debt jubilee, heli money into private accounts etc don't convince me. How can this not create moral hazard? with hindsight while I can now challenge the value of my economics upbringing in Keynes et al, my pratical sense tells me that some sort of punishment needs to be dished out to clean the system, no? Grant tried really in both i'views but both gentlemen somehow evaded on it. would be interesting to have a moral hazard expert to discuss impacts of debt forfeiture/heli money etc? but I feel priviledged to have brought these i'view to me.

  • JF

    Joseph F.

    18 10 2016 18:46

    1       1

    This is the best interview RealVision has put out. Thank you!

  • AN

    Amanda N.

    17 10 2016 11:40

    0       0

    Debt jubilee is a great way to get rid of debt burden..its no surprise to me that people hate debt are often enthusiastic about climate change. Debt is what fuel the global economy for a long time as its much easier to do than raise up productivity . Aussie property are multi layered..i think the first home grant is not the main issue like he said..the market rise back then was minor compare with the most recent boom.. part of that is due to the property market has been stagnated for a while before the recent boom. 2ndly rba rates has gone down a lot to raise the price as a result of the much lower mortgage payment. I do think negetive gearing is bad and main reason for pumping up price.. Some high density apartments market are definitely over supply.. aussies are so tied up with housing market. The government will do 'whatever it takes " to prevent it from crashing...the white goods selling strategy are not common...that said i agree with everything professor keen said...just not so sure about the timing.

  • GS

    Gordon S.

    17 10 2016 09:12

    3       0

    Amazing interview, agree definitely one of the best. But what I would particularly want to point out are the excellent comments accompanying it. Thanks RV for also allowing longer comments as these really enable constructive replies and in my opinion well point out the possible flaws of the interviewees beliefs. I personally also believe his helicopter money proposal to be dangerous, but I’m still fascinated by this topic so love to hear more about it (which will undoubtedly happen). I was however surprised by the negative response here to his mentioning of global warming, I found it excellent. I can’t wait for his next interview!

  • WS

    Wes S.

    16 10 2016 22:02

    0       0

    listen to this Steve Keen interview with the context of the Richard Koo interview and the picture becomes more clear...

  • DS

    David S.

    16 10 2016 04:29

    1       0

    The Western Economies are far too complex for anyone or any model to understand or predict outcomes. The first step is to admit this, especially for professors of economics. The second step is to admit that the Central Bankers were the only game in town to mitigate the financial crisis that Wall Street created. Pogo " We have met the enemy and he is us".

  • PB

    Pieter B.

    14 10 2016 12:17

    0       0

    Great discussion! Thanks a lot.

  • CL

    Charles L.

    13 10 2016 19:19

    3       1

    So much to absorb! Fantastic interview. Re-watched it only 3 times, so far. And will have another go at it. Grant: please, please, show the "chart of all charts" with a logarithmic scale on the amounts!!! That will show that much clearer, when the point in time was, when debt and GDP started to diverge. Was it really on recently??

  • TW

    Tom W.

    12 10 2016 21:46

    2       0

    Awesome discussion!!

  • jd

    john d.

    12 10 2016 17:46

    4       0

    Great interview and once again the interviewer was just as good as the interviewee.

    One thing that struck me was Steve's comment of ZERO chance of a global confrontation because we know the consequences would be so bad. ZERO chance? No such thing and using a Raoul like probabilistic framework and Grant's recent analysis/ presentation on the matter, the probability is certainly greater than ZERO. I guess this is the economist in him speaking though .... and maybe there were some in 1913 that held the same view. Cheers John

  • GG

    Gerald G.

    12 10 2016 02:37

    7       3

    I'm disappointed that Keen seemed to shy away from the most obvious conclusion implied by his own insight into human nature. His assertion that it will take some galvanizing crisis (such as global warming) to act as a catalyst for change seemed like a stretch to me. Accepting that most human beings are fundamentally incapable of altering deeply held world views, a full on systemic collapse would seem the more probable outcome to our current trajectory of escalating monetary madness. I am surprised (and disappointed) that, as someone who seems to pride himself on having a more "objective" (less mainstream) perspective, he was not prepared to confront this horrifying possibility.

    • js

      j s.

      5 7 2017 13:33

      0       0

      Maybe he didn't want to come across like a madman. But I would tend to agree with you that total collapse is more likely. But in that case, what are we actually talking about? Great Depression II? Someone needs to do the work of actually plotting that out. I don't think we're going to have total social breakdown - but short of that, what does a collapse look like, step by step? That's what we need to know and be ready for.

  • MB

    Mike B.

    12 10 2016 01:37

    7       8

    It was all good until he moved to climate change and the need to fight it. Too bad.

  • RM

    Robert M.

    12 10 2016 00:37

    1       0

    Enrico and all other commenters worried about the moral hazard:
    As I said below, this concern assumes the continuance of a roaring, decades long housing bubble. But this reset will be a growth reset and thus the decadal trend of inflation will reverse. No more asset bubbles and no need to worry about moral hazard.
    PS - I can say from first hand acquaintance that Steve is an entirely regular Aussie bloke with many 'common folk' friends!

  • EF

    E F.

    11 10 2016 14:04

    18       2

    Maybe Prof Keen would benefit from developing a few friendships among common folk. It might help him realize that forgiving private debt would not lead to responsible financial behavior but a feeling of being able to get away with it again...

  • CD

    Colin D.

    11 10 2016 06:30

    7       1

    Another excellent, insightful and thought provoking interview. Keep up the great work RV. Shame Grant did not get Steve on to the subject of gold and the possibility of a great debt reset being achieved by massive gold price inflation (as per James Rickards theory).

  • sm

    sam m.

    11 10 2016 04:43

    6       1

    Assume there are no external investors and the banking sector is entirely deposit funded ... then the Government issues a 0% perpetual bond (i.e. currency) to the Central Bank (effectively issued to itself on a consolidated basis since it owns the CB) in sufficient amount to repay the outstanding loans of all borrowers and then the Government gifts this amount to borrowers sufficient to repay their outstanding debts to the banks ... the result is no one owes any money (except the government to itself/CB due to the currency issued) and the banks have no assets or liabilities (but a huge number of staff to pay ...).

    The currently existing transfer of wealth that has occurred from savers to borrowers is then "locked in" and we can repeat the cycle? (e.g. we didn't see inflation we saw the absence of deflation) Do we then destroy the capitalist system since there is no longer an incentive to save since we'll all assume that in future we will be bailed out by further government forgiveness due to repeated currency printing which then leads to hyperinflation? Or do we introduce a new non-credit based monetary system to avoid what we've just re-witnessed.

    btw, I really did enjoy this particular RV interview since I live in Sydney, have an economics degree, am ex central bank/bank supervision/investment bank bond and swap trading and have recently retired to complete a few property developments ahead of the coming deleveraging (e.g. my profession is picking up nickels in front of the steamroller). At least I know the risks I am taking ... RV keep up the good work!

    • js

      j s.

      5 7 2017 13:36

      0       0

      A non-credit based money system is going to be necessary if there's any kind of jubilee like Keen said. He didn't mention that outcome of the scenario he suggested, which is that people are like "Wow, so we just spend up big and then when the situation goes bad the government puts money in our bank accounts! Great! Time to start borrowing again!" Clearly it will require some kind of monetary reset, with hard currency, to stop another credit bubble.

  • LS

    Leigh S.

    11 10 2016 03:01

    4       0

    Steve Keen has coped more than his share of flack over the years. His time has now come and his view on money and debt will in my view become main stream in economic thought and teaching. However how we get out of this mess will be debated for a while yet. Keep going Steve. Leigh SK

  • JS

    Jon S.

    11 10 2016 02:23

    15       1

    Geesh, not sure his basis of going to the war hawk comment with Trump. Hillary, however has the war hawk record. Just thought I let you know. Other than that regurgitated media line, fine interview.

  • AH

    Andreas H.

    11 10 2016 02:16

    0       2

    Well I watched every Interview in the last year and a half. This is the best!
    Super!

  • GS

    Greg S.

    11 10 2016 01:04

    5       0

    Back to back home runs. Koos then Keen. Both very thought provoking.

  • RA

    Robert A.

    11 10 2016 00:24

    17       2

    I've watched them all and this is one of the very best. Although Steve is a great communicator on his own, I think Grant took it to another level by simply being able to "keep up" and focusing him with GREAT follow ups. One of your very best efforts Grant. This hour was easily worth my TWO years of subscription cost! I bet Raoul was real proud of you on this one Grant and thinks he made a very good choice of partners!

  • RM

    Robert M.

    10 10 2016 23:48

    2       0

    Marcus N & Sid V
    Inflation and thus rates would increase. This would break the automatic tailwind behind the decades long increase in housing and housing speculation.
    Doubt the inflation would extend to hyperinflation as that requires serious destruction of productivity.
    There would have to be other policies introduced also in addition to what Steve mentioned - such as a land tax per Henry George. This is what will kill this speculative bubble in housing & stop all those excess returns to the idle, and thus return us to productive investment.

  • PH

    Peter H.

    10 10 2016 23:29

    5       0

    Great interview - and enjoyed your views on the Aussie economy as someone looking to retire shortly. Glad I'm not invested in property (outside modest family home) - but the challenge is where to invest for the future in Australia?

  • HC

    H C.

    10 10 2016 23:15

    4       1

    It was actually Hubert Hoover who preceded Roosevelt as US President (Truman was Roosevelt's VP when Roosevelt died in office. Truman was later elected President), BUT nevertheless, a great interview (as we've come to expect from RealVisionTV.com) with a terrific guest.....not sure how climate change is as big a threat as nuclear war, but maybe episode 2 will address it.

  • HC

    H C.

    10 10 2016 23:13

    2       2

    It was actually Hubert Hoover who preceded FDR as US President (Truman was FDR's VP and later President), BUT nevertheless, a great interview (as we've come to expect here on RealVisionTV.com) with a terrific guest.....not sure how climate change is as big a threat as nuclear war, but maybe episode 2 will address it.

  • VK

    Viresh K.

    10 10 2016 22:55

    19       1

    Grant, great interview. I can't help but disagree with a lot of his remedies and assumptions of how he believes his 'debt write-off' would work. I think the unintended consequences of pursuing such a policy would be disastrous.

    Not only the effect on your local currency but the effect on the public to demand more, and take on more debt with the belief that the government can just create the money to bail them out. Additionally, it doesn't take into account the fact that a lot of the issues we face isn't just due to economics but politics and corruption has played a big role in getting us where we are - resetting debt from 150% to 50% would not solve any of this.

    I agree with Grant that a certain amount of pain is needed, and without that there will not be the desire or will from the public to enforce the changes to economic policy and overhaul of the status quo that I believe is required. It just depends if the political system/party that rises from this is any better...

  • HC

    H C.

    10 10 2016 22:40

    1       2

    It was actually Hubert Hoover who preceded FDR as US President (Truman was FDR's VP and later President), BUT nevertheless, a great interview (as we've come to expect here on RealVisionTV.com) with a terrific guest.

  • HC

    H C.

    10 10 2016 22:39

    0       1

    It was actually Hoover who preceded FDR, BUT a great interview with a terrific guest.

  • HC

    H C.

    10 10 2016 22:39

    0       1

    It was actually Hoover who preceded FDR, BUT a great interview with a terrific guest.

  • HC

    H C.

    10 10 2016 22:38

    0       1

    It was actually Hoover who preceded FDR, BUT a great interview with a terrific guest.

  • HC

    H C.

    10 10 2016 22:38

    0       1

    It was actually Hoover who preceded FDR, BUT a great interview with a terrific guest.

  • KS

    Kathleen S.

    10 10 2016 22:01

    3       1

    One of the best interviews ever, great job Grant and I love Steve Keen watch him on Max Keiser all the time.

    Well done!

  • Sv

    Sid v.

    10 10 2016 21:40

    13       3

    Only an arm chair economist can claim they understand the climate and we need to stop everything and fix the climate!

  • Sv

    Sid v.

    10 10 2016 21:19

    33       9

    Hoover not Truman. It is interesting to hear an intellectual idiot tell us that all we have to do to reduce debt is to print money and pay everyone's debt, and then everything will be ok, because the model tells us so. What he doesnt seem to understand is that people will just reborrow all the money they can get away with. If fact, they will have learned that they were suckers for not having borrowed even more since the government is going to print money and give it to us to pay off our debts. Massive inflation. Totally immoral. No one would have any faith in the currency, the economic system, and the system will fall apart as no one will have faith in the honesty of the system.

  • TT

    Tim T.

    10 10 2016 18:05

    14       3

    Great interview....but climate change?

  • B

    Bojo .

    10 10 2016 17:29

    13       0

    We people are really funny. Giving up virtually everything.. just to be right! Never underestimate what desperate people (central bankers) will do.. especially if they are academics. It is like their entire identity as people depends on not looking at reality.

  • MN

    Marcus N.

    10 10 2016 16:14

    26       4

    Forgiving debt, a 'debt jubilee', whilst simultaneously rewarding prudent savers with equal helicopter drops of cash from the skies sounds like an elegant solution to reducing private sector debt. It is a flawed vision.

    What is missing from this model is any consideration of human behaviour, their appears to be no curiosity or consideration about why people borrow, or what they would do if their debt levels were suddenly reduced.

    Imagine: you are a typical medium income retail debtor; +/-$500,000 mortgage, car loan, credit card debt, boat loan, I don't know what loan... Essentially you are one of the millions of counter-examples in 'The Millionaire Next Door.'

    Suddenly, your government gifts you some forgiveness of some part of your debt (pick any usurious burden). The second reaction anyone would have to this largesse and debt-relief would be 'THIS MEANS I CAN BORROW MORE'

    Debt relief, even if 'sterilised' (politically) with equal credits to savers, must be accompanied by some mechanism to limit or restrict individuals capacity to borrow.

    Unrestricted individuals who fear no debt will always borrow up to the capacity of the institutions prepared to lend to them.

    Reducing the debt burden of private individuals who can then immediately borrow more does not reduce the debt burden of the private sector in aggregate.

    Imagine: part of the solution to the hole we are in might be restrictions on bank lending...

    • js

      j s.

      5 7 2017 13:39

      0       0

      What would it take to make the monetary system backed by gold, in that scenario, so as to ensure that the government could not debase the currency and banks couldn't create credit as they wish? Does that kind of shift require a total reset and crisis?

  • M

    Mark .

    10 10 2016 16:13

    1       0

    We need a pre-Fed deflationary economy, but there is too much debt and government. Technology and globalization is killing the old system.

  • M

    Mark .

    10 10 2016 15:28

    2       0

    I like the explicit connecting of bad monetary policy with social problems. It’s a disaster that more don’t get this. Long video but it went by really fast.

  • KC

    Klendathu C.

    10 10 2016 15:05

    4       0

    The rare economist who thinks for himself.

  • PH

    Philip H.

    10 10 2016 14:30

    6       0

    Herbert Hoover guys........

  • GT

    Graham T.

    10 10 2016 14:15

    2       0

    I must admit I have a signed copy of his 2011 book and recommended to him he read Robert Harris's book "The Fear Index". I am biased, I admit.

  • GT

    Graham T.

    10 10 2016 14:00

    6       0

    Just an outstanding economist, I recommend his 2011 book "Debunking Economics". The very first person who focused on the level of Debt in society and introduced the need for this "social science" to embrace the mathematics of Differential Calculus. He debunks the myth that economies will revert back to equilibrium. If you believe in Minsky rather than Krugman, this bloke is for you. Now teaches in the UK, so no suprise there, another leader for economic change.

  • JS

    John S.

    10 10 2016 11:58

    29       1

    Grant asks the trillion $ question - what happens to the currency with Steve's helicopter money idea?

  • EM

    Ewan M.

    10 10 2016 10:54

    6       0

    I agree this would work, short term everything would boom. But it wouldn't take long to turn into hyperinflation.