Submitted by Edward Harrison of Credit Writedowns
Last week, I highlighted some of the ideas of Australian economist Steve Keen in my post, “Politics and reform: Say I’m a politician….” Keen is of the Minsky camp and he believes that an unsustainable debt bubble has build up in the industrialized world which can only be brought to heel through a ‘debt jubilee.’
Below is a video clip of Keen telling Max Keiser a bit more about how he sees things. Central to his ideas is the concept that demand for credit creates loans which create reserves, which is the opposite causality of what one sees in neoclassical economics. This would mean that, absent a pickup in demand for credit, inflation is unlikely to reappear – irrespective of what central banks do. I will have more on this subject in later posts.
Whoops: for some reason I haven’t been able to embed the video. You can see it here on Credit Writedowns.