Occupy Sydney Day 8 – Steve Keen on Economists and Debt Crises Posted on October 25, 2011 by Richard Smith A quick tutorial from Steve Keen at OccupySydney, via @Ian_Fraser. Yves here. It’s pretty cool to see an Occupy video from a location I recognize. Post navigation ← Europe Readies Its Rescue Bazooka On the Administration’s Latest Potemkin Help Struggling Homeowners Plan → Subscribe to Post Comments 28 comments Andrew not the Saint October 25, 2011 at 1:12 am Great! I didn’t know that Keen was keen on getting involved in political debates. I suppose I could have predicted that, since he’s very well aware of the unbreakable links between politics and economics. Alas, I doubt that the movement will get much support in Australia until their bubbles bust like everywhere else and they start getting the taste of austerity. Right now the only thing that could slap the Aussies out of their la la land is the defeat to NZ in rugby world cup. As for the Kiwis, now I have no hope of any awakening for at least another year – their cup victory will ensure euphoria to the general public (and windfall profits to the booze producers). The Peak Oil Poet October 25, 2011 at 2:12 am Kiwis have only the narrowest of wins in the rugby to comfort them the news out of NZ for the last year or so has been terrible and nothing good on the horizon the icing on the cake will be the Aus government changing the rules yet again to stem the flow of kiwis coming to Aus pop skippy October 25, 2011 at 2:18 am I spoke to a potential counselor in my Ward today. We had a nice chat, to whit the counsel is broke. Although we agreed on good things had been done to lessen the effects, after the GFC, its now at our door step. How we proceed is paramount, people or [????], more community based solutions. Cheers Skippy…one eye on the SOI lol. psychohistorian October 25, 2011 at 3:55 am So what is the story with Melbourne? I guess the future is not quite evenly distributed quite yet. I liked his statement about repudiating “bad debt” or whatever he said…..don’t want to see again to get exact quote. There is not much public discussion yet about the extent to which debt was sold to the public……a nut that he asserts should be cracked. Interesting. Thanks for the posting. steelhead23 October 25, 2011 at 6:03 pm SOI? All I can come up with is the Southern Oscillation Index – the el Nino indicator. Are you a climatologist? Skippy October 26, 2011 at 7:49 pm “Are you a climatologist?” steelhead23. No, just understand a bit from the perspective of piloting aircraft, military operational needs, agricultural and industrial planing, oh…must not forget sailing! Skippy…that and too many beers with some of the NCAR folks at Boulder, Co. so many bright informed people in one spot. Kinda like an antarctic research station, even if one is only the diesel mechanic. LucyLulu October 25, 2011 at 4:05 am Here’s the body of an email forwarded to me today originating from an Aussie from a Tea Party friend. Obviously, no support for OWS on her end. Accompanying the email was a video from somebody icky named David Ickes. I didn’t watch the whole thing but from what I could tell he alleges OWS is part of some grand scheme to move to a global central bank, with ties to MoveOn and George Soros, of course (she drives me nuts, my girlfriend thinks George Soros is responsible for absolutely everything, you’d think he was omnipotent!). “Received this today – our great unwashed were moved on from Martin Place in Sydney on the weekend. They left in their wake urine and faeces, and a horrible mess for the police and cleaners. I hope you’re not reading this at dinner time!” I responded that I didn’t realize Australians were still so uncivilized. My comment was made tongue-in-cheek, lest I offend any of our friends from down under. alex October 25, 2011 at 10:23 am Ickes is a professional conspiracy theorist. Pay no attention – the real conspiracies are a matter of public record. jonboinAR October 25, 2011 at 11:00 pm What the Tea Party puppeteers know oh-so-keenly-well, is that people can be convinced of anything if you play to their needs and emotions. They play those tools like Lizt playing a Strad (or Hendrix a Strat). Dang they’re good! I’ll give ’em that. Alphonse October 25, 2011 at 11:09 pm I think you mean Paganini jonboinAR October 25, 2011 at 11:35 pm Oops!, er, Sure, You’re right. jonboinAR October 25, 2011 at 11:39 pm Just gleaned this from Jonathan Chait: “The American Crossroads memo is the latest and most explicit account of the political theory that has guided the Republican Party throughout the Obama era. Politicians have long trembled before public opinion, but the Republicans have come to understand how ill-formed and malleable public opinion can be, especially on economic policy issues. Most voters, and especially most swing voters, simply don’t know enough about the issues for their opinion to have any political weight.” IOW, you can convince them of about anything if you make it seem like “common sense”. KISS LucyLulu October 25, 2011 at 4:38 am A few months ago, I decided it was high time I learned something about economics. It’s always been a gap in my knowledge I’ve felt I needed to fill. I tend to get OCD about studying certain topics, and will read for hours daily. After Fukushima, it was nuclear physics, and prior to that was fraudclosure and securitization (which reinforced how little I understood finance and economics). So, I studied the different economic theories and some of those who spouted them. Somebody who I respected highly had given me a list of names to work with. Steve Keen was on the list. When I got to his name I felt like I could quit. Finally somebody who completely made sense and where the empirical data lined up nicely with the theory. IMO, someday he will be an important name in the field, like Marx and Keynes, but probably after he’s dead, because that’s how it usually works. And speaking of Marx, it’s good to see a place where Marx’s ideas can be discussed without invoking hysteria or silly accusations of being a communist. His observations on capitalism were really quite astute, prophetic actually. As one example, Marx writing about the worker class, as more and more of the surplus value of labor is siphoned off, eventually discovering the capitalist lie of ‘what is good for the capitalists is good for everybody’. “We can’t raise taxes (or impose regulations) on the job creators”, anybody? However, I digress. Mostly wanted to say that Steve Keen rocks. I’m still waiting for the post he promised me on where he thinks that MMT goes wrong. Though I’d like to buy into it, it would be awesome to not have to worry about public deficit spending, there is something I can’t put my finger on that doesn’t seem quite right. Hearing a critical opinion from somebody far smarter and more qualified (and respected) would be helpful. Benedict@Large October 25, 2011 at 11:10 pm MMTers don’t say that deficits don’t matter. Neoliberals say that MMTers say that, because they are trying to scare everyone away from MMT. Of course, neoliberals try to scare everyone away from everything else, because they can’t survive a competion of ideas. Think of neoliberals as the book burners of the economics profession. As for Keen writing about why MMT is wrong, I suspect you’ll be waiting a long time for that. skippy October 25, 2011 at 5:11 am Anecdotal. LL it has been my observation that the right people using the wrong system can mitigate is flaws. Now the wrong people using the right system can still fk it up or even more scary the wrong people using the wrong system. Skippy…too me its people that create the reality, so its more a people problem than a system problem, one precedes the other…eh. Looters…running a Looting system…is the worst of all possible reality’s. Economic Maverick October 25, 2011 at 10:36 am When are we going to get the Minsky-Keen-Smith grand hypothesis to explain all instability in the world? JasonRines October 25, 2011 at 3:41 pm Maverick – When we can prove Mandelbrot’s theories using the Quantum Computer. Got any time frames on that? Economic Maverick October 25, 2011 at 4:53 pm Mr Rines, I think i’m at a loss to help you on this one! BTW- I checked out your website. Its seems pretty cool! patto October 25, 2011 at 11:14 am @psychohistoria- “So what is the story with Melbourne? I guess the future is not quite evenly distributed quite yet.” Melbourne had a minor protest largely filled by the protest rent a crowd types. While there certainly is stuff to complain about here, it was in many ways missed by many protesters and definitely the media. True poverty and the poor don’t really exist here in Australia. We have a government that hands out to all comers and a buzzing economy still rolling with the good times. Of course there is plenty to complain about concerning government largess and corporate influence over politics but nothing like there has been in the US recently. For those who don’t know Australia. You can currently collect upwards of $20,000 of free cash from the government for buying a house to live. If you are just wanting to be a landlord the government will *only* hand you around $10,000. psychohistorian October 25, 2011 at 8:22 pm Thanks for the report. I have spent the better part of two months wandering around your country, enjoyed the experience and people and want to think that there is a saner place to escape to if life here in America really goes down the crapper. Perth to Alice Springs…..everyone should travel the road and look up all night . Jane October 26, 2011 at 5:15 am No poverty in Australia? Then you must not be including your indigenous population in your assessment. Susan the other October 25, 2011 at 2:29 pm Steve Keen’s clear analysis is death to bankster financialization. The banksters do not yet admit that people are the only resource. They smugly think we of the rabble class are all expendable. richard in norway October 25, 2011 at 4:46 pm We are expendable, oil is a finite resource, land is a finite resource and there are lots of other finite resources. But people are not, world population is 7 billion how many slaves do the 0.01% need? It might be that we soon find out Glenn Condell October 25, 2011 at 5:31 pm I was there! With my 6 yo son who said halfway thru Steve ‘this is borwing’ Made it thru the Qantas guy after him but then had to go as a swim had been promised. ‘I doubt that the movement will get much support in Australia until their bubbles bust like everywhere else and they start getting the taste of austerity’ 100% true. We are still the ‘lucky country’ and most people have a derision of protest generally anyway, the very idea provoking ridicule in some of the circles I move in (which are pretty close to the ground). They say Australia gave the 60s a miss, moving straight from the dowdy 50s to the daggy 70s without the revolutionary interlude. While we have a very well developed suspicion of authority, we don’t have a dissenting tradition. And so our OWS is less broad spectrum, more ‘usual suspects’ at this stage. The media here have generally given OWS a wide berth, but I was cheered to see the reliably reactionary Gerard Henderson have a pop at them in the SMH yesterday: http://www.smh.com.au/opinion/politics/placards-aplenty-at-protest-but-its-hard-to-see-the-good-for-the-pleas-20111024-1mgb2.html A taste: ‘While taking notes, I was approached by a young woman who wanted to tell me her story. It turned out she was an unemployed law graduate who had been looking for work for the past three months. Her problem? Well, she wanted to work in a relatively low-paying community law job but the only positions available for law graduates were in relatively high-paying CBD firms. Some injustice, don’t you think?’ This looks suspiciously like a leaf out of the Thomas Friedman playbook, you know the ‘Egyptian cab driver’ or ‘Syrian student’ who miraculously and against the expected grain, tend to buttress TF’s arguments, such as they are. Henderson runs a corporate policy think tank, so he is on the inside, or the other side of this issue. He knows where his bread is buttered. A GWOTist and Iraq warrior, his job is now to man the barricades for the banks. A dirty job, but someone’s gotta do it. steelhead23 October 25, 2011 at 8:13 pm I am very gratified to see the likes of Steve Keen speaking to an OWS crowd. Basically, the public (the 99) are angry. They’ve lost jobs and homes, and food and gas prices have increased sharply. But nobody has ever bothered to inform them about economics, the fact that while the gurus of economics consider their vocation to be a science complete with mathematical proofs, economics is far more similar to a religion than a science. I might suggest that modern economics theory is a family of religions (say monotheists), as one would not mistake the work of Keynes for that of Friedman, but they all basically believe a similar set of falsifiable assumptions. But the public needs to understand a little more of what happened. No, they don’t need to do the math – they need to understand that those inherent misbelief’s of economics – like the rational actor fallacy – lead to wildly wrong analyses. And let’s not forget the fallacy Alan Greenspan admitted to before Congress – and debunked by Yves in her book – that belief being that individual employees of a firm will always act to the firm’s best interest. Yves showed how an individual is likely to game or overpower a firm’s risk-management group if it benefit’s their self-interest. That is, Greenspan assumed that a bank employee would not hide material facts from his company, would not cause harm to his/her employer, because his/her wages are paid by the firm. In reality, when it is beneficial to an employee’s total compensation to obfuscate the risks they take, they will obfuscate – and when paper profits reach levels that remunerate managers, the managers will join in the fray – effectively looting their own companies. This profit-seeking juggernaut went even further, corrupting ratings agencies, appraisers, and insurers. That is what the public needs to understand. It is important to understand that there is a counter-argument afoot and it is this. Its all government’s fault. Government is corrupt. If only government would get out of the way, things would have gone just fine. That is, many do not believe that excessive credit caused the problem. The real problem with a public perception that the government caused the problem (yes, my NC friends, the government is complicit in this mess, but decidedly not because it over-regulated the industry) is that public support is needed for strict governmental regulation, or this whole mess will be repeated endlessly until we’re all broke or dead. Steve spoke to this as well, using a morality argument that saving is good and borrowing bad and showings by banksters and economists that borrowing is good – are wrong. A strong voice is needed to help the public understand that strong, tightly enforced regulation of the finance industry is good and deregulation is bad. C’mon Yves, step up to the plate – go to OWS and speak. Please. Glenn Condell October 25, 2011 at 11:53 pm steelhead ‘economics is far more similar to a religion than a science’ yes, as I said to a correspondent yesterday (with regard to Adam Curtis’s Machines of Loving Grace’s look at Rand/Greenspan): it has always struck me that ‘free market’ ideology, Hayekian libertarianism and Randian ‘philosophy’ are all rather clumsy attempts to mythologise theft, to give a quasi-religious imprimatur to naked greed. Humans recognise selfishness as a sin against their humanity at some basic level but for some this is overridden by a natural avarice that cannot be admitted, and so a power-friendly intellectual and moral architecture replete with good and evil must evolve, not just to absolve the greedy, but implicitly to demonise the non-greedy and turn their demands for fairness into dangerous threats to the natural order of things. I guess this process began at the moment the first hunter-gatherer realised how to store surplus food, the first ‘have’ among the ‘have-nots…’ Also, on the capitalism as religion meme, you might enjoy John Robb’s Bernanke as Pope: http://globalguerrillas.typepad.com/globalguerrillas/2011/10/journal-the-pope-of-the-church-of-money.html ‘Greenspan assumed that a bank employee would not hide material facts from his company, would not cause harm to his/her employer, because his/her wages are paid by the firm’ I don’t think he is stupid enough to make such a silly assumption, but he is clever enough to get mileage out of pretending to. Call it a Straussian noble omission. Cahal October 26, 2011 at 7:29 am The fact is that capitalism will always seek to corrupt and firms will always get subsidies, patent protection, avoid tax and so forth. Libertarians seem to think that making the government smaller will magically resolve these problems, but it won’t. So we need to go for ‘second best’ policies as advocated by Lipsey and Lancaster, instead of tyring to take steps towards neoclassical fantasy land. This means regulations, unions and the like. Fiver October 26, 2011 at 3:52 am Surprised to see Keen featured here given he fundamentally disagrees with the idea that massive money printing is the way out of this. I think he’s correct, but I usually see him cited by political lunatics like Mike Shedlock. Comments are closed. Tip Jar Please Donate or Subscribe!