Feedback from Steve Keen On 28th Amendment

He doesn’t like the gold standard:

“On your reform proposals, I did take a look and I am not a fan of a gold standard. Lots of reasons for that–some of which I cover in the Roving Cavaliers–but because it’s such a large part of your proposed amendment it makes it difficult to critique any component of the overall plan.”

I’m trying to get him to say something about the other stuff that is independent of the gold standard; specifically, whether the right way to do a jubilee, if we ever had one, would be to cancel everything but the currency and the demand deposits, which is what the proposed 28th Amendment does.

The problem that is addressing, of course, is that without those two things there would be no money out in the economy at all if you canceled every debt, since it is a debt-based monetary system.  Not to mention that commerce should have some monetary basis on which to continue, even if pricing is difficult at first.

For more on this subject, see this and related posts.

Yet, Keen is a self proclaimed fan of Joseph Schumpeter, another one of those early 20th century Austrian economists, and here is what Schumpeter had to say about the gold standard:

An ‘automatic’ gold currency is part and parcel of a laissez-faire and free-trade economy. It links every nation’s money rates and price levels with the money-rates and price levels of all the other nations that are ‘on gold.’ It is extremely sensitive to government expenditure and even to attitudes or policies that do not involve expenditure directly, for example, to foreign policy, to certain policies of taxation, and, in general, to precisely all those policies that violate the principles of [classical] liberalism. This is the reason why gold is so unpopular now and also why it was so popular in a bourgeois era. It imposes restrictions upon governments or bureaucracies that are much more powerful than is parliamentary criticism. It is both the badge and the guarantee of bourgeois freedom—of freedom not simply of the bourgeois interest, but of freedom in the bourgeois sense. From this standpoint a man may quite rationally fight for it, even if fully convinced of the validity of all that has ever been urged against it on economic grounds. From the standpoint of etatisme and planning, a man may not less rationally condemn it, even if fully convinced of the validity of all that has ever been urged for it on economic grounds.

—Schumpeter, History of Economic Analysis (H/T Wikipedia)

So maybe while Steve Keen is not a “fan” of the gold standard he is not a staunch opponent, either.  Or perhaps he is a staunch opponent and is just being polite.

The gold standard, as I have stated elsewhere, is one of those “divisive” issues among economists. 



Filed under financial crisis

2 responses to “Feedback from Steve Keen On 28th Amendment

  1. Steve Keen is a communist from way back. He still likes Marx and says he’s misunderstood (which he no doubt is to some degree). I like Keen but I don’t think he’s entirely rational being strongly influenced early in his career. Many of Keen’s fans are Chartalists. He does distance himself from them somewhat but I think he embraces many of their ideas. Keen believes that this corrupt and unjust system should be heavily regulated by the government. The Chartalists would give the government even more power.

    I believe that the solution lies in the dissolution of power and privilege. However, I imagine this to be politically impossible.


    • Steve Keen a commie? Who knew?

      So he prefers the government regulation solution. Well. No wonder he doesn’t like the gold standard.

      Off the cuff, I’d say that the gold standard is the only hope for the “dissolution of power and privilege”. But I’m still taking input and trying to think this through.


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