Daily Archives: December 16, 2011

More Steve Keen

Obviously, I’m going to have to catch up with him.  Here’s an interview with the BBC from late November:

Obviously, it is quite courageous for an economics professor anywhere in the world, even Australia, to start talking about debt jubilees.  So my hat’s off to him.

On the other hand, he doesn’t seem to want to go all the way, referring to an “intelligent, modern jubilee”.  Thus he has very quickly run into the first unavoidable problem that is presented as soon as any kind of partial debt forgiveness is proposed:  who gets left out (HT is the BBC interviewer)?

HT: Somebody, under your solution, is coming in and saying that’s a good debt, that’s a bad debt?

SK: No. If we try to do it on an individual basis, we’ll be here forever and we’ll feed lawyers more than ….

HT: Who’s making the decision about the broad sweep?

SK: That’s why it has to be an intelligent modern jubilee. We can’t say: Worthy borrower, unworthy borrower. We have to have a systemic approach because fundamentally households did not make the bad decisions. The bad decisions were made by the banks to lend in the first place.

HT: Accepting what you identify as the problem and trying to understand what the solution is, in this new system that we’re replacing the current bad one with, who’s deciding who gets the debt write-off and who doesn’t?

SK: I wouldn’t say it was a case of making a choice between one individual and another. It has to be a systemic process by which we reduce the level of debt-finance money in the economy and increase the amount of government-created money. Because we have two sources of money in a capitalist economy. The banks can create money by extending loans. The government creates money by running a deficit. Now back in the early 60s the ratio of government created money to the overall money supply was 15%. It’s fallen so far that we’ve got an entirely debt-based system which has driven speculation. We need to create the government money to balance out the credit. So I’d actually have a government creation of money system approach to try to rebalance the system and reduce the private debt.

HT: The government, the central bank, prints money to pay off people’s debts? What I’m wondering is, you say, “Write off debts.” And it’s basically private debt that you want written off. Mortgages, companies’ debt. How is that working?

I like how “feeding lawyers” is assumed to be a bad thing.

In any case, it’s apparent that Steve doesn’t really have a good answer as yet.

He needs a lawyer.  Even if he has to feed him.

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Filed under financial crisis, Judicial lying/cheating, Striking lawyers

Rule Of Law Crisis

It’s an ongoing thing.  But lawyers and judges, having (with some exceptions, of course, such as dedicated CDL’s) largely abdicated their important socio-political role in favor of going along, are content to let their own crisis be thought of as a “financial crisis”.

That way, economists can deal with it and we don’t have to.

“Fore!” – Judges say this on the golf course.  Probably the only time most of them ever tell the truth.

“Hello, dear, I’m home from the office.  I can’t believe how much paper work these foreclosures cause.  I had to sign off on hundreds today and almost got writer’s cramp.  Some moron showed up to contest and said something about “robo-signing”, though.  I looked at the clerk and told her that’s something we need to look into right away.  What’s for dinner?”

Somehow I missed this a couple of months ago.  Steve Keen, who’s “debtwatch” blog appears on my blogroll, was interviewed by the comely Lauren Lyster of RT television as he advocated, of all things, a “debt jubilee”:

But a debt jubilee cannot be accomplished by economists.  Only the law can do it.

As I’ve indicated – indeed, it should be intuitively obvious – a debt jubilee, while at this point necessary and a nearly unambiguously Good Thing, has many and far reaching consequences that would have to be addressed.  Keen mentions one of them, an idea he probably got from me, that bank deposits – which are debts from the banks to the depositors – would have to be exempted.

The way I proposed to do that?  At the same time as the debt jubilee takes effect, the gold standard is restored, and the government’s gold is distributed so as to cover the bank deposits.  Everybody still has their “dollars”.

But what would those dollars mean in tangible terms?  What would they buy?  Not much gold, but so what?  You can’t eat gold, but you have to eat.  Which means that food has to be produced, among other things.  Which means that people have to be paid.

What do you pay them?  I mean, how much, how many “dollars”?

I’ve had a thought or two about this, given the debt jubilee/gold standard solution.  Next post.


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