Great Steve Keen Interview

[oddlots]

Thought this a great thumbnail sketch of our predicament. The interview starts at ~ 12:36 (before that you're treated to 12 minutes of Max Keiser hyperventilating):

http://www.debtdeflation.com/blogs/2...er-interviews/

The basic thesis should not be unfamiliar to anyone here but it's so succinctly stated (especially if you find, as I do, that reading detailed forecasts for 2010 you tend to lose the thread ... )

There are also some interesting ideas here that were new to me:

- Keiser asks what effect increasing wealth concentration has on monetary velocity. Keen's answer is that, if the wealthy turn over their wealth at a slower rate than the "wage slaves" it's deflationary. Hadn't ever occurred to me before. Not sure of significance yet but it's striking: again, suggestive of a tightening predicament.
- Keen talks about a return to abandoning the FIRE model and to an "engineer's" version of capitalism: an emphasis on productive (in the sense of not being dependant on Ponzi dynamics) enterprise. I'd really like to hear Keen, EJ and, for that matter, Hudson talk about how this could play out in an environment of apparent global overcapacity. Think, for example, of how chinese car makers are eyeing western markets. (In some ways it seems to me that the Chinese and Japanese have barred the exit here with a mercantalist strategy: in this telling the apparently wasteful buildup of capacity would represent an investment for the next stage. When the apparent profits of the FIRE model are finally recognised as illusory the alternate, formerly paltry seeming returns on manufacturing become the only game in town. This analysis may be a little overwraught, but I suspect it's roughly what's going on.)

Anyway, worth a look IMHO.

[rabot10]

Re: Great Steve Keen Interview

Love Steve Keen, thanks

[FRED]

Re: Great Steve Keen Interview

- Keiser asks what effect increasing wealth concentration has on monetary velocity. Keen's answer is that, if the wealthy turn over their wealth at a slower rate than the "wage slaves" it's deflationary. Hadn't ever occurred to me before. Not sure of significance yet but it's striking: again, suggestive of a tightening predicament.

This is the argument against wealth concentration that iTulip has made since 1999 when the popular belief was that it didn't matter as long as the pie was growing. Our argument was that when the pie stops growing serious policy challenges emerge. Poor wealth distsribution in the 1980s and 1990s produced the same policy antecedent as in the 1920s did that exxacerbated the 1930s consumer demand crash: How can the spending of a small minority produce enough demand to employ everyone else? The problem was only solved when WWII started.

Today, because the Fed is able to engineer an inflationary environment despite weak demand--contrary to Keen's 2008 forecast of a deflation spiral in 2009 that never materialized--the 83% who remain employed feel like they can't get ahead, because the purchasing power of their income is falling, and the are doing 20% more work for the same pay. (See Miserable at Work? You're Not Alone)

- Keen talks about a return to abandoning the FIRE model and to an "engineer's" version of capitalism: an emphasis on productive (in the sense of not being dependant on Ponzi dynamics) enterprise. I'd really like to hear Keen, EJ and, for that matter, Hudson talk about how this could play out in an environment of apparent global overcapacity. Think, for example, of how chinese car makers are eyeing western markets. (In some ways it seems to me that the Chinese and Japanese have barred the exit here with a mercantalist strategy: in this telling the apparently wasteful buildup of capacity would represent an investment for the next stage. When the apparent profits of the FIRE model are finally recognised as illusory the alternate, formerly paltry seeming returns on manufacturing become the only game in town. This analysis may be a little overwraught, but I suspect it's roughly what's going on.)

A return to productive versus finance-based capitalism is the iTulip artgument since 1999. We used the term finance-based economy before we adopted the term "FIRE Economy" from Hudson in 2007.

Anyway, worth a look IMHO.

[bcassill]

Re: Great Steve Keen Interview

This is the argument against wealth concentration that iTulip has made since 1999 when the popular belief was that it didn't matter as long as the pie was growing. Our argument was that when the pie stops growing serious policy challenges emerge. Poor wealth distsribution in the 1980s and 1990s produced the same policy antecedent as in the 1920s did that exxacerbated the 1930s consumer demand crash: How can the spending of a small minority produce enough demand to employ everyone else? The problem was only solved when WWII started.

Today, because the Fed is able to engineer an inflationary environment despite weak demand--contrary to Keen's 2008 forecast of a deflation spiral in 2009 that never materialized--the 83% who remain employed feel like they can't get ahead, because the purchasing power of their income is falling, and the are doing 20% more work for the same pay. (See Miserable at Work? You're Not Alone)



A return to productive versus finance-based capitalism is the iTulip artgument since 1999. We used the term finance-based economy before we adopted the term "FIRE Economy" from Hudson in 2007.

Anyway, worth a look IMHO.

I remember an interview he did recently where he was surprised at how much governments all over the world have pulled out the stops. However, I think the premise is basically the same: the debt has to be destroyed. Whether it's through inflation or through deleveraging, the debt will be destroyed in the end. It is just a question of whether we want to take the entire system down with it.

[Rajiv]

Re: Great Steve Keen Interview

This is the argument against wealth concentration that iTulip has made since 1999 when the popular belief was that it didn't matter as long as the pie was growing. Our argument was that when the pie stops growing serious policy challenges emerge. Poor wealth distsribution in the 1980s and 1990s produced the same policy antecedent as in the 1920s did that exxacerbated the 1930s consumer demand crash: How can the spending of a small minority produce enough demand to employ everyone else? The problem was only solved when WWII started.

Today, because the Fed is able to engineer an inflationary environment despite weak demand--contrary to Keen's 2008 forecast of a deflation spiral in 2009 that never materialized--the 83% who remain employed feel like they can't get ahead, because the purchasing power of their income is falling, and the are doing 20% more work for the same pay. (See Miserable at Work? You're Not Alone)



A return to productive versus finance-based capitalism is the iTulip artgument since 1999. We used the term finance-based economy before we adopted the term "FIRE Economy" from Hudson in 2007.

Anyway, worth a look IMHO.

I am copying what I posted from another thread below

What is interesting is that so called "Free Trade" allowed gains made by the US Labor movement to be weakened, and allowed the income and wealth differential (that had shrunk by the mid 1970s) to increase to levels not seen since the time of the "Robber Barons" ("Captains of Industry.")

A figure from Saez's work will illustrate the shift from the average person to the "Captains of Industry"



Remember that the scales are logarithmic -- so the average salary is ~$40,000

Of course Saez adjusts using the standard CPI. Things for the average worker would be much worse if the Shadowstat CPI figures were used.

It appears to me that along with re-establishing the manufacturing economy, we have to get back to strengthening the labor movement, and institute regulations that prevent wealth concentration