Eureka: Steve Keen discovers WHY

[Glenn Black]

http://www.debtdeflation.com/blogs/

Steve Keen, the economist who correctly predicted the current recession/depression, has recently posted the dynamic economic modeling of an economy including capital, production, labour, employment, banks, and government intervention. The results are here:


The model starts off with a business with an idea, they borrow money from the bank, hire people, pay wages, buys goods, makes product, sells products, uses profits to pay off loans to bank. People who are hired earn wages, deposit it in the bank, buy goods. Life is good for 25 years, then Mr. Keen told the model to have a external shock which causes a credit crunch.

Unemployment soars (see red curve) as demand drops.

Government decides to help. Should they inject $50 billion of QE (Quantitative Easing) to banks, or to the people?

The dynamic, non-equilibrium economic model output graphs shows it's much much better to give the $50 billion government injection to the people (green curve), not the banks (blue curve). If the banks get the government's money, it just sits there. Interesting, where have I heard that before?

When will they listen? Who has the phone # of Helicopter Ben?

There is great hope for using Steve's dynamic, credit-included model for getting us out of this mess. I hereby nominate Steve Keen for the Nobel Prize in Economics. Is there a seconder for this nomination?

[jtabeb]

Re: Eureka: Steve Keen discovers WHY

http://www.debtdeflation.com/blogs/

Steve Keen, the economist who correctly predicted the current recession/depression, has recently posted the dynamic economic modeling of an economy including capital, production, labour, employment, banks, and government intervention. The results are here:


The model starts off with a business with an idea, they borrow money from the bank, hire people, pay wages, buys goods, makes product, sells products, uses profits to pay off loans to bank. People who are hired earn wages, deposit it in the bank, buy goods. Life is good for 25 years, then Mr. Keen told the model to have a external shock which causes a credit crunch.

Unemployment soars (see red curve) as demand drops.

Government decides to help. Should they inject $50 billion of QE (Quantitative Easing) to banks, or to the people?

The dynamic, non-equilibrium economic model output graphs shows it's much much better to give the $50 billion government injection to the people (green curve), not the banks (blue curve). If the banks get the government's money, it just sits there. Interesting, where have I heard that before?

When will they listen? Who has the phone # of Helicopter Ben?

There is great hope for using Steve's dynamic, credit-included model for getting us out of this mess. I hereby nominate Steve Keen for the Nobel Prize in Economics. Is there a seconder for this nomination?

Wish it were that easy guy.

Everyone KNOWS that this would work, THAT'S the PROBLEM!!!

The only thing keeping a serious bid under the dollar is massive debt de-leveraging. You take that AWAY before an alternative Reserve currency system is in place, and all F-ing Hell breaks loose, which is EXACTLY why it hasn't happened.

We could have paid OFF ALL the CRE and residential mortgages outstanding with the $23.5 Trillion in backstops our benevolent leaders provided to the financial industry (and I have to check, but I think we could have LIQUIDATED all private consumer debt TOO). This would have preserved the value of the bank securitizations, AND freed the consumer to start consuming again. (Would have also royally smashed down the dollar too). We'd get our massive inflation over early and quickly, they didn't WANT that.

They know what the solution to a functioning economy IS, they chose NOT TO SUPPORT THE ECONOMY TO perversely SAVE the dollar (for a little while longer).

We all know what happens when debt de-leveraging becomes acute, you end up in a hyper-inflationary depression AKA Argentina.

They know HOW to fix it, and didn't to keep the game going longer. THAT's WHAT we should all be pissed about.

Good news is, we are approaching that Argentina Threshold. Something big has gotta give fast OR EVERYTHING breaks as the astute Nassim Taleb of "The Black Swan" points out.

I wish I could tell you what the design for that next system is, I can't for sure, I can only guess. BUT, objectively, there is really only a couple of options that would realistically work and that EVERYONE would go along with. Focus your attention in these areas and you should do quite nicely for yourself.

Just remember, NO LEVERAGE, and be prepared for ABSOLUTELY ASTOUNDING VOLATILITY as this plays out near the end. NO LEVERAGE IS KEY, because you have to be able to hold on through thick and thin if you are going to make it across to the other side, intact.

They know, dude, they know.

Want proof?

Here you go for a start:

Not the deceleration in ALL MONEY AGGREGATES, that is NOT SOMEONE TRYING TO SAVE AN ECONOMY!! (That is SOMEONE trying to save a currency, temporarily, at least).

Remember, debt de-leveraging can only take a currency up to a certain point, beyond that point (a threshold really), the CURRENCY becomes a greater risk that than the debt. We are getting close to that point. Once you cross it, your currency is toast. The Statists don't want that. They are trying to walk the fine line between an Argentinian type of out come ( they want to get close, but not go over this line). Problem is, the more you walk on a razor's edge, the more likely you are to "Cut" yourself. Accident potential is high (and don't forget, an Accident MAY BE INTENTIONAL).

Best take out some accident insurance.

[Glenn Black]

Re: Eureka: Steve Keen discovers WHY

Speculation and intuition, and personal opinion is significantly different that verifiable computer simulations that are repeatable and can be peer reviewed. No matter how much they may not like the conclusion, they have to defeat the logic.

Somebody need to check Steve's math, and his assumptions, but it seems pretty promising to me.

Who knows, maybe one decision maker may actually listen, and take a different course of action.

The hardest thing to do is to abandon what you have spent all your life practicing, perfecting, and being rewarded for.

Can we expect Ben, Timmy, the Banksters, and all the rest to be any different from us?