Steve Keen talk at Google

[ThePythonicCow]

Re: Steve Keen talk at Google

Not so. EJ predicted a 40% decline in stocks AND a rise in gold prices in 2008 when Keen predicted a huge deflationary collapse but made no predictions on stocks or gold. He did not stick his neck out at all.

Had EJ gotten this wrong, if stocks and gold both fell 40%, or not stocks but only gold, then I and thousands of subscribers would have abandoned iTulip.

You have no idea where you are, do you?

I'm in my living room.

I was referring to a call that EJ made in 2009 that stocks would fall sharply before the end of 2009. He has since acknowledged that call was not a bulls eye.

Mind you, I have no problem with that miss.

My point was, and remains, that the implication of your earlier post was that Keen should be discredited because he made a wrong call, is an implication that I whole heartedly reject.

Perhaps you didn't intend that implication?

There are other criteria for selecting good analysis than a perfect record.

Did you read that article of Keen I linked to? Would you like to comment on it? I'd be interested to see any thoughtful consideration of it.

[Jay]

Re: Steve Keen talk at Google

It might be a bit of nothing, but if you watch Keen's deflationary response to the inflation question, he sticks his tongue in his cheek and paces back and forth right at the end. Doubts maybe on his part? Hmmmm....
He also says that while he acknowledges governments can print he thinks they won't print enough to reverse huge deflationary forces. That doesn't strike me as an airtight call on deflation.

[ThePythonicCow]

Re: Steve Keen talk at Google

He also says that while he acknowledges governments can print he thinks they won't print enough to reverse huge deflationary forces. That doesn't strike me as an airtight call on deflation.

Well, not an airtight call. Somewhere, by Keen or a like thinker, I recall reading recently comments to the affect that it would take Zimbabwe like printing, on a scale at least an order of magnitude more than we have now, for fiat dollars to overwhelm the current dominant credit-based dollars.

Certainly (in my view) if Uncle Sam sent each U.S. Citizen (heck, let's do it for the illegal aliens as well) a check for a million dollars, then most personal debt would evaporate overnight, stamped PAID. If that million dollars was taxable, then the state and local governments would be out of hock shortly thereafter.

Not airtight, but quite unlikely in my view.

Who are you going to believe -- a crazy Aussie, a wiggly cow or EJ ?

[Jay]

Re: Steve Keen talk at Google

Well, not an airtight call. Somewhere, by Keen or a like thinker, I recall reading recently comments to the affect that it would take Zimbabwe like printing, on a scale at least an order of magnitude more than we have now, for fiat dollars to overwhelm the current dominant credit-based dollars.

Certainly (in my view) if Uncle Sam sent each U.S. Citizen (heck, let's do it for the illegal aliens as well) a check for a million dollars, then most personal debt would evaporate overnight, stamped PAID. If that million dollars was taxable, then the state and local governments would be out of hock shortly thereafter.

Not airtight, but quite unlikely in my view.

Who are you going to believe -- a crazy Aussie, a wiggly cow or EJ ?

Here's the thing, he calls this an historically enormous bubble, much bigger than anything prior. I think almost everyone who posts here will agree on this basic tenant. With a bubble this massive, the options are limited: 1) default, 2) increase taxes, 3) print, 4) grow. Due to the size of the bubble we are getting all of the first three in huge doses, and will get a lot more of the same. The fourth option, in my view, is impossible in a world of increasing energy costs; unless we get teleportation, cold fusion, war against aliens or some secret oil field that has been kept out of view is suddenly exposed (that was a sop for you Cow ;)). Massive conservation measures will help smooth the transition.

The punchline, if you take all of the first three in enormous doses, is that you are left with no private industry, no middle class, and an Orwellian world until the economy resets once it finally gets back to terra firma. And, without growth, the vested interests need to be dislocated for renewal to occur, that means unrest to some extent no matter what happens from here. I expect war yet hope for something better. I think Keen hasn't gotten that far, just won't publicly admit it if he has, or maybe he sees growth ahead.

In addition, it means both EJ and Keen are right in a way, lots of printing and lots of deflationary forces to the nth degree. And money continually moves down the pyramid, so FRN's, which is Keen's call is not a bad one, you just need some gold too. Gold will do well no matter what, until/unless the government decides it is best if the pesky speculators are shown a lesson.

We need a new word for the process: Owellianflation? :p

[orion]

Re: Steve Keen talk at Google

I would strongly recommend going straight to the source and ask Mr Keen your questions. It is very easy to register and he can be somewhat easy to reach. Here is an exchange I had to the following post;

http://www.debtdeflation.com/blogs/2...p=all#comments

• 104
  Orion
  December 22nd, 2009 at 5:38 am Steve,
  I was hoping one of Kaiser’s questions would be about inflation. I have followed your posts here and on iTulip but I can’t find why you think the government cannot induce inflation via printing or a devaluation. Could you or someone please point me to your thoughts on this? Merry Christmas
• 106
  Steve Keen
  December 22nd, 2009 at 7:23 am Hi Orion,
  We did actually discuss inflation prior to the show, but not on camera–just the limitations of time.
  The government could cause inflation via “printing”, but the scale needed to do it is beyond what they would be willing to try. Even ignoring financial sector debt, total nonfinancial sector private debt in the USA is close to $25 trillion. Bernanke’s recent quantitative easing program created $1 trillion. That wouldn’t even cover a year’s interest on the level of outstanding private debt, if it went to the debtors which of course it didn’t.
  They are also likely to give it to the wrong recipients. If they put their money into the banks and expect them to lend it out again to a private sector, it won’t happen; if they gave it to the debtors, then it would cause increased activity and potentially some inflation. But they will stick with giving it to the banks.

I was very happy to get most of my answer, I just wish he had also addressed devaluing the currency which I think EJ rightly views as another tool to bring inflation. I would love a more direct conversation with EJ, Hudson, and Keen with pre set questions to get to the nitty gritty issue of where they disagree on inflation vs deflation. I've read the interviews EJ did but I didn't get the answer to the question I posted to Keen from them.

[Jay]

Re: Steve Keen talk at Google

I would strongly recommend going straight to the source and ask Mr Keen your questions. It is very easy to register and he can be somewhat easy to reach. Here is an exchange I had to the following post;

http://www.debtdeflation.com/blogs/2...p=all#comments

• 104
  Orion
  December 22nd, 2009 at 5:38 am Steve,
  I was hoping one of Kaiser’s questions would be about inflation. I have followed your posts here and on iTulip but I can’t find why you think the government cannot induce inflation via printing or a devaluation. Could you or someone please point me to your thoughts on this? Merry Christmas
• 106
  Steve Keen
  December 22nd, 2009 at 7:23 am Hi Orion,
  We did actually discuss inflation prior to the show, but not on camera–just the limitations of time.
  The government could cause inflation via “printing”, but the scale needed to do it is beyond what they would be willing to try. Even ignoring financial sector debt, total nonfinancial sector private debt in the USA is close to $25 trillion. Bernanke’s recent quantitative easing program created $1 trillion. That wouldn’t even cover a year’s interest on the level of outstanding private debt, if it went to the debtors which of course it didn’t.
  They are also likely to give it to the wrong recipients. If they put their money into the banks and expect them to lend it out again to a private sector, it won’t happen; if they gave it to the debtors, then it would cause increased activity and potentially some inflation. But they will stick with giving it to the banks.

I was very happy to get most of my answer, I just wish he had also addressed devaluing the currency which I think EJ rightly views as another tool to bring inflation. I would love a more direct conversation with EJ, Hudson, and Keen with pre set questions to get to the nitty gritty issue of where they disagree on inflation vs deflation. I've read the interviews EJ did but I didn't get the answer to the question I posted to Keen from them.
Click here to cancel reply.

That's essentially the answer he gave on the video too; the government will be unwilling to print that much. I say, hah!

So, you give a crack addict teenager keys to the Porche and he doesn't give it a go?!

You also tell the kid if he drives the car it will make a gigantic debt he has run up with his drug dealer go away and if he doesn't, he will be the dealer's slave forever.

The only catch is that the people who voted him king of the prom will be pissed, but they will be pissed either way, at least he will be able to put on quite a show if he drives the car and he might get a few more days in the sun before they figure out he was full of shit and run him out of town.

Here's the thing, green shoots feel good, it's just the hangover that doesn't. Every time the screws tighten a bit the populace will cave and ask for inflationary policies. We are too far in, have already broken the damn with TARP, clunkers, etc. and the next leg down will be met with stimulus, asked for by those same voters until we are met with an eternal FIRE of hell. I think this goes on for years like this, most will not even realize what's happening except in the rear view mirror. The Scott Brown's of the world get voted in when things feel better, the spenders when things get chilly. We end up bouncing down the stairs of cheh until this mess hits the bottom, wherever that happens to be.

[orion]

Re: Steve Keen talk at Google

Jay,

I think it all goes back to pensions. If we actually allow the defaults to happen who is left holding the bag? Probably private pensions. Is the government pension system (social security) any better? No it goes bust soon along with the government medical system. We, especially pensioners, are in for a world of hurt. As I have old fart territory insight myself I wonder what is the problem the debt or debt holders?

[ThePythonicCow]

Re: Steve Keen talk at Google

Here's the thing, he calls this an historically enormous bubble, much bigger than anything prior.

It's not Keen's calls that I value. It is his understanding of how debt-based (he says 'credit' based) money works, and similar such insights and modeling.

[ThePythonicCow]

Re: Steve Keen talk at Google

I think it all goes back to pensions.

Well, I wouldn't say "goes back to" as if pensions were the fundamental cause and the primary concern. But pensions are one major example of long term monetary 'contract', and when money is unstable, it is the long term contracts that take the most stress. As Keen is quick to note, the mainline schools of economics don't do a very good job of understanding the basis of money and the impact of time in their models. (Hah - I use the word "models" loosely here; in general the "models" of mainline economics are pitiful little stick figure graphs.)

My prediction, given here before, is that pensions will have to take a serious hit and will become means tested, even Social Security (more than it already is, thanks to the tax code.)

Pensions are promises to pay out of future productivity, sometimes many decades in the future. Well, that future productivity isn't here, so the promise must substantially default. Given the magnitude of the pension promises in America, there is no alternative.

[ThePythonicCow]

Re: Steve Keen talk at Google

That's essentially the answer he gave on the video too; the government will be unwilling to print that much. I say, hah!

Well, so far Keen is right here.

So far the government is printing a few trillion, whereas the debt overhang (individual, corporate, and governments local state and federal) is tens of trillion. They aren't coming anywhere close to printing enough.

But really, to understand Keen's point here, I think you need to read more closely his explanation of how credit and money are created in our economies. Credit, and it's alter-ego debt, are the elephants in the room. Fiat created money is a modest wart on the side, even now.

We don't print money into existence. We lend it into existence, and lending has left the building (as they said of Elvis.)

[ThePythonicCow]

Re: Steve Keen talk at Google

I just wish he had also addressed devaluing the currency

Tell me again, just how does the U.S. devalue the dollar?

Other nations promise to exchange their currency for so much of some reserve commodity (e.g. gold) or currency (e.g. the dollar) and devalue by changing the exchange rate to offer less of the reserve.

The U.S. only offers to exchange dollars for Treasuries. So what would it mean for the U.S. to devalue the dollar? Well, I guess it would mean you get "less" Treasuries for your dollar, which I guess means the exchange price of a Treasury increases, aka it's imputed interest rate declines. That sounds to me like what has been happening since the early 1980's. We're now down to approximately zero on 3 month T-Bill's and so far as anyone knows, it makes no sense to go below zero (except for very brief transients.)

So I say the U.S. is at the end of that road. We've already devalued dollars against Treasuries as far as we can go.

The only remaining way to devalue the Dollar would be to suspend exchanging them for Treasuries. That is, the U.S. would have to default on Treasuries. That actually I am predicting. Sometime in the next few years I expect that more than likely that the world's monetary reserve will go from the dollar to some BIS/IMF construct, and at that time I expect some sort of default on Treasuries, manifest as part of this conversion. Default does not mean in this case a total default to zero; rather it means a forced conversion to something of less, more conditional or delayed value.

Americans will not look kindly on this change; so I expect we Americans will be sent through some hell first, by way of "softening" up our resistance.

[LargoWinch]

Re: Steve Keen talk at Google

You have no idea where you are, do you?

Ann, I feel that this comment to member TPC is unwarranted.

[ThePythonicCow]

Re: Steve Keen talk at Google

Ann, I feel that this comment to member TPC is unwarranted.

Thanks for your comment, Largo. It's ok though, as there are extenuating circumstances .

[Jay]

Re: Steve Keen talk at Google

It's not Keen's calls that I value. It is his understanding of how debt-based (he says 'credit' based) money works, and similar such insights and modeling.

I agree 100%. He is great that way.

[Jay]

Re: Steve Keen talk at Google

Well, so far Keen is right here.

So far the government is printing a few trillion, whereas the debt overhang (individual, corporate, and governments local state and federal) is tens of trillion. They aren't coming anywhere close to printing enough.

But really, to understand Keen's point here, I think you need to read more closely his explanation of how credit and money are created in our economies. Credit, and it's alter-ego debt, are the elephants in the room. Fiat created money is a modest wart on the side, even now.

We don't print money into existence. We lend it into existence, and lending has left the building (as they said of Elvis.)

Cow, I understand what Keen is saying, and what role credit plays in the process. My point is that the balance between printing and credit destruction is less important than the magnitude of both which is enormous. That overwhelming process is going to continue without a recovery, which isn't likely to come. Yes, the balance may help decide what the dollar will look like down the road, but the process will inevitably lead to a burnt middle class and increasing government control either way. That is what I was trying to get across. The middle class is cooked and the government is going to be forced to protect itself. Another aspect of my point is that for each process the real economy is also decaying, and decaying amidst an environment of increasing energy costs. This will lead to real inflation in tangible goods no matter what happens. It will also continue to put enormous stresses on our monetary system.