Debt Inequality and Crisis

25 05 2015

When the economic history of our epoch is written, three key phenomena will feature: a period of tranquility giving way suddenly to crisis, rising inequality, and rising private debt. Using my model of Minsky’s Financial Instability Hypothesis, I show that these three phenomena are all related. There is a direct link between rising debt, rising inequality, and the crisis itself. The key to reducing inequality and ending economic stagnation is to reduce private debt through “Quantitative Easing for the Public” or a “Modern Debt Jubilee”. This is the keynote speech Steve Keen gave to the #IEEP conference in Pula, Croatia on May 23rd 2015

Now I still find economics mind numbing…  but Steve Keen’s 3D modelling and his live modelling during this talk is fascinating, even if the algorithms he uses are not for the faint hearted.

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4 responses

25 05 2015
John Doyle

Steve Keen has done a sterling job here presenting ways out of the financial crisis we face now.
His Modern Debt Jubilee has it’s adherents already, like David Graeber, and gearing it to private debts is new.
He also demolishes the moral hazard argument that we must repay our debts. Private debts between individuals yes, but banks create money out of nothing so don’t lose out except in their ledgers.

25 05 2015
mikestasse

Yes, I’ve been banging on for some time that we have ZERO obligattions to repay bank loans created out of thin air…. it’s like me lending you monopoly money!

26 05 2015
MargfromTassie

Does that mean the average bank depositor, who has the legal status of an unsecured creditor, should lose his/her money?

26 05 2015
mikestasse

Did you watch the entire thing Marg (I know some of it is a bit overwhelming…)?

His idea of a debt jubilee is to bail out EVERYBODY, including those with savings. So say, for argument sake, everyone got $200,000. If you have a $400,000 mortgage (and you’d be amazed how many do..) then you can pay half your mortgage off. If you have no mortgage and no savings, you end up with $200,000 in the bank, and in a good position to assist your young’uns to get a start on the housing thing…. and if you already have $100,000 in the bank from your super or whatver, then you end up with $300,000 to do even better for your kids….. whether people with no debts would see fit to assist their children is of course entirely another thing, and it may all end up as consumption which is of course not something I approve of, but there you go… another silver bullet jams in the breach maybe?

I think just cancelling the debts still seems more plausible..

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