Steve Keen

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A Better Model For Predicting What Happens Next

Only by understanding clearly can we avoid the carnage ahead
Friday, July 14, 2017, 11:39 PM

Executive Summary

  • The dangerous shortcomings of the world's dominant 'Neoclassical' economic models
  • The predictive advantage of understanding the Overton Window
  • The alternative (and very likely better) models of Keen and Minsky
  • The critical improvement to ALL models of tying economics to energy/resources

If you have not yet read Part 1: Bad Models Result In Terrible Outcomes available free to all readers, please click here to read it first.

So let’s see if we can understand the model errors for the central banks.  Again this is important because if they’ve got it wrong, then we all will pay a very heavy price -- with Venezuela, Argentina, and Zimbabwe all providing vivid examples of what happens when the social contract of money is ruined.  

To begin, the current crop of monetary practitioners at the world’s central banks are all devotees and advocates of the neoclassical branch of economics.  It’s an odd dogma for them to hold because its track record at explaining or predicting what has either happened or might yet happen is utterly dismal.

As Steve Keen explains:

[Economics as understood by the central bankers] has always been grounded in the beliefs that (a) capitalism is inherently stable, (b) that the financial sector can be ignored—yes that’s right, ignored—when doing macroeconomics, and (c) that the Great Depression was an anomaly that can also be ignored, because it can only have been caused either by an exogenous shock or bad government policy, both of which cannot be predicted in advance.

(Source)

The main flaw in the neoclassical approach to economics is that it completely ignores, or rather assumes away, any and all trends in debt creation.  In this bizarrely incomplete system of thinking, the financial system is considered to be, essentially, a self-correcting zero-sum entity (that balances itself out nicely with a little help now and then). 

So such things as carefully tracking GDP increase per new unit of debt, overall indebtedness ratios and understanding that crises are bred from complacency are of no practical concern to a neoclassical economist, such as those fully occupying the halls of power currently.

One way to understand the dogma that infects the central banking halls of power lies in what Jim Kunstler recently surfaced in a piece he wrote on the Overton Window, which, importantly... » Read more

Insider

Everything You Need To Know About The Credit Impulse

And why it's signalling a coming recession, likely this year
Friday, June 16, 2017, 7:23 PM

Executive Summary

  • The case of the missing credit impulse
  • The credit impulse is the worst its been in recent history
  • How the situation is deteriorating fast
  • Why a credit impulse-driven recession is nigh

If you have not yet read Part 1: The Pin To Pop This Mother Of All Bubbles? available free to all readers, please click here to read it first.

The Case Of The Missing Credit Impulse

An enormous oversight of nearly every major economist is the role of debt in both fostering current growth but also stealing from future growth. 

It seems like such a simple concept, and it’s one I covered in great detail back in 2008 in the original Crash Course, but it remains a mysterious oversight of most here in 2017.  The concept is easy enough; if I borrow money to increase my spending here today, it probably makes sense to take note of that if you're an economist responsible for tracking spending.

My debt-funded spending today is my lack of spending in the future when I pay down the debt. 

Professor Steve Keen has this topic nailed beautifully. In it, he explains how even simply keeping a massive pile of previously accumulated debt at the same level as last year is a net negative on economic growth. A very simple and a very profound concept that still is not a part of conventional thinking.

Now here where things get interesting. And frightening. If we look at... » Read more

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Steve Keen: The Deliberate Blindness Of Our Central Planners

Choosing to ignore the largest risks
Sunday, March 29, 2015, 12:20 PM

The models we use for decision making determine the outcomes we experience. So, if our models are faulty or flawed, we make bad decisions and suffer bad outcomes.

Professor, author and deflationist Steve Keen joins us this week to discuss the broken models our central planners are using to chart the future of the world economy. » Read more

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