Deflation vs Inflation?

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  • Tue, Sep 25, 2012 - 04:58am

    #11

    darbikrash

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    Jim H wrote:Sure..operation

Jim H wrote:

Sure..operation twist is (CB) balance sheet neutral… whereas QE3 is back to good old printing of money.  If I recall correctly… SB once set up some kind of complex flow model that was managing to prove that somehow debt-based fiat money can operate in some kind of homeostasis that does not need to grow exponentially.  I am not sure in what kind of non-crony, non-CB controlled universe this applies, but it didn’t help me much.  He is an Aussie though… so you gotta like that  cheeky

 

 

Steve Keen is a professor of economics, not an investment advisor. He has made a number of substantive contributions to the field of modern economics, and counts himself as a member of the “Post-Keynsian” school. For those unfamiliar with the specifics of his contributions, here is a brief summary:
 
– His main efforts have been directed at exposing the principles of  neoclassical economics as being fatally flawed.
 
– He is an accomplished mathematician, and substantiates most of his conclusions with numerical proofs. Additionally, he has created simulation tools (free downloads) which model the complex flows and stocks of a simplistic economy, which expose, among other things, the fallacy of believing that an economic system underpinned by debt is unsustainable. He demonstrates mathematically that which we can observe, which is that the interest accrued from the act of lending money can in fact be repaid, even though the total debt in the system exceeds the money in circulation, which is in opposition to much of “conventional wisdom”.
 
– He has shown that many incorrect assumptions about money, debt and interest are the results of not understanding the difference between stocks and flows, as well as the importance of dynamics and time based aspects of monetary flow.
 
– His theory of “endogenous money” explains in a rational manner that supply side economic theory “the fed is to blame for everything” is patently false. Endogenous monetary theory concludes that we have a demand side construct which is organized as follows:
 
     ~ Loans are created first as demanded by businesses or consumers, reserves are then solicited after the fact by banks that seek to maintain lawful reserve ratios, not the other way ’round, as is commonly believed. Said another way, passbook savings do not create loans.
The difference is not one of semantics as the implications are profound, especially from an ideological perspective.
 
– The essence of neoclassical micro-economics contains fatal flaws. The notion of the “rational consumer” which is an essential assumption of Neoclassical theory is not reasonable and in fact false (proof by negation). According to Keen, it is not possible to scale micro-economic individual preference and demand curves to represent macro-economic theory, this approach, of necessity, reduces to one consumer with one commodity, which is hardly macro.
 
The upshot of all this is the accusation that the theories used to establish modern political economy, modern monetary theory, and the associated ideologies are based not only on poor assumptions, but irrational and false first principles. He suggests that the disastrous Great Recession was missed by most economists precisely for these reasons, and further, suggests that virtually all the corrective action proposed to date is off target and ineffectual. His version of corrective action contains such measures as a debt jubilee, and strong regulation against speculative finance of any kind, to name but two.
 
These measures are rejected out of hand by the free market crowd, who profess the exact opposite, as the ideological implications of Keens’s work is too disturbing for most.
 
  • Tue, Sep 25, 2012 - 05:48am

    #12

    thatchmo

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    Hot indeed, but is it the bod

Hot indeed, but is it the bod or the brain?  Are those Ruskies (RT) trying to distract us from the important stuff, or remind us of what, essentially, is most important?  Next thing your know they’ll start messing with our gold… I’m just thankful that I think my sweetheart is hotter than LL, or else I’d spent even more time on this computer….Aloha, Steve.

p.s.- just gotta laugh at your making that comment on this site…I’ve been holding back!

  • Tue, Sep 25, 2012 - 09:05am

    #13

    Arthur Robey

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    Typo?

Hello Darbikrash

Is this quote from you accurate and if so, would you mind expanding on it please?

which expose, among other things, the fallacy of believing that an economic system underpinned by debt is unsustainable.

  • Tue, Sep 25, 2012 - 12:11pm

    #14

    Adam Taggart

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    Correct

Goes211 –

Good eye! Yes, the restaurant indeed was Chicago Pizza & Oven Grinder.

As a tourist, I can’t speak to how “authentically” Chicago the pizza was – but it sure was good! And Mish won his bet with me that it’s unlike any other kind of pizza I’ve had before (for the uninitiated, think of a pizza made like a popover).

And yes, we had the flatbread, too (excellent!)

  • Tue, Sep 25, 2012 - 12:26pm

    #15

    RJE

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    Lauren who!? I watched the

Lauren who!? I watched the video between the guests. wink

Lauren is both intelligent and beautiful, and is complimentary to state the obvious.  

Gooooo Tigers

BOB

  • Tue, Sep 25, 2012 - 02:43pm

    #16

    darbikrash

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    Arthur Robey wrote:Hello

Arthur Robey wrote:

Hello Darbikrash

Is this quote from you accurate and if so, would you mind expanding on it please?

which expose, among other things, the fallacy of believing that an economic system underpinned by debt is unsustainable.

No typo, Keens’ models show that debt based economies do not intrinsically require exponential growth in and of themselves. Debt issued and applied to productive use, as opposed to speculative (Ponzi) use, does not require or result in exponential growth. If the debt is used for non-productive purposes, or Ponzi schemes, (as it often is) all bets are off.

There is a growth imperative, but it’s not from the issuance of debt……

  • Tue, Sep 25, 2012 - 03:19pm

    #17
    Chris Martenson

    Chris Martenson

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    Inflation vs. Deflation

Which will it be?  The answer will continue to be ‘yes.’

I had a great time meeting Mish face to face for the first time after ~50 podcasts, and Steve Keen who just magically, accidentally happened to be at another conference in Chicago at the same time.  Aussies put the F in fun.  I could hang with Steve in a bar, on a blog or at the beach.  He’s versatile!

I loved the Pizza joint, it was hopping, but could have used a quieter more distraction free place to really have a free-flowing conversation.  Between Mish and Steve and I wanted a chance to really test out my inflation leaning ideas in a rough and tumble Chatham rule session.

I remain convinced that deleveraging will be fought tooth and nail and nothing of late has dissuaded me of the notion that in the future our money will be worth a lot less compared to the things we both need and want.

One tidbit from the conference that I am wrestling into prose was our meeting with a representative of a firm that has access to all trade data at the millisecond time scale.  If I was worried before that our markets have become electronic scrums where price discovery is utterly divorced from the outside world and volume and liquidity can disappear within a fraction of the blink of an eye, I am doubly worried now.   More on that in a special report coming soon….

  • Tue, Sep 25, 2012 - 04:32pm

    #18

    RJE

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    “Deflation or

“Deflation or Inflation…YES”. I love it!

Next up, Deflation, are my thoughts.

Gooooo Tigers

BOB

  • Tue, Sep 25, 2012 - 10:02pm

    #19

    Arthur Robey

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    Thanks Darbikrash

Got it. Now it makes sense.

  • Tue, Sep 25, 2012 - 11:40pm

    #20
    xkguy

    xkguy

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    Mauldin is wrong about the Euro

John Mauldin is simply wrong about why the Euro was formed. Go back to the quotes of Wm Duesenberg and you will see they wanted  a currency with specific function: 1) not dependent upon a single nation state and 2) no direct support for gold. Figure out why these were important to them and you will bem alot closer to understanding the Euor than any of these talking heads.

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