What he says makes a lot of sense. Though he states why we will not get to a solution because the majority of economists are neo-classical and hence clueless.
The other thing that he failed to comment on was regulatory changes to stop this happening again. We need capital gains on asset increases and strict bank regulations to stop excessive lending on assets. If house prices were the same as twenty years ago then there will not be money chasing speculative gains on real estate. Surplus disposable income will go to savings or long term investments, which could be local businesses or on stock markets.
Securitization still has a life - not sure how much, but here's a mention http://www.ifre.com/european-banks-asset-sales-face-disastrous-failure/1617239.article
Excellent link on securitization and the pickle the banks are in. But it is as Keen says, the actual debt is three or four times the sustainable debt, the useful debt. All that Ponzi value has to disappear. Will it be over decades of patient suffering by households and taxpayers? Will it be a chaotic social collapse? Or will it be a cathartic nationalization and rationalization of the financial system? Likely all three. We can only hope we get to the solution before too much damage is done.
What I think everybody is missing is we have a World War II event looming in the climate crisis. One of the great successes of demand side economics was the organization of the economy during the war, and one of the unsuspected outcomes was the reflation and stabilization that came out of it. This resulted from the "government money" Keen is talking about. 250 percent of GDP in U.S. sovereign debt.
Consumer capitalism is dead. Or it is killing us. One or the other
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What he says makes a lot of sense. Though he states why we will not get to a solution because the majority of economists are neo-classical and hence clueless.
ReplyDeleteThe other thing that he failed to comment on was regulatory changes to stop this happening again. We need capital gains on asset increases and strict bank regulations to stop excessive lending on assets. If house prices were the same as twenty years ago then there will not be money chasing speculative gains on real estate. Surplus disposable income will go to savings or long term investments, which could be local businesses or on stock markets.
Securitization still has a life - not sure how much, but here's a mention http://www.ifre.com/european-banks-asset-sales-face-disastrous-failure/1617239.article
ReplyDeleteExcellent link on securitization and the pickle the banks are in. But it is as Keen says, the actual debt is three or four times the sustainable debt, the useful debt. All that Ponzi value has to disappear. Will it be over decades of patient suffering by households and taxpayers? Will it be a chaotic social collapse? Or will it be a cathartic nationalization and rationalization of the financial system? Likely all three. We can only hope we get to the solution before too much damage is done.
ReplyDeleteWhat I think everybody is missing is we have a World War II event looming in the climate crisis. One of the great successes of demand side economics was the organization of the economy during the war, and one of the unsuspected outcomes was the reflation and stabilization that came out of it. This resulted from the "government money" Keen is talking about. 250 percent of GDP in U.S. sovereign debt.
Consumer capitalism is dead. Or it is killing us. One or the other