Steve Keen On Why Debt Matters “All The Time” And The Need For “Quantitative Easing For The Public”
by Tyler Durden
Following his somewhat epic blog debate with Paul Krugman, Steve Keen appears on Capital Account with Lauren Lyster to debunk more Keynesian propaganda and the kleptocratic status quo ‘debt doesn’t matter’ arguments. Poking holes in the stable/exogenous shock equilibrium ‘model’ versus the real-world’s dynamic systems, the Aussie economist warms up with the zero-interest rate conundrum and liquidity trap (at around 7:00); moves on to the empirical falseness of the debt-to-unemployment relationship (at around 11:00) – implying ‘debt matters all the time’ as Keen explains common-sensibly (but not Neoclassically) that the ‘change in debt adds to demand’ and that involves banks which breaks modern economic theory (since lending is credit creation not savings transfer).
Echoing the deleveraging from the Great Depression, it could take 15 years of unwinding this epic debt bubble before its all over – but not if the status quo of deficit spending is maintained – as Keen somewhat controversially concludes (at around 13:00) “you can’t just cure this with deficit spending [since debt is already beyond the black-hole’s ‘event horizon’], you have to abolish the private debt as well” by“quantitative easing for the public”.