would you rather that working people be bailed out,
or banks?
Well, we've got two economists and their perspectives.
you decide
Paul Krugman vs Steve Keen
1 Ritholz
The
“Central Banks’ Central Bank” Slams the Federal Reserve
By
Washingtons Blog - July 17th, 2012, 1:30AM
World’s
Most Prestigious Financial Agency – Called the “Central Banks’ Central Bank” –
Slams U.S. Economic Policy
The
central banks’ central bank, the Bank of International Settlements or “BIS” –
which is the world’s most prestigious mainstream financial body – has slammed
the policy of America’s economic leaders.
This
is especially dramatic given that the banks own the Federal Reserve, and that
the Federal Reserve and other central banks – in turn – own BIS. In other
words, BIS is criticizing one of its main owners.
Economics
professor Michael Hudson
notes:
Paul Krugman
has urged the Federal Reserve to simply lend banks an amount equal to their bad
loans and negative equity (debts in
excess of the market price of assets). He urges a “Keynesian” program of
spending to re-inflate the economy back to bubble levels. This is the liberal
answer: to throw money at
the problem, without seeking structural reform.
...
As the Telegraph noted reported in 2008:
Nor does it exonerate the watchdogs. “How
could such a huge shadow banking system emerge without provoking clear statements of
official concern?”
“Should governments feel it necessary to take direct actions to alleviate debt
burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high,
they must fall. If savings rates are
unrealistically low, they must rise. If
debts cannot be serviced, they must be written off.
***[PRIVATE
debt OR BANKS’?]
2 zerohedge
Steve
Keen On Why Debt Matters "All The Time"
And The Need For "Quantitative Easing For The Public"
Submitted
by Tyler Durden on 07/07/2012 18:26 -0400
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".
Student loan
debt and delinquency
is also discussed and its
self-referential ponzi-like nature (at around 16:00)...
Keen
discusses his controversial idea of a debt-jubilee and the Debt Black Hole 'event horizon'
that we are already in at around 19:00... (and notably at 24:30 he
discusses how to avoid the 'moral-hazard'
of a modern debt-jubilee with no 'advantage' to being in debt)
At
around 20:30, Keen relates the drop in
bankruptcies to the low interest rate environment warning that this will just
lead to an endless zombie state like Japan...
Lie-borgate
is discussed at around 21:00 with his
view being that the outright fraud confirms his feeling that these bankers are
behaving like a parasite on the host of the economy...
