Understanding the crisis

Steve Keen is an Australian economist who believes that the classical economic theories taught in university economics departments are wrong and dangerous. (He was recently interviewed on the BBC's Hardtalk.) I have great difficulty understanding economics, and knowing that he is a post-Keynsian influenced by Minsky and Schumpeter means little to me. However, he did predict (in 2005) that the 2007+ crisis would occur and that it would be the fault of large amounts of private debt, of borrowing to speculate rather than to invest. He also thinks the US and maybe Europe are probably in for two decades of recession, as happened in Japan.


A few quotes from his book Debunking Economics:

"You don’t need an accurate theory of economics to build an economy in the same sense that you need an accurate theory of propulsion to build a rocket. The market economy began its evolution long before the term ‘economics’ was ever coined, and it will doubtless continue to evolve regardless of whether the dominant economic theory is valid." (http://bit.ly/vspTwV)


Here's his explanation of our present crisis:

“When borrowing is undertaken to speculate on asset prices, debt tends to grow more rapidly than income. This growth causes a false boom while it is happening, but results in a collapse once debt growth terminates – as it has done now. 


Though borrowers can be blamed for having euphoric expectation of sustainable capital gains, in reality the real blame for Ponzi schemes lies with their financiers – the banks and the finance sector in general – rather than the borrowers. That is blindingly obvious during the Sub-Prime Bubble in the USA, where many firms wilfully wrote loans when they knew – or should have known – that borrowers could not repay them. 


These loans should not be honoured. But that is what we are doing now, by maintaining the debt and expecting that debtors should repay debts that should never have been issued in the first place. ” (Steve Keen, Debunking Economics, Zed Books, 2011, p354)

"It may astonish non-economists to learn that conventionally trained economists ignore the role of credit and private debt in the economy—and frankly, it is astonishing. But it is the truth. Even today, only a handful of the most rebellious of mainstream “neoclassical” economists—people like Joe Stiglitz and Paul Krugman—pay any attention to the role of private debt in the economy, and even they do so from the perspective of an economic theory in which money and debt play no intrinsic role. An economic theory that ignores the role of money and debt in a market economy cannot possibly make sense of the complex, monetary, credit-based economy in which we live. Yet that is the theory that has dominated economics for the last half century. If the market economy is to have a future, this widely believed but inherently delusional model has to be jettisoned." (http://bit.ly/vspTwV)


Keen's solution to our present crisis is to have a jubilee, a general write-off of private debts, similar to the ones that took place every so often in the ancient world. Keen suggests that instead of giving money to the banks, as we have been doing, governments should give money to the people and businesses so they can pay off their debts. This leaves the banks with the same assets as before, though less cash flow. Brian Davey proposes a practical way to do this in http://bit.ly/symnIx 


However well his analysis appears to work for the US crisis, it doesn't seem to fit well with the sovereign debt crises in Europe (sez I).

See also a popularizing account of Keen's theories by George Monbiot, originally published in The Guardian in October 2011, at http://bit.ly/tY9rRZ

Degrowth

"Man is small, therefore small is beautiful." (E.F. Schumacher)

Although the word décroissance was familiar to me, I have only just discovered the word degrowth in English. It's an attractive concept.


I have long worried about the limits to growth. It has never seemed possible to me that economies could just keep growing, and that by acting as if they could (for example by running deficits which can only be paid off through increased growth) we were burying our heads in the sand. I found the concept of sustainable development attractive, since it appears to take the limits to growth into account, reducing growth to what the planet can continue to provide. However, degrowth is better, because it goes further, rejecting the idea of sustainable development, and striving to make do with less, at least until a steady state of well-being is achieved.


If making do with less sounds unattractive, think of it as epicureanism. Of course, epicureanism isn't normally associated with less. As the Catholic Encyclopedia reminds us: "In its popular sense, the word stands for a refined and calculating selfishness, seeking ... the pleasures of sense, particularly of the palate". Pace the Catholics, this selfishness has always held a certain attraction for me. I very much enjoy the sun, wine, good food, sex, music... But indulgence in these things is not necessarily excess. Indeed, "Epicurus pointed out that troubles entailed by maintaining an extravagant lifestyle tend to outweigh the pleasure of partaking in it. He therefore concluded that what is necessary for happiness, bodily comfort, and life itself should be maintained at minimal cost, while all things beyond what is necessary for these should either be tempered by moderation or completely avoided." (http://bit.ly/uT98kp)


If you look at today's uncontrolled development, in the Alberta Oil Sands for example, with their monstrous machines and tailing ponds, but also around the world in huge mining, damming, logging projects, in thousand-worker factories and ten thousand-tonne factory ships, it really does seem that, on a global scale, the troubles entailed by maintaining an extravagant lifestyle far outweigh the pleasures of partaking in it. 

Names

So the Burmese pro-democracy activist and former head of the armed forces is called U Tin Oo. I wonder how you pronounce that. Is there a difference between U and Oo?


The king of Thailand, criticism of whom gets you three to fifteen years in jail, is called Bhumibol. The chief minister of Delhi, Sheila Dikshit, has a common and prestigious Brahmin surname, which worried English speakers often pronounce Dixit. There are many names that don't sound good in English, like Chew Kok or the athlete Yoo Suk or poor Mike Litoris. Then there are the unpronounceable ones like Karl Thojntxhebvwg (think I got that right) and the Icelandic volcano Eyjafjallajökull that filled the European skies with ash in 2010. Wikipedia helpfully provides the pronunciation of that one: [eɪjaˌfjatlaˌjœkʏtl̥].


And don't get me started on the stupid first name last name combinations parents come up with, like the Teeds, who called their sons Garren and Warren, or the Lands, who named their daughter Alison Wanda. Well, now I am started, how about the names discovered by a British baby names website, like Justin Case, Stan Still, Jo King, Paige Turner. TheBabyWebsite.com commented sensibly "Parents really do need to think carefully when choosing names for their children."

Unintended Results of the Omnibus Crime Bill

Harper and his caucus can't see that it's counterproductive to put more and more people in jail. Criminologists, bar associations, even the police can't convince them. Maybe they need to think more carefully about some of the unintended consequences of large prison populations:


"Police in Acapulco in south-west Mexico have found inmates in possession of 100 flat screen televisions, as well as DVD players, fighting roosters and two sacks of cannabis. They said they also found 25 women living in the men's section of the prison - six were inmates, while 19 were described as illegal residents and alleged in media reports to be prostitutes. The director of the prison, chief of security and some guards have been fired." (BBC)

Very Important Spam

Sometimes you wonder about Google. Today I received a spam email that said: "Surprise your lover with a powerful sexual energy!" and provided a link. The bright new Gmail had flagged the message as spam, but also as important. I hovered over the flag to find out why they thought it was so important. "Mainly because of the words in the message," said Google. ???

Another Jobs Quote

"Technology alone is not enough," said Mr Jobs at the end of his speech introducing the iPad 2, in March 2011. "It's technology married with liberal arts, married with humanities, that yields the results that make our hearts sing." 
(The Economist, October 8, 2011, p. 82)

Another Alberta Success Story

A Canadian dentist has bought one of John Lennon's teeth for £19,500 at an auction in Stockport. Alberta-based Michael Zuk bid by phone to secure the molar given by the former Beatle to his housekeeper Dot Jarlett, who worked for him in the 1960s. Mr Zuk, who has written a book on celebrities' teeth, said: "Once I heard it was up for sale I had to have it." (BBC report)