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The Great Financial Crash had cataclysmic effects on the global economy, and took conventional economists completely by surprise. Many leading commentators declared shortly before the crisis that the magical recipe for eternal stability had been found. Less than a year later, the biggest economic crisis since the Great Depression erupted. In this explosive book, Steve The Great Financial Crash had cataclysmic effects on the global economy, and took conventional economists completely by surprise. Many leading commentators declared shortly before the crisis that the magical recipe for eternal stability had been found. Less than a year later, the biggest economic crisis since the Great Depression erupted. In this explosive book, Steve Keen, one of the very few economists who anticipated the crash, shows why the self-declared experts were wrong and how ever-rising levels of private debt make another financial crisis almost inevitable unless politicians tackle the real dynamics causing financial instability. He also identifies the economies that have become 'The Walking Dead of Debt', and those that are next in line - including Australia, Belgium, China, Canada and South Korea. A major intervention by a fearlessly iconoclastic figure, this book is essential reading for anyone who wants to understand the true nature of the global economic system.


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The Great Financial Crash had cataclysmic effects on the global economy, and took conventional economists completely by surprise. Many leading commentators declared shortly before the crisis that the magical recipe for eternal stability had been found. Less than a year later, the biggest economic crisis since the Great Depression erupted. In this explosive book, Steve The Great Financial Crash had cataclysmic effects on the global economy, and took conventional economists completely by surprise. Many leading commentators declared shortly before the crisis that the magical recipe for eternal stability had been found. Less than a year later, the biggest economic crisis since the Great Depression erupted. In this explosive book, Steve Keen, one of the very few economists who anticipated the crash, shows why the self-declared experts were wrong and how ever-rising levels of private debt make another financial crisis almost inevitable unless politicians tackle the real dynamics causing financial instability. He also identifies the economies that have become 'The Walking Dead of Debt', and those that are next in line - including Australia, Belgium, China, Canada and South Korea. A major intervention by a fearlessly iconoclastic figure, this book is essential reading for anyone who wants to understand the true nature of the global economic system.

30 review for Can We Avoid Another Financial Crisis?

  1. 4 out of 5

    Peter (Pete) Mcloughlin

    A post-Keynesian look at the role of debt growth and the 2008 financial crisis and return of depression economics. Good as such things go. I am thinking a lot about economics lately and reassessing assumptions. We definitely are outside the Neoclassical moment whether the way forward is some altered Keynesianism or something else is something I have been exploring of late.

  2. 5 out of 5

    Pedro L. Fragoso

    What Is Wrong With the World, Part II. Professor Steve Keens little book packs a powerful punch, I must say. This is an economics textbook and I just couldnt stop reading it until its unforgettable punch line (Stagnation at the global level will be the outcome, not because of an absence of new ideas from scientists and engineers, as secular stagnation devotees assert, but because mainstream economists have clung to delusional ideas about the nature of capitalism, even as the real world, time and What Is Wrong With the World, Part II. Professor Steve Keen’s little book packs a powerful punch, I must say. This is an economics textbook – and I just couldn’t stop reading it until its unforgettable punch line (“Stagnation at the global level will be the outcome, not because of an absence of new ideas from scientists and engineers, as ‘secular stagnation’ devotees assert, but because mainstream economists have clung to delusional ideas about the nature of capitalism, even as the real world, time and time again, has proven them wrong.”) The professor is frustrated, angry and in a mood to settle scores with the establishment, and he goes about it with relish, all caution to the wind, as he’s now safely convinced that facts, reason, and rationality are on his side (N.B.: They are! He is right). The result is fascinating, and the fact that the approach is “academic” enhances its credibility. It was Keynes who famously wrote that “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” Actually, they are pretty much alive and singing and theirs are the tunes the World is dancing to, right up to and beyond the cliff ‘s edge. People with reason on their side, like the professor here, have an ethical duty to keep shouting in the wind, and to ultimately be vindicated for having, in time, pointed to the right issues and the right policy alternatives, knowing full well that they will be ignored until after the end, and probably even then. Nevertheless, their honor imposes that they must persist; this is akin a Greek tragedy (ancient or current…), with the difference that we all are going to live through the dire consequences. A few points on what Economics should be concerned with, but isn’t: “The development of euphoric expectations leads to finance being given to projects that are doomed to fail, and to banks accepting ‘liability structures – their own and those of borrowers – that, in a more sober expectational climate, they would have rejected’, and these euphoric investments accumulate losses during the boom; the demand for finance during the boom drives up money market interest rates, reducing the financial viability of many otherwise conservative investments; stock market participants may sell equities in response to perceived excessive asset valuations at the height of a boom, thus triggering a collapse in credit (…) Inequality rises as well, since with a higher level of debt, the larger share of income going to bankers leaves a lower share for workers (and raw material suppliers) (…) Without bankruptcy, debt would continue to compound forever, and there would be no escape. (…) So credit is the cause of both the booms and the slumps of the global economy, and its smoking gun can be found at the scene of every economic crisis – even ones like in Spain and Greece where the suicidal policies of the Eurozone are a key additional cause of economic failure. (…) Credit has thus been a serial ‘Zombifier’ of economies, turning once vibrant economies into the ‘Walking Dead of Debt’ after exciting but unsustainable booms”. There is much more in the book, buy it already. What does magnificent settling of scores look like? Let’s take a look and be awed, illuminated and entertained: “The textbooks from which mainstream economists learn their craft shielded students from the absurdity of these responses, and thus set them up to unconsciously make inane rationalisations themselves when they later constructed what they believed were microeconomically sound models of macroeconomics, based on the fiction of ‘a representative consumer’.” (…) But to actually do this, economists have to embrace a concept that to date the mainstream has avoided: complexity. (…) Anderson specifically rejected the approach of extrapolating from the ‘micro’ to the ‘macro’ within physics. If this rejection applies to the behaviour of fundamental particles, how much more so does it apply to the behaviour of people? (…) Nor is macroeconomics applied microeconomics. Mainstream economists have accidentally proven Anderson right by their attempt to reduce macroeconomics to applied microeconomics, firstly by proving it was impossible, and secondly by ignoring this proof, and consequently developing macroeconomic models that blindsided economists to the biggest economic event of the last seventy years. (…) The failure of economics to develop anything like the same capacity is partly because the economy is far less predictable than the weather, given human agency, as Hayekian economists justifiably argue. (…) it is possible to develop, from first principles that no macroeconomist can dispute, a model that does four things that no DSGE model can do: it generates endogenous cycles; it reproduces the tendency to crisis that Minsky argued was endemic to capitalism; it explains the growth of inequality over the last fifty years; and it implies that the crisis will be preceded, as indeed it was, by a ‘Great Moderation’ in employment and inflation. (…) The most important was that Godley did not make the assumptions the mainstream required: his papers discussed inter-sectoral monetary and credit flows, not the optimising behaviour of rational agents. His analysis was also strictly in terms of money stocks and flows, when the mainstream had long ago convinced itself that the macroeconomy could and indeed should be modelled as if money, banks and debt did not exist.” (…) You might wonder how economists trying to understand Japan’s sudden transition from economic powerhouse to economic basket case could miss as stark a piece of evidence as Figure 14. The reason is that they did not even consider this data when they went looking for clues. Their approach to sleuthing has more in common with Peter Sellers and his comic invention, the bumbling detective Inspector Clouseau, than it has with Sir Arthur Conan Doyle and Sherlock Holmes. Through a series of plausible but false propositions, they have blinded themselves to the obvious.” (…) Having eliminated money as a potential clue in any economic murder mystery, the next step in the mainstream economics detective manual is to write banks out of the script as well.” Etc. All of it bloody brilliant! And what about the world we live in (most of us, anyway): “In alphabetical order, the other countries that became Debt Zombies in 2008 in addition to the USA are Denmark, Ireland , the Netherlands, New Zealand, Portugal, Spain and the UK. (…) The outstanding candidates for future Debt Zombies are Ireland, Hong Kong and China. The others which have both requisites for a debt crisis – a high level of debt, and a substantial reliance on credit as a source of demand for the last half-decade – are (in alphabetical order) Australia, Belgium, Canada, (South) Korea, Norway and Sweden. Borderline countries – those with one strong requisite but not both – are the Netherlands and Switzerland (debt above 200 per cent of GDP and moderate credit of about 5 per cent of GDP per year for the last five years), Finland, France and New Zealand (debt above 175 per cent of GDP and credit of about 5 per cent of GDP), and Malaysia, Singapore and Thailand (debt above 125 per cent of GDP and credit above 10 per cent of GDP). (…) Lending for speculation on real estate became the main function of the private banking sector. (…) Debt thus plays a pernicious role in our political system, as well as in our economy. Because a private debt bubble stimulates demand while it is expanding, the incumbent on whose watch the bubble begins gets an undeserved reputation for effective economic management. Then when the bust occurs, the blowout in government spending that results lands the hapless incumbent at the time with the charge of being a poor steward of the nation’s finances. The political system rewards the lackey of credit who triggers the unsustainable boom, and makes a political victim of the incumbent when the boom collapses. But the public would not make this misidentification without the help of the misinformation spread by the economics profession. Mainstream economists are the real culprits in the crisis and its aftermath, since they advise governments that credit is in fact benign, that rising private debt is no cause for alarm, that a bigger and politically more dominant finance sector is in fact good for the economy, and that the government should avoid running deficits. (…) This is a world that was supposed to function like clockwork. Instead, it performed poorly (compared to the more regulated 1950s and 1960s), and its clock stopped ticking when the Global Financial Crisis hit, because this model world of Neoclassical fantasy omitted key elements of the real world that unfortunately cannot be expunged from the real world itself. Credit matters here; the real world is always in disequilibrium, and many of the so-called ‘imperfections’ removed by Neoliberal reformers removed feedback effects that attenuated capitalism’s inherent instability.” Best phrase: “Her [Dame Margaret Thatcher’s] ‘reforms’ were supposed to unleash the creative forces of capitalism, but instead they unleashed the credit-creating capacity of the City of London, and set off a leverage bubble that drove asset prices skyward while starving British industry of development capital.” Runner-up: “Even if that could be done, large swathes of the public would oppose those policies because of a mindset about both economics and public morality which has been shaped by that same unrealistic view of the economy. The public treats bank debt as morally equivalent to debts between individuals, where failure to repay forces a genuine loss on the lender. This misidentification is aided and abetted by the mainstream model of banks, which ignores their role as ‘money factories’ which can and do periodically create too much debt, and instead pretends that they are ‘money warehouses’ that only lend out what the public deposits with them.” My take: It is indeed possible to gain a modicum of respect for the dismal science, but one absolutely needs to read this book to start that journey (Professor Michael Hudson’s last two books are also eminently respectable, but as they aren’t in any shape or form “academic”, they aren’t relevant for the purpose of this consideration.)

  3. 5 out of 5

    Aussiescribbler Aussiescribbler

    Few economists predicted the 2008 Global Financial Crisis. Steve Keen is one who did. Our ability to successfully manage our lives is dependent on our understanding of the functioning of the systems of which we are a part. If we want to be healthy it is important to understand how our body works and the effect that various kinds of food will have on it. If we want to live in a safe environment we may need to know about geological systems to tell us if our home is built in an area prone to Few economists predicted the 2008 Global Financial Crisis. Steve Keen is one who did. Our ability to successfully manage our lives is dependent on our understanding of the functioning of the systems of which we are a part. If we want to be healthy it is important to understand how our body works and the effect that various kinds of food will have on it. If we want to live in a safe environment we may need to know about geological systems to tell us if our home is built in an area prone to earthquakes. Our national economy is a system on which our wellbeing is dependent and that system is a subsystem of the global economy. Our ability to make wise decisions depends on our understanding of this system. I’ve never had any economic training. If Keen is right, this may not be entirely a disadvantage as his central argument is that classical economic theory is founded on reductionist assumptions which have little relationship to the real world. Just as you can’t deduct the behaviour of a human being by analysing the behaviour of a single cell, making assumptions about the economic transactions of an imaginary consumer doesn’t enable us to better understand a national economy. It’s all about relationship. A change in the behaviour of one individual in a system will change the behaviour of others. This doesn’t mean that predictions can’t be made, but they are made by studying the behaviour of the system as a whole and looking for patterns. The conclusion Keen comes to is that the key factor in financial crises, like the Great Depression and the GFC of 2008, is private debt. It makes sense. A boom in the economy is fed on credit. We feel optimistic so we take out a loan and buy more stuff. This provides income for companies to employ more people. But if this process continues and we run up more and more debt, eventually it proves unsustainable. We have to spend less because more of our income is taken up paying off bank interest. This is how I see it in my imagination, but Keen illustrates it with graphs which document the process in various countries. This has political implications. We tend to blame our current politicians for the current state of the economy. In fact, both booms and busts are inherited, and the political decisions which contribute to them are those of people who left office a decade or more ago. Keen argues that the person most responsible for the economic troubles blamed on the Blair/Brown Labour government in the U.K., was Margaret Thatcher, who deregulated the banks and thus opened the door for a private debt funded economic boom for which Britons are now paying the price. The argument conventional economists are making is that the current problems are the result of too much government spending and that cutbacks are the answer. Keen argues that an increase in government spending is the result of the economic problems brought on by too much private debt, rather than the cause of the problem. The more people are unemployed, the more the government spends on welfare payments, but it was not the spending on welfare payments which made the people unemployed. An increase in the government deficit is far less of a problem than too much private debt. I haven’t read many books on economics, so if there are serious flaws in Keen’s reasoning I might not be the one to see what they are, but this is a short book which I would recommend to anyone trying to gain a better understanding of the problems facing us.

  4. 5 out of 5

    Daniel

    Can we avoid another financial crisis? No. Why is the more interesting question. The author suggests that main stream economists are all wrong, because in their model, banks and debt do not exist. Financial crises are therefore impossible, as everything will eventually hum along nicely at equilibrium. He posits that that is simply not correct. The economy is a complex system so complex models are needed. The variables interact with each other, so it's more like fluid flow than 2D graph. Can we avoid another financial crisis? No. Why is the more interesting question. The author suggests that main stream economists are all wrong, because in their model, banks and debt do not exist. Financial crises are therefore impossible, as everything will eventually hum along nicely at equilibrium. He posits that that is simply not correct. The economy is a complex system so complex models are needed. The variables interact with each other, so it's more like fluid flow than 2D graph. Furthermore, his model predicts that there will Always be crises! The other important idea from Keen is that total demand is GDP plus private credit. When credit growth even slows down, recession occurs. So this credit fuelled growth is addictive to governments and central banks. He predicts that countries with private debt to GDP ratio >150% and rate of credit growth >10% will face another crisis soon, before 2020. That is worrisome as Singapore, together with China, US, Canada and Australia are all in that quadrant. Well I guess we will know soon.

  5. 5 out of 5

    Tiago Faleiro

    Very well written book. I had no background in economics whatsoever and was still quite easy to read overall. It's very succinct, never overexplaining and rarely underexplaining. Steve Keens explains exactly what mainstream economists got wrong, and how he was one of the few to be able to predict the global economic crisis of 2008. It spends a significant and deserved amount of time explaining the flaws of neoclassical economics and the necessary difference between micro and macroeconomics. It Very well written book. I had no background in economics whatsoever and was still quite easy to read overall. It's very succinct, never overexplaining and rarely underexplaining. Steve Keens explains exactly what mainstream economists got wrong, and how he was one of the few to be able to predict the global economic crisis of 2008. It spends a significant and deserved amount of time explaining the flaws of neoclassical economics and the necessary difference between micro and macroeconomics. It dives into how the crucial importance of credit was ignored despite supporting data and how politicians keep misdiagnosing economic outcomes, never getting to the root of the problem, to the point of getting ourselves in such a snowball that it's not impossible to get out of. On the topic on hand, I think this is the perfect book, and no one could have made a better job.

  6. 5 out of 5

    Alex Trimm

    Not many people can claim that they've called a major financial crisis. Five years from now, Professor Keen will be able to say he's done it twice. I just hope some of the ideas in this book further penetrate mainstream economics so that a lost decade doesn't become a lost generation.

  7. 4 out of 5

    Ali Faqihi

    Why countries with sky-high private debt such as Australia, Belgium, China, Canada, Norway and South Korea, cant avoid recession. Brilliant concise book on the mechanisms that lead to financial crisis and the reasons why financial crisis are endemic under conventional policies. Professor keen (who predicted the GFC among handful other economists) uses at times amusing language and analogies to explain why the Krugmans and Samuelsons and all other idiot savants of the economic world, failed to see Why countries with sky-high private debt such as Australia, Belgium, China, Canada, Norway and South Korea, can’t avoid recession. Brilliant concise book on the mechanisms that lead to financial crisis and the reasons why financial crisis are endemic under conventional policies. Professor keen (who predicted the GFC among handful other economists) uses at times amusing language and analogies to explain why the Krugmans and Samuelsons and all other idiot savants of the economic world, failed to see the 2007 global financial crisis coming (And still do). Keen explains clearly the problems with the tautological economic models used by mainstream economists today, Keen shows how their models disregards the role of credit/money and are grounded on many misconceptions, such as the fallacy that the Macro-Economy can be derived and compared to the Micro-economy (he uses the behaviour of water analogy to eloquently explain this misconception.pg 32-33), and the farcical assumption that the economy is self-stabilizing which returns to equilibrium after any “exogenous shock”. In order to bring back the field of economics to its noble tradition, Professor Keen urges economists to abandon these tunnel-vision, equilibrium theory based (DSGE) models and adopt a more reality based complex models. As an alternative, keen emphasizes in the book on his complex instability model, which is based on the ideas of Hyman Minsky. (The economy is a complex system, it’s never in equilibrium!) Crucially, Keen argues that mainstream economists ignore the aggregate level of private debt/credit, or changes in its rate of growth because they don’t include them in their models and if they do: “credit lending is portrayed as transfer of spending power from one agent to another, not as a means by which additional spending power is created” (pg 52) , the problem Keen notes is that the mainstream economists like Paul Krugman view banks as simply ‘intermediaries’ between savers and borrowers, and they play no role in creating money out of “thin-air” i.e the level of debt and the amount of money are two independent things (discussed on pg.76-77). Paul Krugman forcefully put this view in a blog debate with Steve Keen in 2012.https://krugman.blogs.nytimes.com/201... ,Krugman ended up in embarrassment, as Bank of England in 2014 http://www.bankofengland.co.uk/public... And most recently the Bundesbank in April 2017 https://www.bundesbank.de/Redaktion/E... concluded that that banks do create money out of “thin-air”. As a result of these blinders, Keen argues that in some countries namely Australia, Belgium, Canada, Norway and South Korea, the level of private debt/GDP has grown exponentially and are bound to experience what USA went through in 2007 as they reach their “Minsky moment” (pg.94-95), and In order to avoid crisis and also get the “debt-zombie countries ” such as Japan, US ( pg.87-89) out of stagnation, Keen proposes a modern debt jubilee, however he acknowledges that such policies are difficult to implement politically, and also might not be enough in long-term, considering the inherent unstable nature of capitalist economic system with debt-based money. As caveat I find this book lacking imagination and limited in discussing possible alternative systems. It’s vital for the public and politicians alike to understand the nature of debt-based money and how a government that “owns its own bank” functions differently from household’s restrained budgets. Hence I think it’s very important that this book is read by as many as possible to create the awareness needed for public debates and changes in policies. This short book might be a bit inaccessible to newcomers, if so I recommend watching Prof. Steve keen’s lectures online or read his debunking economics book a prerequisite. But be sure you don’t need a degree in economics to understand the premise of this book (in fact I think it’s better if you don’t, given the cognitive dissonance neoclassical economists with “trained incapacity” (to quote Thorstein Veblen) will have to go through... In his 1672 play les femmes savants, Molière remarked: “A learned fool is more foolish than an ignorant one”).

  8. 5 out of 5

    Stephen

    This book rather continues the theme of past and present financial crises. If anything, it belongs in the category of 'financial crises soon to come'. It has been interesting to chart how financial crises arise (the Overends Crisis of 1866) and how a policy response was framed (the financial crisis of 1914). It is disturbing to see that the conditions of 1866 are not that very different to those today, and our policy response is quite timid compared to that of 1914. The book starts by considering This book rather continues the theme of past and present financial crises. If anything, it belongs in the category of 'financial crises soon to come'. It has been interesting to chart how financial crises arise (the Overends Crisis of 1866) and how a policy response was framed (the financial crisis of 1914). It is disturbing to see that the conditions of 1866 are not that very different to those today, and our policy response is quite timid compared to that of 1914. The book starts by considering two shortcomings of conventional macroeconomics - the belief in the exogeneity of the money supply and the consequent setting aside of the financial sector. This provides the starting point for the book. The author demonstrates how credit conditions have a multiplier effect within the financial sector. This makes the money supply endogenous to the system, and not exogenous, as is currently assumed. If we take that insight, we can derive some interesting conclusions from it. For example, one that stayed with me the most is that, if we move from the monetary economy to the real economy, purchasing power can be seen as aggregate demand plus credit growth. This helps to explain the recent bout of debt fuelled growth in China, which has been a bit of a puzzle. It also helps to explain the observation that households have been maintaining their living standards in the face of falling real incomes by taking on more debt. Our recent growth has not been propelled by growth in our productive capacity. It has been propelled by the growth in total credit within the economy. This works fine until credit growth stops. One of the reasons why it stops is that lenders become wary about the ability of the borrowers to repay and service their loans. If credit growth just falters - a stumble rather than a fall - then the multiplier effect works in the reverse direction. Credit then becomes scarce and operational conditions in the real economy become tighter. A downturn begins. Conventional economics says that this downturn couldn't happen, which is probably why conventional economics was blind-sided by the crash of 2007. The policy prescriptions in this case are quite clear. There is a case for the government to make up any reductions in aggregate demand through a programme of spending. Spending on investment is better, but spending on the current account will do just as well. This will help to shore up credit and help to counter the downward multiplier. Since 2010, we have seen the exact opposite of this. Whereas trading conditions have called for a fiscal expansion, we have actually been on the receiving end of a fiscal contraction - austerity. The role of a fiscal expansion is to inject liquidity into the monetary system, as well as demand into the real economy to mop up that additional liquidity. A monetary expansion through QE serves to inject liquidity into the monetary system. Without the corresponding fiscal expansion, that monetary injection only serves to pump up asset bubbles, in our case in the stock markets and property markets. It is at this point that we get to see the answer in the title. Pumped up asset bubbles have not gone any way to resolve the disruption of the credit system. We still have the global financial imbalances that gave rise to the growth of credit to begin with. This suggests that it is a matter of time before we experience another financial crisis, except that, this time around, the monetary authorities have far fewer policy tools through which they can address it. A heavy dose of inflation would help to resolve the matter, but politics tends to get in the way here. Inflation tends to redistribute income shares from the 'haves' to the 'have nots', and the current political structure is not geared to achieve this. It is for this reason we can expect that future economic turbulence may be closely associated with political turbulence. One feel that the pressure is rising as further austerity fails to resolve the crash of 2007. This is a very short book, but it is very deep. It is surprisingly easy to read for an economics polemic. The author understands what he is saying, and sets it out in a very clear, logical, and methodical way. Prior familiarity with economics would be useful in reading the book, but a lay person acquainted with current affairs ought not to find it too much of a struggle. I found it to be a very useful text.

  9. 5 out of 5

    Alex

    A short book, but a good book. Pitched at the reader slightly above the 'just enough knowledge to be dangerous' level in economics. The cliff notes: - Modern economic models can't predict financial crises because their models have no mechanism for predicting (or even post-dicting) instability. They have stability built into their assumptions, so they're as useless as a theory of evolution that's missing as crucial an element as mutation. - Government surpluses in countries with already high A short book, but a good book. Pitched at the reader slightly above the 'just enough knowledge to be dangerous' level in economics. The cliff notes: - Modern economic models can't predict financial crises because their models have no mechanism for predicting (or even post-dicting) instability. They have stability built into their assumptions, so they're as useless as a theory of evolution that's missing as crucial an element as mutation. - Government surpluses in countries with already high private debt to GDP ratios will cause recessions wherever they are tried; Australia is next, and Turnbull will wear it. - Credit is the cause of economic growth, but also the cause of its instability when credit is too loose (the flipside of credit is debt). - Australia, China, Canada, and a half dozen other economies are sleepwalking their way into a multi-decade crises (see: Japan) and the only possible solutions are all politically infeasible. At only 129 pages, well worth your time to read (a solid afternoon). If you own property in any of the above countries, it'll keep you awake at night.

  10. 5 out of 5

    Shaan

    I've always had a vague intuition that macroeconomists like Paul Krugman have no idea what they're talking about. This series of essays gets into the weeds and really makes the case. The models that most macroeconomists use today (DSGE models) are fundamentally flawed. They make oversimplifying assumptions about individual behavior and don't account for important systems-level phenomenon. They ignore important metrics like the private debt / GDP ratio and income inequality which are surprisingly I've always had a vague intuition that macroeconomists like Paul Krugman have no idea what they're talking about. This series of essays gets into the weeds and really makes the case. The models that most macroeconomists use today (DSGE models) are fundamentally flawed. They make oversimplifying assumptions about individual behavior and don't account for important systems-level phenomenon. They ignore important metrics like the private debt / GDP ratio and income inequality which are surprisingly powerful indicators of economic crises. They ignore the role of banks and bank lending. Unfortunately, the author's conclusion is that the way out of our private debt trap is to further inflate the money supply. History has shown that this too is not without catastrophic consequences.

  11. 5 out of 5

    Steve

    I picked up Professor Keen's mercifully short tract with hopes of a lucid, concise hypothesis of our economic fortunes. I was underwhelmed. Professor Keen has a reductionist view of what ails the world's economies ... private debt. It seems he's devoted so much energy to this topic, he's akin to the barber who when asked if a potential client needs a haircut, knows only one answer ... yes. While Professor Keen may be correct in pointing to private debt as the primary factor that pushed the I picked up Professor Keen's mercifully short tract with hopes of a lucid, concise hypothesis of our economic fortunes. I was underwhelmed. Professor Keen has a reductionist view of what ails the world's economies ... private debt. It seems he's devoted so much energy to this topic, he's akin to the barber who when asked if a potential client needs a haircut, knows only one answer ... yes. While Professor Keen may be correct in pointing to private debt as the primary factor that pushed the economy's nose down in 2007, the reasons for the financial panic that followed were unrelated. I have a strong opinion on this topic because I had a bleacher seat for the entire mess up, as an employee of one of America's largest banks. I covered the financial institutions industry, observing the slow-motion train wreck first hand. Perhaps this points to one major problem with academics - they lack real world experience. Yet, they try to conform the real world to their models.

  12. 4 out of 5

    Surush Javan

    How oblivious mainstream economists are to private debt and economic data as a whole is truly amazing! The book could have been more complete if the effect of debt defaults on financial crises in the last century were explicitly discussed with data. Im not on the same page with Professor Keen on governments ability to extend spending beyond taxation revenue, and I think further investigations and researches are required to resolve debt-fuelled crises. Hats off to Steve Keen. Support him on How oblivious mainstream economists are to private debt and economic data as a whole is truly amazing! The book could have been more complete if the effect of debt defaults on financial crises in the last century were explicitly discussed with data. I’m not on the same page with Professor Keen on governments’ ability to extend spending beyond taxation revenue, and I think further investigations and researches are required to resolve debt-fuelled crises. Hats off to Steve Keen. Support him on Patreon.

  13. 5 out of 5

    Braden Batch

    Concise, thought provoking, and a little scary As a student of economics, there were moments where I could not believe the assumptions about aggregating micro models to macro. To see that same skepticism in print years later is validating. I don't know if mean is correct about his modelling, ultimately, but the contrarian point of view is well presented in this book. I certainly found t enlightened. Thanks Dr. Keen. I'll be following your work from now on.

  14. 5 out of 5

    Aidan Moloney

    Steve Keen is probably the economist I most respect because he speaks common sense and doesn't do B.S. He is now being funded by public donations through patreon meaning he is not conflicted nor censored in what he says. This book was short but I like it. He gets straight to the point. He comes with practical common sense solutions and explains economics with simple examples and graphs. He doesn't venture into the weeds and lose the average reader.

  15. 5 out of 5

    Conrad

    A short, good-to-read and clearly stated view on what is wrong with modern macro. Steve Keen, a self-described 'heterodox economist' who foresaw the crisis of 2008, presents his viewpoint in a book that you as a non-economist can read and understand in an hour or two. That is one hell of an achievement.

  16. 4 out of 5

    Adam Ashton

    I'm on board with the arguments in this book and can see that accelerating private debt will eventually lead to a crash in Australia, but a lot of the technical economic information wasn't accessible to the average reader (in the authors defence, it's probably not a book meant for "the average reader")

  17. 4 out of 5

    Tomáš Richter

    A bit of this short book restates what Steve Keen wrote in his Debunking Economics, only does so more succinctly. But, if I remember correctly, the discussion of the (destructive) role of (excessive) private debt in this book is new and very enlightening.

  18. 4 out of 5

    Konrad

    Brilliant summary of the state of the world economy after 2008, exposing logical errors in the responses of several governments without collapsing into technical jargon. Excellent read for anybody seeking understanding what the hell happened 'after Lehmann'.

  19. 5 out of 5

    Eric Bottorff

    I wish it had been a little longer, and expanded more on the political economy of debt. But basically this is brilliant stuff that should be read by all economists. Keen again proves himself to be a top destroyer of economic orthodoxy.

  20. 4 out of 5

    Steven

    Too much debt! Keen clearly explains how the underlying cause of financial crises (Japan's, US, Greece, etc.) were cased by too much private debt, and that that debt was not even factored into the thinking of the conventional economists at the time. But we haven't learned. Great.

  21. 5 out of 5

    Daniel Lambauer

    Excellent little book making the very convincing argument that we are entering a consumer debt crisis that will most likely lead to a prolonged economic stagnation (or even worse).

  22. 4 out of 5

    Vikas Erraballi

    ideas that should be well distributed today, but nice refresher and quick read.

  23. 4 out of 5

    Robert

    Unfortunately far too short to properly discuss or analyse the issue.

  24. 4 out of 5

    John Mihelic

    Here keen argues that No, we cannot avoid it Debt will eat the world

  25. 4 out of 5

    Marcus

  26. 5 out of 5

    Greg

  27. 4 out of 5

    Rolf Inge

  28. 4 out of 5

    Joseph Harris

  29. 4 out of 5

    Johan

  30. 5 out of 5

    MR M J CROXALL

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