Steve Keen «When the Swabian hausfrau saves, what does she do to your bank account?»
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- Опубликовано: 14 фев 2019
- Savings is promoted as a private virtue that should be practiced at a national and international level as well. What happens to the economy when it is implemented? Keen explains one of the great economic fallacies: that a government needs to manage its finances like a household, and if the government consistently spends more than it receives in income, the nation’s debt will ultimately become unsustainable, and the nation will go broke. Furthermore he will address why the predominant Neoclassical economic model of banking is dangerously misleading as a guide to how a capitalist economy actually works and was thus incapable of predicting the Great Financial Crisis of 2007.
Steve Keen was Professor of Economics and Head of the School of Economics, Politics, and History at Kingston University, London until the end of 2018. Keen has a dynamic approach to economics, in which banks, debt, and money play an integral role. He is an expert on Minsky's Financial Instability Hypothesis, and one of the handful of economists who warned of the 2008 crisis. He has been a critic of mainstream economics ever since he led a student revolt at the University of Sydney in 1973. He is now crowdfunded at / profstevekeen
More information: www.rosalux.de/dokumentation/...
Skip to 6:30 if you just want to watch Steve.
Mark Blythe also discusses this issue (fallacy of the Swabian hausfrau) in some of his videos on Austerity, and others videos on how this concept affected the Greeks in the post-2012 crisis.
Thanks. I'm going to incorporate "Swabian Hausfrau" into everyday conversation.
Powerful presentation, thank you Professor.
A complex issue simply put, thank you.
The RBA or the FED are not run by their prospective governments. If they were they would not need to borrow money internationally.
The FED doesn’t really borrow money internationally, they just take foreign currency for trade. China needs to hold a good amount of US Dollars to trade with the US, same goes for the US, who needs to hold Yuans to trade with China.
It’s hoarding equals saving, but this must not be true. What about Investment?
Investments in liquid assets are savings and are predominantly not productive. Meaning don’t increase productivity for the real economy. Forcing someone’s else to increase debt.
Doesn't this assume the supply of money in an economy is fixed? If banks are creating money through lending couldn't that facilitate saving in other sectors? This is without considering of course how new money creation is invested and the impact this has on the supply of value in aggregate i.e. is no new value is created then either there will be price inflation or value will begin to accumulate in the accounts of rentiers through interest payments, etc.
The talk just doesn’t address that in detail but yeah, endogenous private sector deficits can account for its savings. This is how it worked to a large degree in the 50s and 60s. But private sector indebtedness may become unsustainable when expectations of future economic growth suddenly become more pessimistic (maybe because of a supply-side shock or an oil crisis or an earthquake, corona virus or any unexpected event). In that case spending and therefore income will fall and the private sector may be unable to repay its debt. This is where the government must step in to keep spending relatively stable to account for the increased desire to save. Austerity would be a fatal decision that would lead to massive accelerated deflation. A government is not income constrained like a private household. It doesn‘t have to generate any income in order to spend. It is the single supplier of money that can sustain any level of „debt“.
global assets - global liabilities = 0, but only in a pure credit economy and thank god we do not have that. If all the debts/liabilities are paid down/defaulted on, there are no liabilities but the assets i.e. buildings, machines, animals/plants still remain, so the assumption that we have to have negative equity on a national/global scale is false.
Steve's model is a great improvement but it omits the critical issue of rent and interest on capital. His 'Goddley tables' would not add up if the mode did include source of the capital allocated to paying for the interest rate.
clearly it applies to financial assets rather than physical ones.
The columns sum to zero; the rows sum to zero: correct.
The fallacy is between Year 0 and year 1. It is the "zero sum" fallacy, that savings do not create new wealth. All history, and Samuel Smiles book, refutes this idea. The savings become investment; investment creates new wealth; and as people save they and the country become richer.
It's called "Thrift".
Hence "The Paradox of Thrift" and the guy who wrote it being the most influential economist ever. But I'm sure you know better, as all his other opponents who created crises and poverty and lousy working conditions.
Assets are liabilities? Real Assets?
This economic model doesn't take into account what someone values what they receive in a transaction. Sure, Swabia may have a higher GDP, however, do the Swabians then value the objects that they receive from Germany and the EU more or less than their GDP? A transaction should only happen when someone values what they will receive more than what they pay for it. Maybe the Swabians don't value the goods they receive as much as what they are paying for them and therefore, in order to value what they receive, it makes sense to pocket the rest because then they value the money more than any of the other opportunities that they have with Germany or the EU. It also makes sense to save when you could potentially get something of greater value later (differed gratification) or to prevent future misery (such as a rainy day). At the end of the day, saving is an investment in future opportunity, and thus itself has an opportunity cost.
The mistake you make is to only view it from an individual level. Sure, saving on an individual level makes. Keen doesn‘t suggest that you shouldn‘t save on an individual level, only that it is impossible to save if nobody else invests (goes into debt) the exact same amount. Therefore if the private sector as a whole wants to save, either you need to have a current account surplus or a government deficit or both. Every country that has a current account deficit and a net-saving private sector needs to have by logic of accounting identity a government deficit to account for the desire to save. There is no way around that. That‘s the whole point of the talk. Government deficits are private sector surpluses. It‘s an accounting identity. Therefore if there is uncertainty and a pessimistic expectation of the economy and everybody is saving the government MUST account for that by running a deficit. And it can easily do so by simply spending more than it taxes.
You speak of 6 introductory lectures but unfortunately don't link to them in the description. Your website and youtube channel is also not clear. Here they are (why don't you make a playlist entitled "Economics beyond the Swabian hausfrau"):
1. Heiner Flassbeck (in German only) “Situation der Eurokrise” (14 June 2018) (ruclips.net/video/Tips7pIwCuw/видео.html)
2. Ann Pettifor (English/German) ““The finance sector has become too powerful” (15 September)
(not on youtube)
3. couldn't find
4. couldn't find:
etc
Hi AniishAu, not all the lecutres have taken place yet. But we created the playlist, the 4th video will come very soon.
ruclips.net/p/PLvnBzZOjEg-H7tS98cZ-TroQfMJ_b7meB
@@rosaluxstiftung Good on you! It's a great valuable service (albeit mostly on deaf ears) you're performing. You can lead a horse to water, but you can't make it think.
people think money as crops, that you have to save some crops for winter. This is wrong. Money is not crops. Money is not destroyed when spent. Somebody else has that money. It is only destroyed if the Federal government start running budget surpluses; and or converted into cash and physically burned.
Steve was great, but that bollocks at the start about women economists being ignored was awful.
Firstly, it's not true at all, Maria Demertzis and Frances Coppola (whom you mention) are two extremely well-respected economists, and there are a ton more. I think it's insulting to women that you'd push such a condescending message across - 'Oh yeah, you women are great too, please come and see the WOMEN'. If people aren't going to see them it's not because they're women, it's just that most of the radical economists, with big public followings, like Keen here, are fellas.... nothing to do with gender.
Stephanie Kelton is good.
wtf u talking about Mac? There's Stephanie Kelton, Ann Pettifor, Ellen Brown, Naomi Klein, Nomi Prins.
Damn straight. Stephanie Kelton and Naomi Klein are boss.
Feminism is just another middle class movement that should be kicked out by the socialists.
"Savings is promoted as a private virtue" Who taught these people English? It's pathetic.
What else can crooks advice
Remember many decades back it was said save today and smile tomorrow..
Dear Rosa Luxemburg Stiftung,
The entire point of having maverick thinkers like Mr Keen, as a public speaker, is to think outside the conventional box, especially in rarified areas like economics.
When you apologise for females not making the life choices to become economists, you are thinking like a soggy cardboard box that bends pathetically to a convention that is imposed by a political few fanatics.
When you go further to offer ANY economist with female attributes, as speaker, and then wonder why there is a poor audience turnout, you start to see a problem that you are creating.
Please, please, respect women for making life choices, like NOT becoming an economist, and maybe raising beautiful children, instead of subjecting all of us to your anti womens' choice pedestrian views.
In trying to bend to the absurd views of a few outspoken fanatics, you think are PC, you are smudging your whole outlook and the benefit to the wider world which you CERTAINLY want to offer and CAN offer here, in this forum.
So, stand up for peoples' choice, celebrate difference, take notice of your audience's choices, and be upright enough to seek reality and not a reality that reflects a reality built on the oppression of individual choice.
Thank you.
He's not a maverick thinker, he's stupid and dishonest, all he's doing is parroting repackaged John Maynard Keynes rhetoric..
Keen's example of the Swabian economy is totally faulted.
He fails to discern the difference between apparent increases in wealth because of the increase in the money supply of both the Swabian economy and the German economy economy as opposed to actual GDP which has not changed in his example. There is no actual decrease in the combined income of both economies but only a change in the amount of money in both economies.
If his logic were applied to the following example in which an economy increased the amount of fiat money by 100% he would be saying via his logic that both economies GDP had risen by 100% which is false since there is no account of actual output in either example.
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