Sie sind auf Seite 1von 16

S

' D

A na ly sing the Coll apse of the Globa l De bt Bubble


= Menu =

Out of Amazon borrowing program

Swags for Homeless Wins Human Rights Award

DebunkingMacroeconomics
By Steve Keen | December 10, 2011 | Debtwatch

Tweet

28

Email

Share

I have just had the following paper published in the freely accessible online journal Economic Analysis and Policy, which is published by the Queensland branch of the Economic
Society of Australia.The citation is:
Keen, S. 2011. Debunking Macroeconomics. Economic Analysis & Policy 413: 147167.
Ive been published in peerreviewed journals that are freely accessible online before of coursesuch as the Economics Ejournal paper Solving the Paradox of Monetary
Profits. I think Economic Analysis and Policy does a better job of blending the old paperstyle journal with the new, with a home page that emulates the cover of a paper journal
while providing hot links to the papers from that page.
The paper can be downloaded from this link, and you can download the whole issue from here. If you enjoy my analysis, I recommend also downloading Mark McGoverns paper
Beyond the Australian Debt Dreamtime: Recognising Imbalances. Here is the abstract to Marks paper:

Sadly, all the efforts of a generation of Australian men and women have only made them more indebted to the rest of the world. Australias external net
wealth is negative, soon passing minus $900b on an accelerating downward trajectory. This ongoing dissipation of national resources is unsustainable.
Australians live in a debt dreamtime, one from which the rest of the world has been rudely awakened. After years of inadequate policies, the nation has a
large external debt and significant government exposures. Servicing pressures are growing as rising uncertainties permeate global credit markets. Reserve
Bank policies are worsening Australias external position and needlessly driving up internal costs. Major policy rethinking is warranted. Relevant issues are
still little considered, crowded out of dialogues by comforting myths that accompany the Australian Debt Dreamtime. Imbalances need proper recognition
with new approaches and strategies developed. Automatic corrections will not occur as history and current overseas experiences demonstrate. A real
awakening, improved positioning and a touch of luck are required if Australians are to avoid being seriously impoverished by world events and their own
confused Dreaming.

This paper summarises the arguments I make at much greater length on macroeconomics in the second edition of Debunking Economics. The one extension to that argument
here is a more detailed discussion of Hickss ISLM modeland in particular, Hickss admission in 1981 that ISLM was a preKeynesian, neoclassical model dating from 1934,
which his 1936 review of the General Theory falsely passed off as a model of Keyness General Theory.

Introduction
The failure of neoclassical models to warn of the economic crisis has led to some rare soul searching in a discipline not known for such introspection. The dominant reaction
within the profession has been to admit the failure, but to argue that there is no need for a drastic revision of economic theory.
I reject this comfortable conclusion, and argue instead that this crisis illustrates the point made beforehand by Robert Solow, that models in which macroeconomic pathologies
are impossible are not adequate models of capitalism. Hickss critique of his own ISLM model also indicates that, though pathologies can be imposed on an ISLM model, it is
also inappropriate for macroeconomic analysis because of its false imposition of equilibrium conditions derived from Walras Law. I then focus upon what I see as the key
weakness in the neoclassical approach to macroeconomics which applies to both DSGE and ISLM models: the false assumption that the money supply is exogenous. After
outlining the alternative endogenous money perspective, I show that Walras Law must be generalized for a credit economy to what I call the WalrasSchumpeterMinsky Law.
The empirical data strongly supports this perspective, emphasizing the need for a root and branch reform of macroeconomics.

Defendingtheindefensible
That modern neoclassical macroeconomic models failed to forewarn of the economic crisis that began in 2007 is undisputed. What is in dispute is the implications this should
have for macroeconomic theory.
Prominent members of the discipline have argued that there should be no consequences. Ben Bernanke Bernanke 2010, recent Nobel Prize laureate Thomas Sargent Rolnick
2010 and the founding editor of the AER: Macro Olivier Blanchard Blanchard et al. 2010 have all asserted that neoclassical models helped guide policy during the good times,

and should not be abandoned simply because they did not see the bad times coming. Bernankes argument is representative of this perspective:

the recent financial crisis was more a failure of economic engineering and economic management than of what I have called economic science

Do these failures of standard macroeconomic models mean that they are irrelevant or at least significantly flawed? I think the answer is a qualified no.
Economic models are useful only in the context for which they are designed. Most of the time, including during recessions, serious financial instability is not
an issue. The standard models were designed for these noncrisis periods, and they have proven quite useful in that context. Notably, they were part of the
intellectual framework that helped deliver low inflation and macroeconomic stability in most industrial countries during the two decades that began in the
mid1980s. (Bernanke 2010, pp. 3, 17; emphasis added)

I make no apology for describing this argument as specious, on at least two grounds.
Firstly, this argument would only be tolerably acceptable if neoclassical economics also had welldeveloped models that were suitable for periods of crisis, but it does not.
Secondly, this blas acceptance that there can be bad times sits oddly against the triumphalism that characterized neoclassical discourse on macroeconomics prior to this crisis.
This is best exemplified by Lucass Presidential Address to the American Economic Association in 2003, in which he asserted that neoclassical economics had succeeded in
eliminating the possibility of extremely bad times like those we are now experiencing:

Macroeconomics was born as a distinct field in the 1940s, as a part of the intellectual response to the Great Depression. The term then referred to the
body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in
this original sense has succeeded: Its central problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for
many decades. (Lucas, Jr. 2003, p. 1 ; emphasis added)

The proposition that there can be separate models for good and bad times also implies that there is no causal link between good and bad times, which would be true if they
were simply the product of exogenous shocks to the macroeconomy. This is in fact how most neoclassical modelers have reacted: by retrospectively treating the crisis as being
due, not merely to unprecedentedly large exogenous shocks, but shocks which varied in magnitude over timewhile still remaining negative rather than positive:

the Great Recession began in late 2007 and early 2008 with a series of adverse preference and technology shocks in roughly the same mix and of roughly
the same magnitude as those that hit the United States at the onset of the previous two recessions

The string of adverse preference and technology shocks continued, however, throughout 2008 and into 2009. Moreover, these shocks grew larger in
magnitude, adding substantially not just to the length but also to the severity of the great recession (Ireland 2011, p. 48, see also McKibbin and Stoeckel
2009)

The fact that these shocks came from the financial sectorwhich the ordinary public would tend to regard as being part of the economy, and therefore to be more of an
endogenous economic phenomenon than an exogenous eventhas been treated as largely irrelevant by leading neoclassicals:

The crisis has shown that large adverse shocks can and do happen. In this crisis, they came from the financial sector, but they could come from elsewhere
in the futurethe effects of a pandemic on tourism and trade or the effects of a major terrorist attack on a large economic center. (Blanchard, DellAriccia
and Mauro 2010, p. 207)

Given the severity and persistence of this crisis, this is also specious reasoning: if the crisis was merely due to a large exogenous negative shock, surely by now it would be over?
Surely too, since the shocks emanated from the finance sector, and the standard neoclassical doctrine that permits a separation of economics from finance has now been
empirically rejected Fama and French 2004, the treatment of disturbances in the finance sector as exogenous to the economy should also be rejected?
These reactions of neoclassical theorists and modelers are therefore no more than a plea that the core neoclassical vision of the macroeconomy as a stable system subject to
exogenous shocks should be preserved, despite an unprecedented empirical failure. This proposition has been put openly by Blanchard et al., amongst others:

It is important to start by stating the obvious, namely, that the baby should not be thrown out with the bathwater. (Blanchard, DellAriccia and Mauro
2010, p. 204)

However, no lesser Neoclassicals than John Hicks Hicks 1981 and Robert Solow Solow 2003, 2001, 2008 have put the contrary case that these babies both todays DSGE
models and the ISLM model that preceded themshould never have been conceived in the first place.
Hickss disowning of ISLM appears to have disappeared without trace in neoclassical literature. Solows voice was at least acknowledged by Blanchard when he published his
excruciatingly badly timed survey of modern macroeconomics Blanchard 2009, Blanchard 2008, in which he stated that:

after the explosion of the field in the 1970s, there has been enormous progress and substantial convergence.,, largely because facts have a way of not
going away, a largely shared vision both of fluctuations and of methodology has emerged Not everything is fine But none of this is deadly. The state of

macro is good. (Blanchard 2009, p. 210; emphasis added).

In a footnote, he added Others, I know, disagree with this optimistic assessment for example, Solow 2008, but he did not engage at all with Solows critique. As the globe is
now in its fifth year of unrelenting economic turmoil, it is time Solow was listened to.

SolowscritiqueofDSGE
Solow became a critic of neoclassical macroeconomics because he was simply incredulous that the growth model he developed could be even considered as a basis for modeling
the business cycle:

The prototypical realbusinesscycle model is nothing but the neoclassical growth model

The puzzle I want to discussat least it seems to me to be a puzzle, though part of the puzzle is why it does not seem to be a puzzle to many of my
younger colleaguesis this. More than forty years ago, I worked out neoclassical growth theory [I]t was clear from the beginning what I thought it
did not apply to, namely shortrun fluctuations in aggregate output and employment the business cycle

[N]ow if you pick up an article today with the words business cycle in the title, there is a fairly high probability that its basic theoretical orientation will
be what is called real business cycle theory and the underlying model will be a slightly dressed up version of the neoclasssical growth model. The
question I want to circle around is: how did that happen? (Solow 2001, pp. 23, 19)

Solow identified the search for microfoundations for macroeconomics as the fountainhead of DSGE modeling, and though he surmised that The original impulse to look for
better or more explicit micro foundations was probably reasonable Solow 2003, p. 1, he dismissed the defense that microeconomics justified DSGE macroeconomic models as
a delusion:

Suppose you wanted to defend the use of the Ramsey model as the basis for a descriptive macroeconomics. What could you say? (I take it for granted
that realism is not an eligible defense.)

You could claim that it is not possible to do better at this level of abstraction; that there is no other tractable way to meet the claims of economic theory. I
think this claim is a delusion.

We know from the SonnenscheinMantelDebreu theorems that the only universal empirical aggregative implications of general equilibrium theory are
that excess demand functions should be continuous and homogeneous of degree zero in prices, and should satisfy Walras Law. Anyone is free to impose
further restrictions on a macro model, but they have to be justified for their own sweet sake, not as being required by the principles of economic theory.
(Solow 2008, pp. 244)

Solow rejected both the Saltwater and Freshwater approaches to macroeconomics. The base model itself, the Freshwater real business cycle model, was unsuitable for
macroeconomics because it ruled out the very behavior that macroeconomics is supposed to explain:

The preferred model has a single representative consumer optimizing over infinite time with perfect foresight or rational expectations, in an environment
that realizes the resulting plans more or less flawlessly through perfectly competitive forwardlooking markets for goods and labor, and perfectly flexible
prices and wages.

How could anyone expect a sensible shorttomediumrun macroeconomics to come out of that setup?

I start from the presumption that we want macroeconomics to account for the occasional aggregative pathologies that beset modern capitalist economies,
like recessions, intervals of stagnation, inflation, stagflation, not to mention negative pathologies like unusually good times. A model that rules out
pathologies by definition is unlikely to help. (Solow 2003, p. 1; emphasis added).

He dismissed the New Keynesian variant that came to dominate the profession as no more than windowdressing to improve the apparent fit of a bad model to the data:

The simpler sort of RBC model that I have been using for expository purposes has had little or no empirical success, even with a very undemanding notion
of empirical success. As a result, some of the freer spirits in the RBC school have begun to loosen up the basic framework by allowing for imperfections in
the labor market, and even in the capital market

The model then sounds better and fits the data better. This is not surprising: these imperfections were chosen by intelligent economists to make the models
work better... (Solow 2001, p. 26; emphasis added)

One need not wonder how Solow would react to neoclassical macroeconomists, after the crisis, adding not merely imperfections but adjustable exogenous shocks to improve the
models fit to data that imperfections alone cannot explain, since he gave his opinion beforehand:

It is always possible to claim that those pathologies are delusions, and the economy is merely adjusting optimally to some exogenous shock. But why
should reasonable people accept this? (Solow, 2003, p. 1; emphasis added)

Though Solow saw the destination that neoclassical macroeconomics had reached as an impasse, he provided no alternate route forward. Some hark for a reversal of direction
back to ISLM models Manfred Grtner and Florian Jung, 2010, in which pathologies at least appear feasible. However that route was blocked three decades ago by one John
Hicks.

HickssCritiqueofISLM
In 1981, John Hicks admitted that, though regarded as a model of Keynes, ISLM is neoclassical model that predates Keyness General Theory J. M. Keynes, 1936. Hicks noted
that though he first spelled out the ISLM model in detail in Mr. Keynes and the Classics J. R. Hicks, 1937, his review of The General Theory, the model was first developed in a
less wellknown paper, Wages and Interest: The Dynamic Problem J. R. Hicks, 1935. Hicks was adamant that this paper, and not Mr. Keynes and the Classicslet alone The
General Theory itselfwas the real foundation of the ISLM model:

The other, much less well known, is even more relevant. Wages and Interest: the Dynamic Problem was a first sketch of what was to become the
dynamic model of Value and Capital (1939). It is important here, because it shows (I think quite conclusively) that that model was already in my mind
before I wrote even the first of my papers on Keynes. (Hicks 1981, p. 140; emphasis added)

Of course, that ISLM is in fact a Neoclassical model and not a Keynesian one is no reason per se to dismiss it: it could still be an adequate model of the macro economy. But
Hicks argued that on its own merits, it failed.
The model in Wages and Interest had an ultrashortrun of a week in a bread economy in which prices were decided on a Monday and then applied for the remainder of the
week. But ISLM, which Hicks described as a translation of Keynes nonflexprice model into my terms, was a shortperiod, we shall not go far wrong if we think of it as a
year John Hicks, 1981, p. 141. In Hickss model, events during the week were not allowed to affect anythinga device which Hicks described as a very artificial device, not I
would think now much to be recommended, but which let him treat expectations as constant. Therefore, equilibrium applied:

That is to say (it is equivalent to saying), we may fairly reckon that these markets, with respect to these data, are in equilibrium. (Hicks 1981, p. 146)

However, this artifice could not be extended to a year, and used to derive an LM curve since:

for the purpose of generating an LM curve, which is to represent liquidity preference, it will not do without amendment. For there is no sense in liquidity,
unless expectations are uncertain. (Hicks 1981, p. 152; emphasis added)

This in turn meant that markets had to be in disequilibriumbut ISLM itself was derived from equilibrium analysis, as Hicks also explained:

the idea of the ISLM diagram came to me as a result of the work I had been doing on threeway exchange, conceived in a Walrasian manner. I had
already found a way of representing threeway exchange on a twodimensional diagram (to appear in due course in chapter 5 of Value and Capital). As it
appears there, it is a piece of statics; but it was essential to my approach (as already appears in Wages and Interest: the Dynamic Problem) that static
analysis of this sort could be carried over to dynamics by redefinition of terms. So it was natural for me to think that a similar device could be used for the
Keynes theory. (Hicks 1981, p. 141142)

But in fact, extending an equilibrium model with a timeframe of a week to a timeframe of a year in which liquidity preference played a key role led to a hopeless muddle which
Hicks, with hindsight, could now appreciate. His final judgment on his own model was scathing:

I accordingly conclude that the only way in which ISLM analysis usefully survivesas anything more than a classroom gadget, to be superseded, later on,
by something betteris in application to a particular kind of causal analysis, where the use of equilibrium methods, even a drastic use of equilibrium
methods, is not inappropriate

When one turns to questions of policy the use of equilibrium methods is still more suspect. There can be no change of policy if everything is to go on
as expectedif the economy is to remain in what (however approximately) may be regarded as its existing equilibrium. It may be hoped that, after the
change in policy, the economy will somehow, at some time in the future, settle into what may be regarded, in the same sense, as a new equilibrium; but

there must necessarily be a stage before that equilibrium is reached. There must always be a problem of traverse. For the study of a traverse, one has to
have recourse to sequential methods of one kind or another. (Hicks 1981, p. 152153)

Hickss fundamental conclusion therefore is that macroeconomic analysis must assume disequilibrium rather than equilibriumand this does even more damage to ISLM than
Hicks himself appreciated. To reduce macroeconomics to the interplay of simply the goods and money market, Hicks had used the Walrasian assumption that, if n1 markets are
in equilibrium, then the nth market must also be in equilibrium, so that he could ignore the market for loanable funds:

One did not have to bother about the market for loanable funds, since it appeared, on the Walras analogy, that if these two markets were in
equilibrium, the third must be also. So I concluded that the intersection of IS and LM determined the equilibrium of the system as a whole. (Hicks 1981, p.
142)

But this Walrasian logic cuts both ways: if disequilibrium applies in one market, then at least one otherand probably all othersmust also be in disequilibrium. Therefore, as soon
as disequilbrium is acknowledged, markets whose very existence has been ignored in equilibrium analysissuch as, obviously in ISLM, the labor marketcan no longer be
ignored. Their disequilbrium dynamics must now be considered, and the ISLM model can give no guidance as to how they will behave.

Analternativemacroeconomics
Solows key observation is that macroeconomics should seek to account for the occasional aggregative pathologies that beset modern capitalist economies. Hickss key
contribution was that macroeconomics must be a study of disequilbrium dynamicsa point made decades earlier still by Irving Fisher when he penned The DebtDeflation
Theory of Great Depressions:

We may tentatively assume that, ordinarily and within wide limits, all, or almost all, economic variables tend, in a general way, toward a stable
equilibrium But New disturbances are, humanly speaking, sure to occur, so that, in actual fact, any variable is almost always above or below the ideal
equilibrium

Theoretically there may bein fact, at most times there must beoveror underproduction, over or underconsumption, over or underspending, over
or undersaving, over or underinvestment, and over or under everything else. It is as absurd to assume that, for any long period of time, the variables in
the economic organization, or any part of them, will stay put, in perfect equilibrium, as to assume that the Atlantic Ocean can ever be without a wave.
(Fisher 1933, p. 339; emphasis added)

These principles point in the direction first indicated by Hyman Minsky, that since capitalist economies have experienced Depressions in the past, to adequately model capitalism:

it is necessary to have an economic theory which makes great depressions one of the possible states in which our type of capitalist economy can find itself.
(Minsky 1982 , p. 5)

Minskys alternative was the Financial Instability Hypothesis, and it was based on an explicit rejection of the neoclassical paradigm:

The abstract model of the neoclassical synthesis cannot generate instability. When the neoclassical synthesis is constructed, capital assets, financing
arrangements that center around banks and money creation, constraints imposed by liabilities, and the problems associated with knowledge about
uncertain futures are all assumed away. For economists and policymakers to do better we have to abandon the neoclassical synthesis. (Minsky 1982 , p. 5)

I have developed mathematical models of this hypothesis Steve Keen, 1995, 2008, 2011b, 2000 which are based on a considered rejection of virtually every precept of
neoclassical theory. Explaining all these methodological decisions requires a book rather than a journal paper Steve Keen, 2011a, so here I will concentrate on what experience
has convinced me is the key reason why neoclassical economists failed to foresee the crisis, and why to this day they cannot understand why it remains so intractable. This is their
vision of how money is created.

EndogenousMoney,EconomicGrowthandDisequilibrium
Noneconomists might expect that economic models of how money is created would be based on empirical research. There is such a model, but it is the province of the non
neoclassical school of thought known as Post Keynesian economics. Neoclassical economists have instead persisted with the fractional reserve banking/money multiplier model,
which argues that banks need excess reserves before they can lend, that these are created initially by an expansion of governmentcreated fiat money, and that a sequence of
bank deposits by recipients of fiat money, and loans of all but a fraction of this deposit by banks, creates credit money that is a multiple of the initial injection of fiat money.
This is in turn married to a vision of banks as mere intermediaries, so that they can be formally ignored in macroeconomic modeling. Finally, the level of private debt is also
ignored in neoclassical macroeconomics, since a loan is regarded as simply a transfer of spending power from a saver to a borrower. With one persons spending power going
down and anothers going up by the same amount, only the distribution of debt could matternot its aggregate level. As Bernanke explained, this is why Fishers Debt
Deflation explanation of the Great Depression was ignored by neoclassical economists:

Fishers idea was less influential in academic circles, though, because of the counterargument that debtdeflation represented no more than a
redistribution from one group (debtors) to another (creditors). Absent implausibly large differences in marginal spending propensities among the groups, it

was suggested, pure redistributions should have no significant macroeconomic effects (Bernanke 2000, p. 24)

Over forty years ago, the then Senior VicePresident of the New York Federal Reserve, Alan Holmes, pointed out that this perspective in which the aggregate level of debt does
not matter, and banks are mere intermediaries between savers and lenders, was erroneous. He argued that the view that the banking system only expands loans after the
[Federal Reserve] System or market factors have put reserves in the banking system was based on a naive assumption. Instead, he argued,

In the real world, banks extend credit, creating deposits in the process, and look for the reserves later. The question then becomes one of whether and how
the Federal Reserve will accommodate the demand for reserves. In the very short run, the Federal Reserve has little or no choice about accommodating that
demand; over time, its influence can obviously be felt. (Holmes 1969, p. 73; emphasis added)

Holmes was thus arguing that banks do not need deposits in order to lendthat in fact the act of lending simultaneously creates a matching depositand that banks can
therefore endogenously create new spending power new deposits by issuing a loan, without thereby reducing the spending power of savers.
This experiencebased judgment was subsequently confirmed by empirical research by the Post Keynesian economist Basil Moore Basil J. Moore, 1979, 1988, 2001, 1983, and
even by the founders of Real Business Cycle theory Finn E. Kydland and Edward C. Prescott, 1990. This led to the development of the model of endogenous money, in which a
loan is regarded not a transfer of spending power from a saver to a lender, but a creation of spending power for the borrower by the bank ab initio. This modern Post Keynesian
theory in fact rediscovered an argument first put by Schumpeter, that banks create money simply by an accounting operation: a loan extended to a borrower creates both debt
and spending power out of nothing:

It is always a question, not of transforming purchasing power which already exists in someones possession, but of the creation of new purchasing power
out of nothing (Schumpeter 1934, p. 73)

This means that the increase in debt actually adds to aggregate demand, so that total spending is the sum of both incomes generated in the circular flow which primarily
finances consumptionplus the growth in debtwhich primarily finances investment. Since this concept is so foreign to neoclassical economists, it is worth citing Schumpeter at
length on it here:

the entrepreneurin principle and as a ruledoes need credit, in the sense of a temporary transfer to him of purchasing power, in order to produce at all,
to be able to carry out his new combinations, to become an entrepreneur. And this purchasing power does not flow towards him automatically, as to the
producer in the circular flow, by the sale of what he produced in preceding periods. If he does not happen to possess it he must borrow it He can only
become an entrepreneur by previously becoming a debtor his becoming a debtor arises from the necessity of the case and is not something abnormal, an
accidental event to be explained by particular circumstances. What he first wants is credit. Before he requires any goods whatever, he requires purchasing
power. He is the typical debtor in capitalist society. (see also Biggs and Mayer 2010, Biggs et al. 2010, Schumpeter 1934, p. 102)

Schumpeter does not deny that some investment is financed by a transfer of existing funds from savershence resulting in a fall in spending by saverconsumers and an
offsetting increase in spending by borrowerinvestors, with no overall macroeconomic implications. But he insists that the primary source of investor spending comes from the
endogenous expansion of the money supply, which gives spending power to entrepreneurs without sacrificing the existing spending power of savers, so that rising debt does have
macroeconomic effects:

Even though the conventional answer to our question is not obviously absurd, yet there is another method of obtaining money for this purpose, which
does not presuppose the existence of accumulated results of previous development, and hence may be considered as the only one which is available in
strict logic. This method of obtaining money is the creation of purchasing power by banks (Schumpeter 1934, p. 73)

This leads Schumpeter to what he happily describes as a heresy that processes in terms of means of payment are not merely reflexes of processes in terms of goods Joseph
Alois Schumpeter, 1934, p. 95. Instead, in a growing capitalist economy, aggregate demand is the sum of demand from the sale of goods and services plus demand from the
growth in creditmoney, where the latter is the primary source of investment. Fama and French confirmed this hypothesized relationship between change in debt and investment
in an empirical study:

These correlations confirm the impression that debt plays a key role in accommodating yearbyyear variation in investment. (Fama and French 1999, p.
1954)

This combination of the endogenous expansion of spending power by bank lending, plus the use of that by entrepreneurs to finance investment, means that the change in the
level of private debt does have macroeconomic significanceand it plays a central role in Schumpeters theory of the business cycle. However it is not the end of the matter,
because entrepreneurs are not the only ones who borrow money: so do key actors in Minskys explanation for Great Depressions, Ponzi Financiers.
These borrowers do not primarily invest with borrowed money, but buy existing assets, and hope to profit by selling those assets on a rising market. Unlike Schumpeters
entrepreneurs, whose debts today can be repaid from profits tomorrow, Ponzi Financiers always have debt servicing costs than exceed the cash flows from the assets they
purchase with borrowed money. They therefore must expand their debts or sell assets to continue functioning:

A Ponzi finance unit is a speculative financing unit for which the income component of the near term cash flows falls short of the near term interest
payments on debt so that for some time in the future the outstanding debt will grow due to interest on existing debt Ponzi units can fulfill their payment

commitments on debts only by borrowing (or disposing of assets) a Ponzi unit must increase its outstanding debts. (Minsky 1982, p. 24)

Therefore in a creditbased economy, there are three sources of aggregate demand, and three ways in which this demand is expended:
1. Demand from income earned by selling goods and services, which primarily finances consumption;
2. Demand from rising entrepreneurial debt, which primarily finances investment; and
3. Demand from rising Ponzi debt, which primarily finances the purchase of existing assets.
Schumpeters and Minskys perspectives thus enable us to integrate credit, asset markets and disequilibrium analysis into an alternative macroeconomics. In a credit economy,
aggregate demand is the sum of income plus the change in debt, and this demand is expended on both goods and services and purchases of existing assets. Debt therefore has
both positive and negative connotations for the economy: it finances the expansion of economic activity via innovation and investment, but it can also cause asset bubbles and
eventually, an economic crisis if too much of this debt is directed to Ponzi Finance. This is precisely what occurred in the last two decades.

ComparingEndogenousMoneytotheMoneyMultiplier
As is well known, Bernanke blamed the Fed for causing the Great Depression:

there is now overwhelming evidence that the main factor depressing aggregate demand was a worldwide contraction in world money supplies. This
monetary collapse was itself the result of a poorly managed and technically flawed international monetary system (the gold standard, as reconstituted
after World War I). (Bernanke 2000, p. ix)

The money multiplier theory of money creation played a large role in his argument that the Great Depression was triggered by the Federal Reserves reduction of the US base
money supply between June 1928 and June 1931:

the United States is the only country in which the discretionary component of policy was arguably significantly destabilizing the ratio of monetary base
to international reserves fell consistently in the United States from 1928:II through the second quarter of 1931. As a result, U.S. nominal money
growth was precisely zero between 1928:IV and 1929:IV, despite both gold inflows and an increase in the money multiplier.

The year 1930 was even worse in this respect: between 1929:IV and 1930:IV, nominal money in the United States fell by almost 6 [percent] The proximate
cause of this decline in M1 was continued contraction in the ratio of base to reserves, which reinforced rather than offset declines in the money multiplier.
This tightening locates much of the blame for the early (pre1931) slowdown in world monetary aggregates with the Federal Reserve. (Ben S. Bernanke,
2000, p. 153)

Bernankes statistical evidence focused on the relationship between change in M1 and the level of unemployment. Using a longer and more detailed series for M1 than Bernanke
used Friedman and Schwartz 1963, Table A1, there is indeed a robust negative correlation between change in M1 and unemployment see Figure 1; unemployment is inverted
on the right hand axis to show the negative correlation more clearly. The R2 is 0.33 for the whole period, 0.31 for 19201930 and a strong 0.67 for 19301940.

Figure 1: ChangeinM1andUnemployment,19201940

However M1 includes money created by the banks, and blaming the Federal Reserve for its collapse in the 1930s takes the money multiplier for granted as a valid explanation of
money creationwhich the endogenous money approach disputes. Only M0 or Base Money is strictly under the Feds control, and using the

StLouisFREDAMBSLdata,

the relationship between unemployment and that part of the money supply over which the Fed has undisputed control is very different see Figure 2. The correlation for the
whole time period now has the wrong sign +0.44; moreover there is a break in the relationship. In the period 19201930, the correlation is small with the correct sign 0.22; in
the period 19301940, it is small with the wrong sign +0.28.

Figure 2: ChangeinBaseMoneyandUnemployment,19201940

There is also a break in the relationship between changes in M0 and changes in M1. In the 1920s, the correlation was strong and positive +0.89in line with the money
multiplier argument. But in the 1930s, while still positive it was much weaker +0.34. From the data too, it is obvious that the 1930s Fed was trying to boost the money supply
from 1931 till 1937. It then reduced its stimulus in 1937 when it falsely believed that the crisis was over as unemployment began to fall, only to see it start to rise once again from
11 back to 20 percent. Shocked, it rapidly reversed direction, increasing base money by more than 20 percent per annum from mid1938 on. Arguably the direction of causation
was not that changes in M0 and M1 drive unemployment, but that changes in unemployment drive Federal Reserve policy and hence changes in M0but with little impact on
the overall growth of the money supply and hence little impact upon economic activity.
Clearly the The Fed Did It argument is on shaky grounds with respect to the Great Depression, and as Bernanke is now finding out the hard way, it is an even more suspect
argument today. Firstly the relationship of growth in M3 to unemployment is even stronger than the M1 to unemployment relation from 19201940: the R2 is 0.7 for the whole
period.

Figure 3: M3ChangeandUnemploymentarestronglynegativelycorrelated(R^2=0.72)

However the M0 to unemployment correlation has the wrong sign, and is even stronger than the wrong correlation for the 1930s at +0.51 see Figure 4. The biggest boost to
Base Money in recorded history did little to avert the collapse into the Great Recession, and repeated boosts are doing very little to end it.

Figure 4: TheCorrelationofM0ChangeandUnemploymenthastheWrongSign

The Money Multiplier also has even less effect on the money supply itself now than back in the Great Depression: the correlation between changes in M0 and changes in M3 is
effectively zero for the whole period since 1990 0.07, strongly of the wrong sign for the precrisis period from 19902008 0.55, and only barely positive for the postcrisis
period +0.14.

Figure 5: ChangeinM0hasnoCorrelationwithChangeinM3

In contrast, the endogenous money analysis of both the Great Depression and the Great Contraction http://www.projectsyndicate.org/commentary/rogoff83/English is
substantially more robust. To test the endogenous money explanation, I put the proposition that aggregate demand is the sum of income plus the change in debt, and that this is
expended on both goods and services and purchases of existing assets, in an equation where the left hand side represents monetary flows and the right hand side represents the
monetary value of physical supplies and turnover of financial claims on physical assets:

NAT stands for Net Asset Turnover, which can be factored into the price index for assets PA, times their quantity QA, times the turnover TA expressed as a fraction of the number
of assets

The endogenous money hypothesis thus asserts that there is a relationship between the change in debt and the level of both economic activity GDP and activity on asset
markets. Since the strength of this relationship visavis the impact of income on economic activity and asset markets depends on the size of the change in debt relation to the
level of income, in the following correlations I consider change in debt relative to GDP rather than change in debt per se.
The correlation between change in debt and unemployment is far stronger than the correlation between change in M1 and unemployment during both periods:

Figure 6: ChangeinDebtDrivesEconomicPerformance

Figure 7: Change in Debt Drives Economic Performance

Similarly, there is a relationship between the acceleration of debt and both the rate of change of GDP Biggs and Mayer 2010, Biggs, Mayer and Pick 2010 and the change in
asset prices:

This relation can be seen as a generalization of Bernankes Financial Accelerator Bernanke et al. 1996 to both asset markets as well as goods markets, and without the false
Neoclassical restriction that only the distribution of debt, and not its aggregate rate of change, has macroeconomic significance.
The data strongly support the endogenous money proposition that the acceleration of debt has macroeconomic significance. The correlation between credit acceleration and
change in unemployment in the 192040 period is significant and has the correct sign.

Figure 8: Debt Acceleration and Unemployment Change, 19201940

The correlation for the period 1990Now is stronger still 0.75 and in fact is larger than the correlation of change in M3 with the level of unemploymentlet alone its rate of
change.

Figure 9: Debt Acceleration and Unemployment Change, 19902012

The correlation of the acceleration of debt with change in asset prices is also substantial. In strong contrast to the now discredited Efficient Markets Hypothesis claim that
debt plays no role in determining the value of even a single corporation, the acceleration of debt has a substantial influence upon the change in valuation of the entire asset
market.

Figure 10: CreditAcceleration&theDJIA,19221940

Figure 11:CreditAccelerationandtheDJIA,1990Now

This is especially marked in the case of housing, when the acceleration of mortgage debt can be isolated. The correlation of the acceleration of mortgage debt with the
change in real house prices is 0.8.

Figure 12: Mortgage Acceleration and Change in Real House Prices

Since debt cannot accelerate indefinitely, this is also why asset bubbles, ultimately, have to crashand therefore also a reason why macroeconomic policy should attempt to
prevent them in the first place.

Conclusion:towardsanewmacroeconomics
The analysis here is still only preliminary, but the data gives far stronger empirical support to the endogenous money, creditdriven perspective than to the neoclassical. For both
theoretical and empirical reasons, Neoclassical macroeconomics does indeed deserve to be thrown out with the bathwater, and a new dynamic, disequilibrium macroeconomics
constructed in its stead.
Failure to honestly confront the theoretical weaknesses and empirical failures of the dominant school of economics will not preserve it. Indeed, continuing to ignore the gulf
between the predictions of neoclassical economic models and the state of the economy will simply accelerate the steep decline in the public respect accorded to economists
since this crisis began. Ultimately, complacency and denial will lead economics back to the position of disdain that Keynes described so well during the last Depression:

But although the doctrine itself has remained unquestioned by orthodox economists up to a late date, its signal failure for purposes of scientific prediction
has greatly impaired, in the course of time, the prestige of its practitioners. For professional economists, after Malthus, were apparently unmoved by the
lack of correspondence between the results of their theory and the facts of observation; a discrepancy which the ordinary man has not failed to observe,
with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical
results are confirmed by observation when they are applied to the facts. (J. M. Keynes, 1936, p. 33)
References
Bernanke, B. 2010. On the Implications of the Financial Crisis for Economics. Conference Cosponsored by the Center for Economic Policy Studies and the Bendheim Center
for Finance, Princeton University. Princeton, NJ: US Federal Reserve.
Bernanke, B.S., M. Gertler and S. Gilchrist 1996. The Financial Accelerator and the Flight to Quality, Review of Economics and Statistics. 78: 115.
Bernanke, B.S. 2000. Essays on the Great Depression. Princeton, NJ: Princeton University Press.
Biggs, M. and T. Mayer 2010. The Output Gap Conundrum, Intereconomics/Review of European Economic Policy. 45: 1116.
Biggs, M., T. Mayer, and A. Pick 2010. Credit and Economic Recovery: Demystifying Phoenix Miracles. SSRN eLibrary.
Blanchard, O. 2008. The State of Macro, National Bureau of Economic Research Working Paper Series, No. 14259.
Blanchard, O. 2009. The State of Macro, Annual Review of Economics. 1, 20928.
Blanchard, O., G. DellAriccia, and P. Mauro 2010. Rethinking Macroeconomic Policy, Journal of Money, Credit, and Banking. 42: 199215.
Fama, E.F. and K.R. French 1999. The Corporate Cost of Capital and the Return on Corporate Investment, Journal of Finance. 54: 193967.
Fama, E.F. and K.R. French 2004. The Capital Asset Pricing Model: Theory and Evidence, The Journal of Economic Perspectives. 18, 2546.
Fisher, I. 1933. The DebtDeflation Theory of Great Depressions, Econometrica. 1: 33757.
Friedman, M. and A.J. Schwartz 1963. A Monetary History of the United States 18671960. Princeton NJ: Princeton University Press.
Grtner, M. and F. Jung 2010. The Macroeconomics of Financial Crises: How Risk Premiums and Liquidity Traps Affect Policy Options, International Advances in Economic
Research. 17: 1227.
Hicks, J.R. 1935. Wages and Interest: The Dynamic Problem, The Economic Journal. 45: 45668.

Hicks, J.R. 1937. Mr. Keynes and the Classics; a Suggested Interpretation, Econometrica. 5: 14759.
Hicks, J.R. 1981. IsLm: An Explanation, Journal of Post Keynesian Economics. 3: 13954.
Holmes, A.R. 1969. Operational Constraints on the Stabilization of Money Supply Growth, in: F.E. Morris ed., Controlling Monetary Aggregates. Nantucket Island: The
Federal Reserve Bank of Boston: 6577.
Ireland, P.N. 2011. A New Keynesian Perspective on the Great Recession, Journal of Money, Credit, and Banking. 43: 3154.
Keen, S. 1995. Finance and Economic Breakdown: Modeling Minskys Financial Instability Hypothesis, Journal of Post Keynesian Economics. 17: 60735.
Keen, S. 2000. The Nonlinear Economics of Debt Deflation, in: W.A. Barnett, C. Chiarella, S. Keen, R. Marks, and H. Schnabl eds., Commerce, Complexity, and Evolution:
Topics in Economics, Finance, Marketing, and Management: Proceedings of the Twelfth International Symposium in Economic Theory and Econometrics. New York:
Cambridge University Press: 83110.
Keen, S. 2008. Keyness Revolving Fund of Finance and Transactions in the Circuit, in: R. Wray and M. Forstater eds. Keynes and Macroeconomics after 70 Years.
Cheltenham: Edward Elgar: 25978.
Keen, S. 2011a. Debunking Economics: The Naked Emperor Dethroned?. London: Zed Books.
Keen, S. 2011b. A Monetary Minsky Model of the Great Moderation and the Great Recession, Journal of Economic Behavior & Organization. Forthcoming.
Keynes, J.M. 1936. The General Theory of Employment, Interest and Money. London: Macmillan.
Kydland, F.E. and E.C. Prescott 1990. Business Cycles: Real Facts and a Monetary Myth, Federal Reserve Bank of Minneapolis Quarterly Review. 14: 318.
Lucas, R.E., Jr. 2003. Macroeconomic Priorities, American Economic Review. 93: 114.
McKibbin, W.J. and A. Stoeckel 2009. Modelling the Global Financial Crisis, Oxford Review of Economic Policy. 25: 581607.
Minsky, H.P. 1982. Can It Happen Again?: Essays on Instability and Finance. Armonk, NY: M.E. Sharpe.
Moore, B.J. 1979. The Endogenous Money Stock, Journal of Post Keynesian Economics. 2: 4970.
Moore, B.J. 1983. Unpacking the Post Keynesian Black Box: Bank Lending and the Money Supply, Journal of Post Keynesian Economics. 5: 53756.
Moore, B.J. 1988. The Endogenous Money Supply, Journal of Post Keynesian Economics. 10: 37285.
Moore, B.J. 2001. Some Reflections on Endogenous Money, in: L.P. Rochon and M. Vernengo eds., Credit, Interest Rates and the Open Economy: Essays on
Horizontalism. Edward Elgar: Cheltenham: 1130.
Rolnick, A.J. 2010. Interview with Thomas Sargent, The Region. 24: 2639.
Schumpeter, J.A. 1934. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest and the Business Cycle. Cambridge, MA: Harvard University
Press.
Solow, R.M. 2003. Dumb and Dumber in Macroeconomics, Festschrift for Joe Stiglitz. Columbia University:
http://www2.gsb.columbia.edu/faculty/jstiglitz/festschrift/agenda.cfm
Solow, R.M. 2001. From Neoclassical Growth Theory to New Classical Macroeconomics, in: J. H. Drze ed., Advances in Macroeconomic Theory. New York: Palgrave.
Solow, R.M. 2008. The State of Macroeconomics, The Journal of Economic Perspectives. 22: 24346.
Suka

Tweet

Share

StumbleUpon

About Steve Keen


I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of
conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative
dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debtdeflation on the back of the enormous
private debts accumulated globally, and our very low rate of inflation.
View all posts by Steve Keen

Bookmark the permalink.

Out of Amazon borrowing program

66 Responses to Debunking Macroeconomics

Swags for Homeless Wins Human Rights Award

Older Comments

alainton December 14, 2011 at 10:44 am


@Mahaish
What do you mean by net spending if financed by taxes or bonds or even financial repression/seigniorage or asset sales how can it be inflationary its just a
sectoral transfer payment and reflux puts it back in circulation? What I am trying to get at is that monetary circuit theory or even MMT/MCT hybrids seem to
imply a redefinition of expansionary/contractionary fiscal policy whether it is expansionary or contractionary depends on the net change in debt created money
not the change in government expenditure per se. Austerity is deflationary because of the paying down of debt. Inflation of specific asset classes wont be
inflationary net unless there is monetary expansion to chase the assets.

koonyeow December 14, 2011 at 3:54 pm


Title: Just Expressing Myself, Reloaded
From Lyonwiss:
You should have mentioned the substance of many posts in this thread: What sovereign debt crisis? The Europeans and Americans are only imagining things. Smells
like MMT?
I have accepted the fact that I am an ignoramus.

mahaish December 15, 2011 at 12:10 am


What do you mean by net spending if financed by taxes or bonds or even financial repression/seigniorage or asset sales how can it be inflationary its just a
sectoral transfer payment and reflux puts it back in circulation?
hi alainton
ggov spending > ttaxes = net spending
or in terms of the governments operating accounts at the central bank,
the debits from those accounts are greater than the credits from those accounts.
i dont really have an arguement with what you have proposed, except to say that the word financed is a incorrect description of what happens, since its the initial
reserve add from the deficit that actually funds the reserve subtract when reserves or deposits are swapped for treasury securities.
its a banking system reserve operation
but again the system wide balance sheet effect may be neutral, but localised effects may be different,
so for example a multi billion dollar government office building program as a consequence of the current government deficit whose inflationary effects have
suppossedly been neutralised by debt issuance , has led to no less than 10 cranes littering the landscape in a radius less than 10 km from where i live,leading to no
doubt envious looks from our friends in shanghai
leading to all sorts of interesting inflastionary effects on the labour market, the property rental market, etce etc.
the banking system reserve effect may be neutral, but the deposits that get created as a consequence of the deficit may have interesting inflationary effects,
but i digress, since my original arguement was , that whether the bank or non bank private sector held that net spending as deposits , reserves or bonds, the
distinction that bonds are potentially less inflationary than cold hard cash is highly questionable, given the liquid nature of both, and given the short term bond
yield is a proxy for the interbank rate which sets the parameters for the yield on non government debt
whether it is expansionary or contractionary depends on the net change in debt created money not the change in government expenditure per se.
again we can agree to an extent but not completely. the deficit can be leveraged by the private sector if the deposits created by that deficit end up in non bank
balance sheets the fhog is a prime example,
and yes the credit engine may be the significant driver on the way up to the top of a economic expansion
but
when the government deficit is running at over 4% of gdp
since 2009 , and the government debt has doubled from 11% to 22% of gdp since 2009, the effect of that government spending on non bank balance sheets can
stop delevaraging in its tracks , and indefinately if the government had a mind to.

this is not to discount the effect of central bank rate cuts


now the deficit and the government spending multiplyer might push the credit engine along, but a budget surplus in accounting and sectoral terms amounts to
private sector disaving, and would be like pouring fuel on the fire in a credit contraction, especially if there are multiplyer effects involved,
the private sector disaving caused in part by government saving and a credit contraction can be lethal.
so again i have to disagree to an extent , in that the financial balance of the government can have significant expansionary and contractionary effects,
its the non bank balance sheet effects of the government fiscal position combined with central bank manipulation of the yield curve, and a little help from china
that goes a good way to explaining why we havent had a major downturn in this country unlike others,

alainton December 15, 2011 at 12:13 am


To follow up another MMT flaw is that government surplus must equal private sector deficit. It not how government debt enlargement/paydown works, which is via
a net increase or decrease of Tbill redemptions over issues or additionally for paydowns purchases in the secondary securities market. In a paydown there is no
private sector deficit, rather the system is balanced by a net increase or decrease in total money supply or more strictly the future yield curve for changes to money
supply. The mistake comes from treating sectoral balances in a static framework, as if they are changes to stocks not flows.

mahaish December 15, 2011 at 6:27 pm


stocks or flows , we cant change accounting reality alainton,
a deficit is a banking system reserve add,
the government adds to the stock of reserves, and the private bank and non bank sector with the help of the central bank can effect the composition of the reserve
add and create flows from one class of assett to another.
so what you describe is essentially a assett swap or liquidity swap,
the private bank or non bank sector cannot change total amount of the reserve addor net assetts a deficit creates.
the private sector can certainly leverage the net asset increase, but in terms of horizontal money the balance sheet effect for the private sector is zero, and no
increase in net assetts.

alainton December 15, 2011 at 10:07 pm


@Mahaish
The situation you describe only applies to compulsory reserve requirements on banks with the central bank and assumes the central bank is on the state side of the
balance sheet. First it is a slight of hand and secondly this form of seignorage is only a small component of deficit financing in most modern states.
It is much better to think of a deficit as a security add as most purchases of T bills are pension funds needing to pay current maturities.
I agree with the point about disaving and how government debt reduction leads to contraction of the money supply which is the point I was first making. You
dont need to worry so much about the intermediation of bank reserves it is secondatry what ever the mechanism used and there are many the key issue is
whether or not the debt management measures expand or contract the money supply/effective demand.
Being less static government debt reduction is immediate reduction of the money supply, government debt increase through bond yields is a commitment to
expand the money supply in the future. Now direct cash injections has an immediate effect. Bonds yields are the key macroeconomic regulator. As you say it sets
the floor on the interbank rate now we are getting into the complex area of whether or not there is a debt crowding out effect. If you hold to the post keynsian
idea of a velocity multiplier rather than a money multiplier then the key issue is whether the velocity is the sector being taxed is greater than the sector
government is spending on. Disaving from idle balances spent on infrastructure would seem to be an example of crowding in to my mind, which is why i favour the
recent suggestion that bonds have to be financed domestically.

goidcc December 17, 2011 at 10:02 am


Hi Mr. Keen,
I just finished reading your latest book. It is very interesting. Thank you for explaining complicated concepts by making them so easy to read.
I have one question. In your book and most of your papers you are assuming that firms take loans to produce products. Whay havent you considered households
taking loans for thier consumption. In America many homeowners took loans using thier homes as collateral to consume more. I am sure this could play an
important role. Maybe you would like to add household loans in your simulations and see how it plays out. Then you can add different bailout schemes that the
govt can use to help the economy.
Thank you.

AK

Steve Keen December 17, 2011 at 11:16 am


Thanks AK,
I have included household consumption as part of an unpublished model, linked to an asset price bubble. However it will take time to add the dynamics of the asset
market as well. The model in DE II was simply to illustrate how a credit money system works. Later work will be on how that system crashesand funding Ponzi
schemes like the subprime fiasco is a major part of that story.

Pingback: Debt Britannia | Steve Keen's Debtwatch

Pingback: Everyone Is Starting To Realize The Size Of Britains Debt Crisis | Forex news

Pingback: Debt Britannia (with 16 graphs) RealWorld Economics Review Blog

Pingback: Everyone Is Starting To Realize The Size Of Britains Debt Crisis | Forex Trade News

Pingback: Staggering: Everyone Is Starting To Realize The Size Of Britains Debt Crisis InvestmentWatch

Pingback: The Case for Deflation | Gestalt Reality

Ken MacIntyre July 19, 2012 at 12:28 am


Apologies for coming to this discussion so late. A comment on neoclassical models helped guide policy during the good times, and should not be abandoned
simply because they did not see the bad times coming. It is exactly the same as saying that the car navigation system that took you over a cliff cannot be junked
because, hey, it worked ok in the three miles before you got to the cliff edge. Any software company that came up with that excuse would not be allowed to
manufacture navigation systems. Specious as you say.

Pingback: Debunking Economics, Part X: Causes of the Great Depression (and Great Recession) Unlearning Economics

Older Comments

Leave a Reply
You must be logged in to post a comment.

DoyourMAinEconomicsatKingston
KingstonoffersarangeofEconomicsMAdegreesfromheterodox,pluralisticandappliedperspectives,fulltimeandparttime.Clickhereformoreinformation

MinskyFunding
KeepRussellStandishontheMinskyProject
Level1$10

OtherAmount:

YourEmailAddress(andcommentifyouwishtoaddone):

RedmiNote33G
Gold
Rp2,7JT
Lengkapdan
Mudah
Bhinneka

Login/Register
Register
Login
EntriesRSS
CommentsRSS
WordPress.org

EndingOverlending

AustralianHousing
PropertyKnowledgeGroup

Blogroll
CentreforPolicyDevelopment
DebtwatchPodcast
DebunkingEconomics
DougNoland
GlobalHousePriceCrash
Houseofcreditcardsmayfall
HousingAffordability
iTulip
TheNewMatilda
USHousingCrashBlog

Cartoons
Oureconomicmanagers

Coverage
20070314:LateLineontheUSSubPrimeCrisis
20070314:Warningonsillyloans
20070815:7.30ReportAmericanmortgageshockwaveshitAustralia
ABCPMonUSSubprimeCrisis
FNArena:MortgagecrunchinAustraliatoo?
NZReserveBankonRegulation:PMMay9th2007
SharedEquityLoans

Debt&AssetBubbleBlogs
7.30Report
GlobalHousePriceCrash
HousingAffordability
USHousingCrashBlog

Podcast
DebtwatchPodcast

RBAWatch
RBA2003ConferenceonAssetPricesandMonetaryPolicy
RBASpeechMarch16th
TwoDepressions,OneBankingCollapse

RelevantNewsItems
20070308:Baddebtsontheriseinmortgagebelt
20070309:Latepaidmortgagesshowpaininsuburbs
20070317:OnwardrollsthesubprimestoryintheUSA
20070815:7.30ReportAmericanmortgageshockwaveshitAustralia
20070917:Howbaddebtinfectedtheworld
7.30Report
BearStearns:Turmoilinsubprimemortgages
BewareofExplodingMortgages(NewYorkTimesJune102007)
Canthemortgagecrisisswallowatown?
Creditderivatives:Attheriskyendoffinance
Firsthomepaymentshit$3000permonth
SharedEquityLoans
Truerateofhomedefaultshidden

Statistics
RBABulletinStatisticalTables
USFederalReserveHistoricalStatistics

SubPrimes
20070725NewYorkTimesLenderSeesMortgageWoesforGoodRisks
20070725NewYorkTimesOpEdStoppingtheSubprimeCrisis
20070826NewYorkTimes:InsidetheCountrywideLendingSpree
20070917:Howbaddebtinfectedtheworld

UK
20070917:Howbaddebtinfectedtheworld

USA
20070826NewYorkTimes:InsidetheCountrywideLendingSpree
20070917:Howbaddebtinfectedtheworld
Canthemortgagecrisisswallowatown?
USHousingCrashBlog

User
Register
Login

EssentialPosts

FinancialInstability
RovingCavaliersofCredit
ReadSomeMinsky
MonetaryProfitsParadox
AreWe"It"Yet?
MonetaryMultisectoralModel

TheNewDepression
"Noonesawthiscoming"?
WhytheCrisisisnotover
Deleveragingwithatwist
Bernankedoesn'tunderstandtheGreatDepression
TheCaseAgainstBernanke

AustralianHousing
RescuingtheBubble
Australianhouseprices
CompetitionNoPanacea
HousePrices&BanksI
HousePrices&BanksII

Videooverview
LecturesonEndogenousMoney
DebtandAustralianhousing
BBCHARDtalkInterview
INETInterviewonwhyIsaw"It"coming

The FT.
Independent.
Insightful.
International.
Subscribe &
save 33%

DebunkingEconomicsII

Das könnte Ihnen auch gefallen