Keen on Krugman~(?)

Here is a rough transcription of the presentation for people who are hard of hearing. Apologies for the lack of grammar, I am working to improve the automated transcriptions -
zero dearly beloved and we are gathered here today so let’s go to the United States of America and look at their house prices arm this isn’t just house prices but we have this is exactly exact shape of house prices the case Shiller core logic and the court case Shiller 20 composite and they came down again yesterday and that is the shape at the end unfortunately unfortunately why say unfortunately they had to come down so sooner they come down sooner something else can happen but this is the actually the price to rent chart and the prices and the price to rent are the same the back to where they where in 1999 and arm I’m not sure exactly what it means and how they work out this price to rent but there it is basically at all and say there it is arm and it was all flat along that number on the x-axis on the left that of one which I think is the good balance between price of a house and renting a house and had a little arm a house price boom before the 1991 recession and 91 this this recession calm that down again all the way to 19 9899 where am price to rents are kind of meeting now also in Minsk Yasuo Minsk it is that’s that’s your basic chart so what we have this going back to 1983 and house prices had that little boom before 1991 and really started to take off again with the red line which is the case Shiller composite 20 in the year 2000 after the dot-com crash or during the dot-com crash what we have is Minsk E here now Minsk ease arm is instability hypothesis he said that an economic system will become unstable due to any Proulx protracted length of time that it stays stable because people in the system will presume it is going to space table and that takes fear away from them and then they push the envelope they start pushing possibilities right so in 83 8990 right up to 2002 even we can say up to 2002 we go through in start going through the Minsk is stage of initially you get investment-grade investments the going to be three great investment-grade was the first the you just do naturally you want to buy a house as opposed to renting a house of you buy a house next to get speculative grade speculative grade is well I’m a bit torn between buying and renting but I’m going to buy because it looks like house prices are going up so it speculative you think well I’m going to ride this a bit and I could well win but if even if I don’t win and has prices come down again nothing really lost because my salary can cover the mortgage and I will of lost a little be uncomfortable to be under water or whatever but my salary can cover the mortgage and it would be uncomfortable but I can go on so with been through investment-grade speculative grade but after that and really after 2002 and three we going to Ponzi finance where people enter into the market buying houses in this the your instance and they buy a house based on the fact that the prices will go up and if the prices do not go up another words they can’t just roll it over and sell the house then they cannot afford the mortgage and that is Ponzi grade financing so we’ve been through are the three grades and end up with a Ponzi arm scheme of housing and that’s what we got from 2004 five right up to the Bloomberg the bust okay so that the Minsk is system that says if it will become unstable because of its long length of intrinsic stability or steaming stability nobody believed anything could go possibly go wrong of course soon as you get through those grades and up to Ponzi it will definitely go wrong okay moving on rhubarb is you unexcited up articles excited couple days ago at night was our think that was about Steve Keynes well going to Berlin to the are INET conference conscious of the liberal Paul Krugman New York Times Minsk E and mythology monkish now monkish for Paul Krugman article in the New York Times means it’s not really few non-in cannot economists people you got to understand it cutting economic’s to really read this article wall you’ll just be lost so don’t bother with it monkish that’s what it means so only economists welcome and can have a look Steve keen it opens with Steve keen has a new post up nurse with a link to a new paper now we have all linked to the new paper and have already from start to cover scrum cover to end and all understood it haven’t we know right the doesn’t matter, about Minsk year and or is it Minsk EI economic’s and how people like me get it wrong like Krugman gets it wrong well good for him says poorly debates like this are always productive and I wish domestic responsibilities when keeping me from going to the Berlin conference so I could have a little chat with you and tell you Stevie where you’re going wrong it’s pretty grotty little article this but let’s get to the one paragraph that I pulled out that I thinks at the whole thing revolves around and in its own way it’s the naughtiest paragraph although if you read the article it’s not long he will never write much the New York Times well worth reading all it link number two right three lines keen doesn’t seem to be doing that there were ever his paper contains a number of assets Asian is will all I With all of this and have pulled out the wrong article another wrong wrong paragraph and then have to go to are confined it don’t worry don’t worry here display among yourselves be seconds it comes after that paragraph communiqué still three lines further confuse check is right okay we back were back Tony was excited in particular, I’ll change it over so will have this up and only the last paragraph in because is that it the other three lines was the paragraph before this one so going with the what’ll be heard through to seek in particular he asserts that putting banks in the story is essential now this is to confirm had this long are had little farm comment with axiom arm just yesterday talking exactly exactly this he asserts that putting banks and the story is essential now the story read model in economic they have models sofa story when he says story he means modelling when you’re modelling things in economic that what he means by story he asserts that putting banks and the stories in sent essential in other words putting banks in your model is essential now I’m all for including the banking sector in stories in models where it is relevant but why is it so crucial to a story about debt and leveraged why are banks crude so crucial to a story about debt and leveraged leveraged which is loans debts now this is a very naughty paragraph because I think he’s got away with it with the one Keeshan other words economists know what he’s talking about the general public wouldn’t and is treating keen as though he was a member of the general public and he wouldn’t understand what elm maestro are Nobel prizewinner for economic’s Krugman is saying here in are just running month one time or in particular he asserts the putting banks in the story is essential now I’m all for including the bank of the banking sector in stories were it’s relevant but why is it so crucial to a story about debt and leveraged now this is just cheeky it’s just kind of tweaking somebody’s nose because and if it some it’s tempting it’s a flirtatious thing because what he’s saying here is a saying something that obviously provocative why put banks in a model about debt when obviously banks are got be in the model about debt for a normal person but what Krugman’s got behind this is that he is kind of hiding just behind the veil that is going to go half this is what I meant all along when when you getting on on that what you say to what of course you got the banks in the story that the model a story about that debt course you got to and he goes, you obviously don’t know your economic’s you poor little cretin what okay what crude Krugman is talking about here and even says in this article I I can read it from here I wrote about this a long time ago in that piece written around 1991 another words I’ve known this rages through rights the way Krugman and other economists look at this why you don’t have to put banks in a model when you’re modelling and it the economy including debt is because you’ve got to people you got a and B you got a which has who has money who spends a lot of that money but there has money left over that he doesn’t want to spend so this is for aggregate demand is what the rest the articles about aggregate demand so he doesn’t want to demand anything else with that money so he puts it in the bank the bank takes that money and then is it to be who then spends it somewhat Krugman say is it does not matter whether a spends the money all money or a spend some of the money put some of the money in the bank the bank lent it to be and then be spends the money the effect the aggregate demand in the economy is exactly the same Now Bush is the little local school or Clever I am the would be revealed if anybody has ago Krugman on that paragraph and it’s so facile that I find it slightly pathetic because will go back to where I was in producing the keen paper to you and inviting you to link and read it about in dodginess money creation a spend some money put some money in a bank who cares the comes along when he borrows money he doesn’t borrow a is money the bank makes in dodginess money from the inside from the inside out in dodginess money and gives it to be it is new money and this is what the differences and you can say what that makes no difference as long as the bank only lens the amount of money that a put in the bank but the peak of give sure to how much a is put in the back the bank will lend to be have if the banks in the mood exactly the amount of money the be wants a put the spends 90 puts 10 in the bank for instance the bank of lend be 1 million but Krugman doesn’t take any notice of that because he does not understand the fact the banks create in dodginess money printed from nowhere and just spent into the economy to be in mortgage could easily be 1 million it’s not in Krugman story/models because he doesn’t understand how banks work and it’s a real shame the Krugman won’t be going to Berlin to have a little chat with Steve Wright let’s go on to the next which is number three New York Times Paul Krugman our conscience of the liberal and I can it’s only for paragraph wrong long song and read the whole lot just more note today in about today’s column doing the research I found myself feeling as if I had turned over rock and found a lot of creepy crawlies things underneath this is really upsetting stuff look in particular at the semisecret history of Arizona immigration law just go with this a legislator goes into a closed-door meeting with corporations including a big operator of private prisons and soon afterwards submits legislation that will sends a lot of people to those private prisons if you read the corrections to that report you see that Alec a LEC and or its clients went over the piece with a fine tooth comb to find anything that they could attack sure you can’t prove that the corrections Corporation of America but less than they sound lovely people inspired the law all that Alec lobbied for it hates all could be oh cowinner sued and it’s covering is asked there but this is really really creepy and scary Krugman banged on absolutely bang on and if you’re and am now Rick in person the USA I eat and you don’t know who Alec are you should be ashamed of yourself you don’t know Google and keep you going to you know how horrible Alec is right moving on number four the billion prices project from MIT they didn’t think that the CPI was covering enough bits and bobs in the economy to MIT they can handle – they were going there I think that I don’t know the got the whole billion in yet that the in the end Dell have the whole billion prices that they can chat follow in America huge idea annual inflation CPI in blue billion prices project in red that come down from 4% annual inflation billion prices project now down to 2% inflation have to go back to Shadow stats and John Williams if you want big numbers overly EU Ren Ollie Wren tells Spain stick to deficit targets European Union’s top economic official said the recent sharp rise in Spanish borrowing costs was the result of perceptions Madrid was seeking to wiggle out of the tough deficit shrinking targets caused on the Spanish government to push through more austerity measured measures called on the Spanish government to push through more austerity measures and another paragraph from that article in the financial times despite signs Spain was headed for one of Europe’s deeper recession is Mr Wren said Madrid would only regain market confidence by sticking to the rule mandated deficit targets which require the Spanish government to cut their deficit to 3 to cut it down to 3% of economic output by next year last year’s deficit was 8.5 meaning Madrid had to make some of the deepest cuts in any Eurozone country outside Greece down to 3% think number six Forex live Spanish government deficit rises in the first two months of the year Jen you were raped and fed you were really Spain ran a deficit of 1.9% of GDP in the first two months of the year I’m no maths genius but that works out at about 12% for the year if that level and sustain for the rest of the year and that’s rather above forecast Spain is in deep old to go to do all United Kingdom Jeff Randall arm I don’t like Jeff Randall and get them some why from reading I when I read is probably paragraphs the rash and not a good way of writing nothing to comes from a bit of the grotty mind anyway doesn’t mean that he hasn’t can’t had numbers and present them well enough bar not present that the numbers are good right maybe the leg ochres left in the obeah good morning everyone let’s start the week with a gentle quiz by the end of this Parliament will United Kingdom’s net national debt be a higher be lower see about the same OD eliminated altogether all stoppage peeping over at Osborne’s note Clegg but whether calculator the answer is of course a which was higher in just four years time our state debt United Kingdom will be 40% yes 40% higher than it is today 40% higher than it is today by 2000 15/16 thanks in part to the power of compound interest the government will oh on our behalf more than £1.4 trillion compared with just over 1 trillion now the extra £400 billion is equal to 1 years income tax VAT Corporation tax and National Insurance combined austerity howls it working for you that’s finish with this I know are been a bit longer let’s finish off this this will add of his lighter or not it’s a letter to the editor of the Singapore times Singapore has decreed maids must be given at least one day off per week this did not go down well with funky” on the roads in the grieve letter I read with disbelief what I I in disbelief that the government has decided that all maids will get weekly day off on the extra ones more likely to actually maybe doglike that but it doesn’t matter as go to the bottom because he’s thinking about them the maids of course know the maids is thinking about the maids here and the impact on the maids the problem is not whether the maids will use their days off to run away rather the exponential increase in days off and I love that exponential in their your these really bright people use exponential just where it’s necessary the exponential increase in days off may lead them to squander their hard earned pay instead of saving it to help finance a better life for when they returned home and the higher risk of prominent promiscuity extra marital affairs and on in

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  • NascentMind

    Even I know Krugman is wrong. ( so why is he so wrong? What has Keen said to upset the people who Know? )

    Krugman Assumes?

    Keen points out.

    You spell assume as ” Don’t make an ASS out of U and ME.”

  • CSArichardo

    I do not follow you ? 

    As the song goes “Slow down you move too fast”. 

    Not sure about your bank story point of why debt and leverage are or are not relevant.

  • Bigcollapso

    Before I defend Krugman, I need to say that I think that he is insane.
    But I think that he is correct in what he says. But the “Disassociated, Ponzi, High Risk thing that he is talking about applies to the entire monetary system. It has not collapsed nor been attached to reality for an more than a generation. We therefore go from bubble to bubble creating more and more fantasy. That is, until we don’t.

  • Windcutter

    Here’s a nicely written short paper summarising the debt-deflation we are experiencing.

    http://integratedeconomics.com/attachments/File/Time_to_Re-Think_How_Economics_has_Failed_America_012111.pdf One killer paragraph is at the start of page 12.”A dollar in capital can result in eight or ten dollars loans to families”Misguided bullshit. Stuff more debt onto the families and we’re all going to have a party!

  • snedmeister1

    There IS a perspective, where Krugman is correct…

    Generally speaking, he would be wrong from our ( private sector ) perspective ie, the users and creators of horizontal money, and this is
    important for me to say before I say my next bit…. But….

    If we take the view of the Prevailing monetary theory, ( ie no vertical money ) we see that Gov’t A, does borrow what Person B saves….
    That without the Vertical Deficit spending or QE inputs into the system, the only source of Gov’t funding is from the savings of B ( private sector )….

    MMR/MMT would not agree with this view, but assuming Krugman is a smart cookie ( which he must be ), I think we can
    safely say, that he has at least considered  the MMR/MMT perspective, and he must also be fully aware that a bank can create
    funds from nowhere to lend person B for a mortgage, for example….

    My only conclusion is that he is referring to the Prevailing Monetary Theory ( Flat world Syndrome ) perspective regarding
    Gov’t spending…???

    I haven’t read any more on the discussion between the two, so I may have lost some context in my thinking, but maybe
    this is what he is referring to…??? ( Indirectly, so he can seem clever to the larger crowd…??? )

    I’m going to try and read up a bit now, and hopefully get a bit more insight…
    ( I’m hoping he doesn’t actually say he is referring to two members of the public in his example, because then I would be really puzzled
    by his thinking…???!!! )

    • http://overthepeak.com/wordpress/ Mystic

       Oh….he is talking about two members of the public alright~!

      (spell checker says `alright` is wrong…is that right~?)

      • snedmeister1

        Yes, he seems to be, doesn’t he…??!!
        Odd isn’t it…???

        Would he knowingly leave himself open to ridicule in such a way, or does he think he knows something Keene doesn’t…???
        I can’t believe he hasn’t considered Endogenous money..???

        P.S. 
        All right – Alright…..???? You spell it any way you like, it’s your show..!!! :)

        • http://overthepeak.com/wordpress/ Mystic

           His life has been IS-LM and so he feels he has to stick with it.

        • http://overthepeak.com/wordpress/ Mystic
          • Paul–Sod

            Mystic,
            Why don’t you get in on that comments section there and give ‘em hell?  Work OTP into your comments so we can get more of these money dudes on OTP.  I’m pretty sure Krugman reads all those comments.  His ego demands it.  If not personally, I’m sure he has some graduate student type lackeys that he has assigned this task and who draw out the best comments for his perusal.  Give ‘em hell!  It might be a chance for you to put a Nobel Prize firmly in his place~?!

            • http://overthepeak.com/wordpress/ Mystic

               I am not inspired to do so.
              Today’s video may give you a hint why.

          • snedmeister1

            Oh dear…

            But at least there is an easy target for the Keeno’s to fire at..???

            I have stopped looking for ways in which he could be right now….
            I think he’s searching, and trying to wriggle a bit…!!??

            I wonder what Paul Krugman, thinks is meant by the term, “lender of last resort”…???
            And how many of us take a loan, ask for the cash, then buy something, without that person depositing it..???
            Better still, how many borrow money, and then withdraw the cash…???

            These ideas are a bit outdated, I think, old school textbook no doubt..??

            This could all play out very nicely…!!! :)

            • http://overthepeak.com/wordpress/ Mystic

               That is it though…..PK uses ancient books for reference……Or should I say, his models are based on books written nearer the great depression than this great recession.
              He is being a classic hide bound, nothing gonna change on my watch, dinosaur. 

              • Paul

                True.  His models are not applicable to today’s economic system.  The fact that he won a Nobel prize has elevated his status amongst the lemmings.  The Nobel in Economics is a joke, bestowed by a Swedish Bank;  not a peer-reviewed evaluation.  Keen has an uphill struggle.  What is your take on Stiglitz in this debate? 

                • http://overthepeak.com/wordpress/ Mystic

                   I am not aware that Stiglitz has commented….and would very surprised if he has.

                  • Paul

                    Do you see Stiglitz in the Krugman camp or the Keen camp, or some other camp?
                    I always felt Stiglitz seemed like a straight-shooter, with practical ideas.  What do you think of him?

                    • http://overthepeak.com/wordpress/ Mystic

                       I don’t mind lefties for being lefties, but when you are a leftie first and economist second, it makes it hard to judge your economics.

                      It was about three weeks ago that I listened to a lot of the Stig and, in the end, I had to turn him off. 

                      I think he would be in the Krugman camp.