Monday, March 17, 2014

I Steve Keen

From Closing the door on the GFC by Steve Keen, at Business Spectator:
... central banks hope they can “fine tune” the economy using the interest rate alone, and with US unemployment levels now within cooee of the level at which Ben Bernanke said monetary policy could return to “normal”, the Federal Reserve may start to increase rates in late 2014.

This belief that getting the interest rate right is all that it takes to keep the economy out of recession is the product of economic models, not of economic experience.

...when you look at the data, there isn’t much of a relationship between the interest rate and recessions...

But in fact there is a much clearer relationship when you include one factor that these models ignore: the level of private debt...

...look not at interest rates alone, but interest payments as a percentage of GDP...


Oh yeah, one more thing:

I thought it was a typo.

1 comment:

Oilfield Trash said...


You stated you wanted to do some Macro so here is Keen's endogenous money primer. IMO some of the best new Macro theory out there.‎