tag:blogger.com,1999:blog-2098432983500045934.post2760098972664395810..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: Sometimes I need an exampleThe Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2098432983500045934.post-67233524050025030012016-04-09T07:02:46.008-04:002016-04-09T07:02:46.008-04:00"... in our demand-led economies.""... in our demand-led economies."<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-62716185914194611292016-04-09T06:56:09.175-04:002016-04-09T06:56:09.175-04:00In response to JW Mason's objection
"Keen...In response to JW Mason's objection<br />"<b>Keen repeatedly says that “aggregate demand is income plus change in debt.” There are many variations on this through his writing, he evidently regards it as a central contribution. But what does it mean?</b>"<br /><br />In <a href="http://www.privatedebtproject.org/view-articles.php?Are-We-Facing-a-Global-Lost-Decade-14" rel="nofollow">Are We Facing a Global “Lost Decade?"</a> Steve Keen writes:<br />"<b>a slowdown in the rate of growth of credit will cause a reduction in aggregate demand and income, and therefore lower growth in our demand-led economies.</b>"<br /><br />I don't see how this can be denied. And it seems to me that disputing the meaning of "aggregate demand" as Mason does is really quite irrelevant. And then Noah links to that shit and a meme is born. And forty years from now it'll be embedded it mainstream thought. And forty years after that. no one will understand why there is suddenly another financial crisis. "Suddenly", because no one was paying attention to debt.<br /><br />What Keen is talking about is: what debt does to the economy. What Mason is talking about is a distraction. Anyway, I've been keeping an eye open. Everybody uses the term "aggregate demand" as Keen uses it, to mean total demand. Nobody uses it <i>only</i> as shorthand for an argument about causality.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-75582907416039121982016-03-29T20:41:53.363-04:002016-03-29T20:41:53.363-04:00Hi nanute. Yes, I think it is right to say "i...Hi nanute. Yes, I think it is right to say "if debt levels are lower, it would tend to increase aggregate demand." That's what I'm thinking when I argue for lower debt levels.<br /><br />But comparing two economies -- one with a low level of debt and one with a high level of debt -- is a much simpler discussion than looking at one economy <b>while it changes</b> from a high level to a low level. So I tend to be cautious, often.<br /><br />In particular, the change from a high level to a low level requires either a reduction of new borrowing or an increase in debt service payments, either of which is liable to cause a drop in consumer spending, not an increase. I think there are ways around this problem, but no one else seems to see them.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-11470913753498501802016-03-29T11:40:51.253-04:002016-03-29T11:40:51.253-04:00Art, you said, ...change in debt" in aggregat...Art, you said, ...change in debt" in aggregate demand somehow throws a monkey wrench into the "insufficient aggregate demand" argument. I can't see it from here.<br />I guess it would depend on if the change in debt is positive (less debt), vs. negative, (more debt.) No? It would seem plausible to assume that if debt levels are lower, it would tend to increase aggregate demand. More discretionary income not being used for debt service would have a better chance of an increase in consumer spending, vs. the alternative of more debt service payment required for increases in debt levels. I'm talking about private debt here, not public debt. Thoughts?nanutehttps://www.blogger.com/profile/04526158764171117978noreply@blogger.com