Courtesy of Mish.
Inquiring minds are watching Australian economist Steve Keen correctly debunk Paul Krugman in an interview with Lauren Lyster on Capital Account. Unfortunately, Keen’s solution to the debt crisis leaves a lot to be desired.
Position of Keen
“Debt does not just matter at zero-bound conditions, debt matters all the time. The change in debt adds to demand. … It could take 15 years of deleveraging before it’s all over. That’s why Krugman is wrong. You can’t just cure this with deficit spending, you have to abolish the private debt as well.”
So far so good. However, I strongly disagree with Keen’s proposal of a “private debt-jubilee” which he defines a quantitative easing for the public.
Essentially Keen wants to print money and give it to the public on the provision they must pay down debt first.
Debt Jubilee Nonsense
Suppose everyone is given a “debt-jubilee”. What is to stop consumers from immediately going back into insane levels of debt? More regulation? Government controlled printing presses? Academic formulas from all-knowing economists?
Please! Stop already.
Inflation Genie
I am in general agreement with Keen on numerous things.
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