18 thoughts on “Monday Message Board

  1. Is this the end of the Keynes tradition?

    If you add up the external debt of 18 capitalist economies, you get over 50 trillion.

    But there has only been 5 trillion days since the Big Bang.

    So this gives you an idea of how much rediculous stimulus has been piled into countering the contradictions of capitalism – the keynesian medicine.

    Even if we saved $10 every day since the “Big Bang”, even this would not be enough to pay of the external debts now owing. Of course this is just utter economic madness.

    Internal debt is extra.

    A useful critique of Keynesian precepts is at:


  2. That is a simple case of the money being in the wrong hands, Chris. It is interesting that there has been 50 trillion dollars available to lend in the first place.

  3. Not to be sanguine about it (because I’m not) but there are all sorts of ways to get rid of that debt aside from paying it back.

    First up, a bunch of it cancels out – it’s not as if it’s all one-way.

    Secondly, if the debt cannot be paid, countries either default – no biggie in the medium or long term, or the debt can be inflated away (same difference really). Neither of these are great outcomes but they are far better than austerity and also belie the idea that everyone everywhere is in penury forever.

    I agree with the general point that debt is an attempt to defray the problem of compound growth at the same time that wages (and therefore tax receipts) are being squeezed, and that sooner or later (preferably sooner) we’ll have to move to a more sustainable macroeconomy.

  4. @Dan

    You would hope that a debt of A to B, is nominally cancelled by the reverse – a debt from B to A.

    But where is the explicit case either; that this is so, or that the existance of each side of the debt, does not raise nominal asset values within each individual economy.

    If I borrow 100,000; I then gain fictitous capacity to bid up the price of what I want to secure. The fact that the debt may be counterposed (not cancelled) through some other lending I may have made, does not seem a relevant point.

    More reasoning or explanation is needed.

  5. External debt is very large, but it’s not something we can’t deal with if we’re determined. Australia could renouce all claims to foreign assets and a huge chunk of eternal debt would thus simply disappear overnight. Then we could devote say 10% of GDP a year getting rid of what Australia owes for however many years it takes until its all gone. Then we could pay attention to domestic matters such as state external debt. The external debt held by Australian states is massive. Queenslanders own assets in South Australia, South Australians own assets in Tasmania… it’s a huge mess. But, with time and effort it could be eliminated. Serparate state currencies may be of benefit in achieving this. Then finally we could eliminate debt entirely. Now some libertarian types may complain that it infringes on their freedom if they can’t lend someone a few dollars, but are any of us really free so long as someone somewhere owes someone anything at all? I don’t think so. Some people may disagree, but I’ve decided to ignore them and keep eating paint chips.

  6. @Chris Warren

    The essay (?) you placed a link to in your opening post was published in 1987. Perhaps it could do with some editing in light of recent events?

  7. I suspect we could break out a few more old tomes and go at them with the ole red ink. But I think our Marxists friends, regardless of either my or your own politics, have a lot more ammo to shoot with now than in the eighties in regards to Keynesian economics.

  8. Greg Smith resigns from executive director role of Goldman Sachs with open letter to NY Times damning the culture of the executive management. Quite damning indeed, but unfortunately it’s just more conformation of what most of us already knew. Morally bankrupt psychopaths running these institutions and many are Obama’s crony mates.

  9. Chris, while I’m sure we both agree on the pernicious effects of allowing a person on one side of an arbitary dotted line own something on the other side of said line, I don’t understand why you refer to external debt as Keynesian. If you read Keynes 1940 book, How to Pay for the War, you will see he was actually against the racking up of debt. Perhaps you should refer to the external debt as being not at all Keynesian.

  10. Yes Keynes paddled in different directions according to circumstances. In fact Keynes can be seen as anti-capitalist and he was aware that each time we secure to-day’s equilibrium by increased investment we are aggravating the difficulty of securing equilibrium to-morrow. But this precept did not descend into Samuelson nor any of our rather silly modern modellers and Treasury boffins.

    So even if his “general theory” is general because it covers non-equilibrium situation – even Keynes still hankers for equilibrium. So Keynesian theory can be seen as based on non-equilibrium but also based on equilibrium. Its a mess.

    In his chapter on units he seems satisfied with a labour theory of measurement, but then in his chapter on costs he introduces ‘user cost’ which cannot be measured in actual labour.

    Keynes, in the original, is a bit of a mystery – no real consistent theory – just opportunist quips that can be picked and reinterpreted as needs be? Even his supposed logical fallacy in Marxism is nothing but a set of opportunistic quips.

    External debt (and government deficits) certainly pre-existed Keynes, so there is a basis for not identifying external debt as keynesian, hower the recourse to it in modern times seems highly correlated with economists waving Keynesian banners and pointing to levers by which they pretend they can prevent boom and bust (eg Samuelson) and GFC’s.

  11. Well, since unlike some historical figures, Keynes wrote down what he thought, it might be best to stick to calling that Keynesian to avoid confusion. And if it’s something Keynes changed his mind on it could be called something Keynes changed his mind on.

  12. @Ronald Brak

    To pursue that, you may need to rewrite a lot of university textbooks and Government briefs.

    The confusion, by Keynes, may have been deliberate – to admit the truth but then detour around it.

  13. Not even Keynes could sort out what Keynes thought. Here is his effort w.r.t. entrepreneurs profit [General Theory ch 6].

    It is necessary, therefore, that I should at once remind the reader that in my Treatise on Money I defined income in a special sense. The peculiarity in my former definition related to that part of aggregate income which accrues to the entrepreneurs, since I took neither the profit (whether gross or net) actually realised from their current operations nor the profit which they expected when they decided to undertake their current operations, but in some sense (not, as I now think, sufficiently defined if we allow for the possibility of changes in the scale of output) a normal or equilibrium profit; with the result that on this definition saving exceeded investment by the amount of the excess of normal profit over the actual profit. I am afraid that this use of terms has caused considerable confusion, especially in the case of the correlative use of saving; since conclusions (relating, in particular, to the excess of saving over investment), which were only valid if the terms employed were interpreted in my special sense, have been frequently adopted in popular discussion as though the terms were being employed in their more familiar sense. For this reason, and also because I no longer require my former terms to express my ideas accurately, I have decided to discard them — with much regret for the confusion which they have caused.

    It seems to me that Keynes was a Ptolemaic economist.

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