Keen: Instability in Financial Markets

Steve Keen’s talk at INET is now up on the web (hat tip BT). His talk is billed as involving a discussion of “Instability in Financial Markets”. It also comes over as a primer on the economic approach of economist Hyman Minsky. In the session, Steve argues that one cannot model Minsky using a New Keynesian or traditional neoclassical approach because of the reliance of these modelling approaches on the economic equilibrium assumption. Keen sees this assumption as the major flaw that cannot be remedied using standard modelling approaches.

The talk runs just over 22 minutes and ends with two innovative solutions to this and future debt crises.

1 Comment
  1. David Lazarus says

    Yes that was a great video. I particularly like the overall cap on leverage on a national basis. If we had total debt cap of 100% of GDP it would stop housing bubbles, it would stop governments over extending themselves and also crowding out the private sector. It might enable savers to have sensible rates of return and with lower debt levels overall it would require greater savings to actually buy homes and that will also lower risks of bank solvency. The only problem is that households need to de-lever substantially as do the banks themselves, especially in the UK. Though the addition of capital controls will stop spillover effects.

    Both Keen and Bezemer together have the framework of a sustainable financial system. Only problem will be that the banks will not like it because they would become substantially smaller and directors bonuses would be minimal.

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More