Presentations text content in Debunking Economics
Slide1
Debunking Economics
Why is the world in economic chaos right now?
Because the experts on the economy are experts on a flawed model
Which ignores instability and assumes equilibrium
Which ignores money and debt and assumes away bubbles
Which treats government as “a business” when it is more “a bank”
The real expert—ignored before the crisis—was Hyman Minsky
“
capitalism is inherently flawed, being prone to booms, crises and depressions.
This instability, in my view, is due to characteristics the financial system must possess
if it is to be consistent with full-blown capitalism.
Such a financial system
will be capable of both
generating signals that induce an accelerating desire to invest
and of
financing that accelerating investment
.” (Minsky
1969)
Inherent flaws? Three
undeniable dynamic facts…
Slide2Capitalism’s Inherent Financial Instability
The
employment rate
will rise if
economic growth
exceeds the sum of
population growth
and
growth in
labor
productivity
;
The
wages share of output
will rise if
wage
demands
exceed
growth
in
labor
productivity
;
and
The
private debt to GDP ratio
will rise if the
rate of growth of private debt
exceeds the
rate
of economic growth
.
First two facts can’t be ignored
Neoclassical economists deny relevance of 3
rd
fact:
“Think of it this way: when debt is rising, it’s not the economy as a whole borrowing more money.
It is, rather, a case of less patient people—people who for whatever reason want to spend sooner rather than later—borrowing from more patient people.” (Krugman 2012,
End this Depression Now
!
)
“Absent
implausibly large differences in marginal spending propensities among the groups …
pure redistributions
should have
no significant macroeconomic effects
.” (
Bernanke 2000
)
By ignoring private debt, they saw “The Great Moderation”…
Slide3The “Great Moderation”
“the past two decades has seen not only significant improvements in economic growth and productivity but also a marked reduction in economic volatility… dubbed
‘the Great Moderation’.” (Bernanke 2004)
Inflation & Unemployment Falling
Unemployment
Deflation
Slide4Capitalism’s Inherent Financial Instability
When you leave the fact about debt out, this is what you see…
When you include it, this is what you see
Rising private debt caused the boom before the crisis & the crisis too…
Slide5Capitalism’s Inherent Financial Instability
Rising inequality & rising private debt are directly related
Slide6In the real world as well as in the model…
Slide7Japan’s fate awaits unless we reform economics…
Slide8Slide9Slide10
Debunking Economics
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