Written by John Lounsbury
Steve Keen has a new lecture which shows a strict accounting demonstration of the role of credit in the economy. This provides an explanation that what Larry Summers calls “secular stagnation“–which blames the limp economy on slower population growth and technical change–is actually “credit stagnation” due to too high a level of private debt.
This presentation explains the logic behind credit being an essential component of aggregate demand and income; the empirical consequences–including stagnation in the “Walking Dead of Debt” countries and coming crises in the “Future Zombies” countries; and a complex systems approach to economic modeling which transcends “the Lucas Critique“.
Keen reviews the history of “secular stagnation” and includes a satirical segment describing a fictional particle physics analogy to macroeconomics.
Note: The “Marc” mentioned several times in the lecture is Marc Lavoie with whom Keen has had a multi-year discussion (with disagreements, civil in nature) on the development of the Keen research on dynamic, non-equilibrium economics.
Source: YouTube