Professor Steve Keen argues that mainstream neoclassical economics is fundamentally flawed, leading to economic catastrophes and a failure to address critical issues like financial instability and climate change. He advocates for a more realistic, dynamic, and accounting-based approach to economics.
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you're saying you're assuming
everybody's an idiot. And I said, well,
did you see the financial crisis coming?
He said, no. I said, well, on that
basis, on your own definition, you're an idiot.
idiot.
>> France, Netherlands, Germany, they would
be better off having their own currency.
>> I I think we should, the euro is always
a mistake. If you eliminated all
government debt by having the Treasury,
the central bank buy all the outstanding
debt tomorrow, then the bond market
would disappear and the banks would
scream like crazy saying, "Is us more
bonds, sell some of those bonds back to
us." You don't want banks to be creating
money to drive up asset prices. You want
them to be creating money to create
assets. People are sensing a system
breakdown. And in that world, things
like gold, assets of that nature do well
when there's social breakdown. And the
thing is, you should be trying to
address the social breakdown rather than
celebrating the rising price of gold.
Very, very rarely do humans solve a
problem preemptively. They experience
the problem and then try to survive the
aftermath. And that's what I expect. [Music]
[Music] [Applause]
[Applause] [Music]
Hello everyone. And my name is Paul
and welcome back to Reinvent Money.
Today I have an amazing opportunity to
sit in person with Professor Steve Keen.
Hi Steve.
>> Good to be here.
>> It's what seven years since last time we
had a chat.
>> Yeah. Yeah. We um had also an online
chat like 5 years ago but seven years
ago when we were in Thailand. Yeah.
>> Um yeah. But you live in Holland so
therefore record this in the studio.
>> It's always much better of course than
than online. Um you are um at the moment
a visiting professor also in Amsterdam
at the University of Amsterdam.
>> Yep. Teaching of course they're in the
mast's program. Only a small amount of
teaching but quite a lot of fun with
cars homes is one of the very good
academics here.
>> Nice. And we're going to talk about
economics of course. Uh we're going to
talk about some of your books. I have
one here. I got a bunch of them at home.
Um this is the new economics. Um but of
the first one I ever read was debunking
economics of course. Um let's let's
start um there first and and um I'd like
to give you the opportunity again to
debunk mainstream uh neocclassical
economics and then we're going to talk
about our financial system which is like
the main topic of of uh the reinvent
money podcast where we talk about money
and power.
>> Um I'd like to get your most recent
insights on on um what's going wrong at
the moment in our financial system and
how we can alleviate that or how we can
solve some of our challenges. And then
we're talking afterwards we're going to
talk a little bit about the bigger
picture like challenges that humanity
faces at the moment such as nuclear war
possibly or climate change some of these
things that you're also very concerned
about uh because in in our little talk
in the car over to our studio I uh
you're a bit gloomy um let's see if we
can get get some positive spirits out of
you today.
>> We have to work hard but give it a try.
>> Yeah. So let's first talk about um
economics. uh what um do you believe is
is is the main thing that uh most
mainstream economics e economists get wrong?
wrong?
>> Well, their entire framework is wrong. I
mean I I've taken like the the term we
use to describe the dominant school of
thought and economics these days is
neocclassical and that actually was the
previous school was called the classical
school. These guys are the
neocclassicals. Um but I call them toll
make because fundamentally they've got a
a model of the economy which is as acc
less accurate about the and less correct
about the structure of the economy than
tomake astronomy was about the structure
of the universe. Uh but one if if you
have a like if you have the the toll
situation for astronomy we know that
there are no crystalline spheres. Uh we
know that the heavenly bodies are not
perfect. We know the Earth is not the
center of the universe, but for 1500
years, that's what educated people
believe was the case. And with that
paradigm, they did a damn good job of
enabling themselves to predict where the
planets were going to be, you know, in
in the vast in the indefinite future.
Um, so they had a model which fitted the
data and was completely wrong. And I
think economics is the similar sort of
situation. Uh it it all starts from a
theory of microeconomics and there
there's it looks convincing the
intersecting demand and supply curves
you know everything happens where the
two lines cross that sort of thing and
it's got a superficial appeal to it it's
it's an easy meme for people to have the
way that they organize how they think
about the economy in general but when
you look at the foundations what lies
behind the demand curve what lies behind
the supply curve it's complete rubbish.
the uh the the theory itself is
internally inconsistent and people don't
realize this unless you read the very
deep literature which of course I've
done. So people think oh you know makes
sense you it's more expensive when you
increase output supply's got to increase
in price and uh demand's going to be get
larger as price falls so there'll be an
equilibrium between the two etc etc but
when you take a look at can the theory
itself explain why the curves are there
why they intersect where they do and why
the intersection is is stable and
equilibrium it fails on all those fronts
and uh it it what it means is it's a
it's a convincing model which is
completely wrong about the structure of
the economy and then you take guidance
from that model and apply it to the
economy and my god you have economic
catastrophes. Who would ever have
thought it? So it I'll give the probably
the simplest one and I'm actually
writing some pieces about it right now.
Part of the theory says that the cost of
production rises because what they call
diminishing marginal productivity. So
what's supposed to happen is you have a
as you add more and more workers to the
same number of machines ultimately you
reach a ideal situation where you get
the ideal ratio of workers to machines
but if you want more output you've got
to go past that point so you have too
many workers for the machines they each
had a bit more output but prod
productivity falls over time that is a
mythical conception of how a factory
operates what you find is factories are
designed by engineers uh to work be most
efficient at maximum scale of output.
Factories deliberately have excess
capacity for two reasons. One, you're in
a growing economy. So there'd be if you
made a factory which was a new new
factory which is 100% utilized on day
one, it's too small. So you've got to
have spare capacity with so therefore
there's you you do not have you're not
at the point where you've got too many
workers per machines. What you have
instead of lines, you have idle which
you'll turn on when the production
expands enough to justify adding those
machines. But you're not you you're not
going to reach the point where you have
too many workers per machine. And that's
if you read it in economics textbook,
that's what they teach you. What that
means is firms have constant or falling
variable cost per unit. They make a
markup on top of that to set their
price. There is no way that what they
call marginal cost ever equals price.
And therefore, what you get is is firms
don't uh compete with homogeneous
products. Another assumption of the
theory. So like you know you and I drove
here in a car. Okay. Now, what's a car?
Okay. A car is a three or four-wheel uh
uh enclosed personal motorized serious
durable transportation device. Do you
own one of those? No. What What's your
car? It's I've forgotten the brand.
>> A Volvo.
>> A Volvo. Okay. But you could have a
Ferrari or a Lamborghini or a Prada or
whatever else. Um products are
differentiated. So a huge part of the
the story that people get locked up in
is imagining there's such a thing as the
supply curve for the car industry if
that's so what's the equilibrium price
for a car. It's a silly bloody question.
That's what it is. So all these things
mean we have a mental framework which is
completely wrong about how production
actually occurs and then we try to
manage production and that happens the
same story. We use exactly the same
model to model banking and then we try
to control the monetary system. So if
you got if you got a wrong model, you're
going to make stuff ups all the time.
And that's what I find is just
commonplace. And the pity is it's such a
superficially appealing theory to tell
people in fact the foundations are wrong
means they've got to change their entire
mindset. And most people aren't capable
of doing that.
>> But that's the most amazing thing that
the one thing economists don't seem to
understand is money itself.
>> Is it a bit like a fish in a water that
doesn't water? Then basically, you know,
a fish doesn't know what water is. And
it it goes right back to the early
neocclassical. So we date the
neocclassical school from the 1870s. But
if you go back, you can the basic idea
of the neocclassical school as opposed
to the classical. It's the neocclassical
things. Value is subjective. Okay? Value
is a utility. So it's the pleasure that
I get from drinking this that determines
how much I
>> Which makes total sense in my view,
>> which makes sense. It sounds appealing.
Okay. Um but if then the price is
subjective or objective that comes down
to the issue does the price reflects my
satisfaction from consuming it. But it
also according to the theory reflects
the fall in satisfaction for the person
who sold it to me. Okay. Their utility
falls as they give me their stuff. Mine
rises and that is
the factory producers not getting a
decline in utility because I've bought
this product off them. Okay. they they
have they're they're quite happy to see
the product go out the door. So it's the
foundation ends up being as the
classical sku used to say things
exchange at their cost of production.
Okay, profit is still feasible in that
situation but it's the cost of
production that sets prices not utility.
So the the the standard idea that
Marshall teaches and he says that
analogy most people have probably heard
that say whether supply or demand sets
price and quantity or which one sets you
know does supply or demand set set
quantity and price. Marshall said you
might as well ask which blade of a
scissors cuts a piece of paper the up or
the under. But in fact when you when you
do the analysis and look at how firms
actually operate the the result is the
cost of production sets the price. Firms
put a markup on their cost of production
to make a profit but it's the cost of
production that sets price. Demand sets
quantity. Okay. They are independent in
that sense. So utility determines how
many you sell. Okay. But not the price
at which it's sold. That's
>> as I can I can confirm that if I decide
what the price of my product should be,
I have to take into account what it cost
me to produce it. And you and you in put
a markup on you. Your markup is, you
know, what are my competitors doing?
What markup can is my product better or
worse than theirs? Uh uh what's
differentiates me from my rivals? That's
real world competition and that's
interesting and it's fascinating and
that's what we should be studying.
Instead with this myth of homogeneous
products, people uh the little
mathematical exercises which only work
if people factories run by idiots who
you know don't have enough machines
handy and let things get crowded. If you
read a textbook explanation of a of a
factory, for example, Manure, which is
one of the textbooks that I savage in my
my writing, manure it talks about uh
Hungry Helen's Biscuit Factory. And of
course, Hungry Helen, you know that
company well, don't you? You've shoed
there many, many times. It's the figment
of his imagination. And in that figment
of his imagination, he has people lining
up for machines and bumping into each
other. It's it's a keystone cops version
of what factories actually do. You might
start that way, but you don't stay in
business if you remain that shambolic.
So the model they have is a shambolic
system for producers who don't know what
they're doing, don't have enough
machines. It's crazy. Yeah. But that
story, people fall for it and they don't
realize they've got themselves locked
into a set of ridiculous assumptions
that are just not about the real world.
So that's our starting point. With an
economics like that, everything we do
guided by mansion economic theory is
going to be a mistake. and and some u
economists um argued or or criticized
your book saying look maybe they're
oversimplifying um reality but perhaps
you're oversimplifying
their models because
>> no I mean again we were talking about
money and I got a bit distracted there
but if you go back to see where the
ideas for money came from it's from Jean
Baptiste say who was a a neo neo sort of
proton neocclassical friend and rival of
Ricardo's and he he Ricardo was saying
cost of production sets price. Uh um um
Smith say was saying utility sets demand
and price but as part of his argument he
said that uh producers don't want money
producers want goods. So a producer
though they have the air of wanting
money for their goods do in fact want
merchandise for their merchandise.
That's the argument he made. In other
words, capitalists don't wish to
accumulate money. Now call me crazy but
I think they do want to accumulate
money. So what you got with say is not a
model of capitalism. It's a model of
petty commodity exchange where there's
no accumulation of wealth over time and
no desire to accumulate wealth. That's
not capitalism. Okay. So it's an
unrealistic vision of a capitalist
system. And as part of that unrealism
say claimed that people don't want to
accumulate money and therefore they
treat money as what they call a veil
over ba. So if you remove the monetary
system, you see capitalism more clearly.
But to me, removing the monetary system
from capitalism is a bit like taking the
wings off a bird and then saying, "Let's
see if the bird can fly." I'm sorry. It
needs the wings to fly. If you don't
have the wings as part of your model of
a bird, you're never going to understand
flight. And if you don't have money as
part of your model of capitalism, you're
never going to understand capitalism. So
I've as well as critiquing mainstream
economics I've also developed the
software package to enable me to model
the monetary system properly. I call
>> named after the one economist that did understand
understand
>> Minsky. We've actually changed the name
recently because it's it's also got a
data analysis side to it which is we're
targeting the business intelligence
market with a graphical tool for
analyzing multi-dimensional data far
more flexible and far more powerful than
pivot tables. So we're calling it Ravvel
now, but it still includes all that
modeling component. And what it does,
and this might sound crazy to anybody
who's worked in business, it implements
accounting. It simply has a double entry
bookkeeping tool we call a godly table
after win godly. And when you put the uh
when you have a like a theory of a
monetary system, neocclassical
economists talk about supply and demand.
We show assets, liabilities, and equity.
And I can actually say if that's what
the structure of the of the marketing
the monetary system is then your
predictions are right. But this is
actually the structure or your
predictions are wrong.
>> Yeah. I think one one clear
demonstration of the fact that most
economists don't understand u money is
that most of the people in their
profession didn't see the 2008 crisis
from happening.
>> Totally blind. Yeah.
>> You predicted it. I did. You're famous
for that. Um but also Minsky was able
through his
>> if if I had read Minsky I wouldn't have
predicted the crisis cuz while
>> Tell me more about Minsky.
>> Yeah. So Minsky um his parents were um
Menchevik communists. They escaped
Russia to get away from um Stalin. I'm
not sure whether they met in Chicago or
they left came to Chicago together. But
he was raised in the middle of the Great
Depression by two parents who were
communists. Okay. uh but not not the
Leninist style who said you got to go to
socialism. The Mencheviks believed you
had to go through a capitalist phase
first of all.
>> The more the moderates socialism but
Marx's ideas were that Markx believe you
had to have capitalism first before we
could reach socialism. Lenon has said
okay we can just leap over the
capitalist stage and go from a feudal
structure. We saw what a disaster that
was. So the Meniks were more realistic.
They would have been targeted by the
Leninist if they'd stayed. So they move
to move to America and then the great
depression occurs and the the and that
would be you imagine how much that would
have been discussed in his household. So
Minsk's uh question that he asked
himself when he became an economist is
can it a great depression happen again
and if it can happen why hasn't it
happened between the the end of World
War II and the 1980s when he was doing
his most prolific writing and he said to
explain that we have to have a model
that can generate a great depression as
one of the possible states of a
capitalist economy. Unless your model
can generate that it's not a model of
capitalism. Well, if you look at what
the neocclassicals do with their
so-called dynamic stoastic general
equilibrium models, they don't have
money or banks or debt inside there. So,
the things that give you a financial
crisis are not even part of their model.
So, Bernani spoke to the American
Congress when he was governor of the of
the Federal Reserve. gave his
presentation to Congress in I think it
was it was July I think of 2007 and he
gave them predictions about what a great
year 2008 was going to be 3 weeks before
the financial crisis began
>> and he's supposed to be a student of of
the great depression
>> but you you read I mean this this is
where people people have this
superficial understanding that's why I
go back and I read all the originals
people say you know have you read yes I
have read okay uh but he wrote had a
book called Essays on the Great
Depression and that was his like his
calling card sort of applying for the
job as being governor because he said
I'm the expert on the great depression.
Well, as expert on the Great Depression,
you'd think you'd read some of the other
people. So, Hyman Minsky and Charles
Kindleberger are two people a lot of
people in finance would know the work of
Charles Kindleberger.
>> This is pretty the entire consideration
that Bernani gives to Kindleberger and
Minsky in his book. He says Minsky and
Charles Kindleberger have argued for the
innate instability of a capitalist
economy, but in order to do so, they
have deviated from the assumption of
rationality. I read Kindleberger two
years ago in in my summer break and I
loved it so much, but um I cannot
understand why someone like Berneni
wouldn't would not have read that book
because he he he probably flicked
through it. Okay. Okay. But what this is
this is a sentence literally that's a
sentence. Kindleberger and Minsky have
predicted instability but had to deviate
from the assumption of rational economic
behavior. There's a footnote and the
footnote then says I don't doubt the
importance of irrationality in ordinary
life but it seems to me the best
research uh approach is to push the
rationality postulate as far as it will
go. That's the end of his discussion of
Minsky. Okay. So he doesn't even read
interpretations of the great depression
that don't fit in a neocclassical
framework. So from a neocclassical point
of view, what could have caused the
great depression? Answer, the Federal
Reserve. And he criticized the Federal
Reserve for reducing the money supply by
not boosting the money multiplier and
not converting gold inflows into
reserves in 1928 and 29.
>> Yeah. But he missed bank credit completely.
completely.
>> Missed bank credit completely. Totally
missed it. And then of course that's
what I look at. So as soon as because
Minsky focuses upon the role of private
debt in both causing booms and crashes,
the first thing I looked at uh I I got
asked to get involved in law law cases
and expert witnesses back in 2005. So
I'd done my PhD on modeling Minsky's
financial instability hypothesis back in
the '90s. Finished it. Then I wrote
debunking economics. I got involved in
battles with neocclassicals over some of
the claims I made in that book. So I
sort of let the debt ball
drop for a while. I hadn't looked at
levels of private debt for it since the
early 90s. And then I took a look at the
ratio of private debt to GDP in
Australia. And I'd said I'd written a
line saying the ratio of private debt to
GDP has been growing exponentially
recently. Now, as an expert, you're not
allowed to make hyperbolic statements.
So, I better go check and see. It won't
quite be exponential. I'll need to
modify the word a bit. Then I plotted it
and the relationship between a pure
exponential curve from 1965 I think
through to 2005 when I was writing the
book fitted to a correlation coefficient
of.99 something you know good enough I
said and I said bloody hell that ratio
is rising exponentially I don't have to
change the word wonder what's happening
in America I downloaded the flow of
funds data the same thing not quite as
extreme but from 1945 through to 2005
the same basic story I I think the
correlation was 0.92 with a pure
exponential of the ratio not the level
of debt but the ratio of debt to GDP and
I thought this ratio can't continue
rising at some point it will have to
turn around credit will therefore
probably go negative so rather than
credit adding to aggregate demand it'll
be subtracting from aggregate demand
when that happens we'll have a crisis
>> and is that a so-called Minsky moment
>> that's the Minsky moment so I I that's
the like the verbal analysis that I did
and then when you look at the actual
data you see that the the level the rate
of change of private debt in America
from 1945 until 2005 was always
positive. So credit was always adding to
aggregate demand and income over that
period of time. And then it went from
being equivalent to 15% of GDP. So plus
15% additional demand coming from credit
in 2005 and by 2009 it was minus 5%.
That's a 20% of GDP turnaround to demand
coming from credit. So partly what I've
had to do to make all these cases I I
made the claim that credit adds to
aggregate demand. Now neocclassicals say
that's not true because if Paul then
Steve some money Paul can spend less and
Steve can spend more and the aggregate
demand cancels out. That's the loanable
funds model where banks don't originate
money and debt. Banks enable savers to
interact with borrowers and they might
charge a fee for the service but that's
all the banks really do according to the
textbook. That is, can I use a technical
term here? Yeah, >> that's
>> that's
>> Yeah, you can use your French.
>> That's Okay. What the banks
do, banks create debt and they create
money at the same time. And when you
have that happening, the increase in
assets on one side, which is the the
bank's assets of loans increase, they
increase their liabilities at the same
time. And the person who borrowed that
money didn't borrow for the sheer
pleasure of being in debt. They borrowed
to spend. So they borrow the money, they
spend it. Therefore, that increase in
credit becomes both part of aggregate
expenditure by the borrower and
aggregate income by the person they
spend that borrowed money on. And that's
I've done the mathematics to prove that
now. So, it's something I didn't know
back in 2005, but I can now prove that
mathematically. And what that means, it
justifies the explanation that a high
level of credit will increase demand.
And when credit goes negative, it puts
you into a not just a recession, but
potentially a depression.
>> Yeah. and Minsky um he had in his in his
work he defined three phases uh how how
you get to that eventual Minsky moment
you have hedge phase the speculative
phase and then the Ponzi phase
>> yeah I don't particularly use that a
great deal I mean that's more the sort
of thing you do with if you do a multi-
aent model for example you might have
you know you might have three sorts of
agents hedge agent speculative agent
Ponzi agent that's quite feasible I just
work at the aggregate level but that's
the basic point he made is that people's expectation
expectation
change over a business cycle. Now again,
one fantasy thing that neocclassicals
argue in favor of and it's built into
their macro models which is why they
don't see these things coming is what
they call rational expectations. Now you
you're you're rational, aren't you?
>> Uh yeah, but I have a factors around me. So
So
>> but your expect if you so says you have
rational expect. Well, yeah, I'm
rational. Yeah, my expectation would be
rational. When you look at how they
define rational expectations, it
actually translates as capacity to
predict the future accurately using
economic models. That's what they know
rational. Nobody's rational. That's
garbage. It's that is actually
definition of capacity for accurate
prophecy. They say when they say you're
rational, aren't you? They mean you
think you're Nostradamus or Jesus, don't
you? No, maybe Muhammad. Okay, it's it's
a distortion of what the word rational
actually means. And then if you go back
and take a look where the idea came from
and again this is the sort of reading
that I do all the time. It came out of a
paper by a colleague called John Muth
when he was trying to get rid of what's
called the cobweb cycle explanation for
cycles in the price. It's called the hog
cycle in America ups and downs of
agricultural prices and he wanted to get
rid of the argument that the market was
unstable. So he said all the farmers are
rational. That means they have models of
the economy in their head that are the
same as my economic models. Therefore
they can predict the future. So this
move up and down the demand curve.
They're not doing this crazy cycling.
But as part of it, he said his
justification was and this is where what
I've got I've just realized only
recently. They will make an assumption
to hang on to the conclusion of the
theory. They'll make an assumption that
contradicts the fundamental theory. So
for example, their theory of pricing is
things are based on utility. Uh to have
utility something to have a price as
well as having utility something to have
a price it has to be scarce. So if
water's, you know, cheap, you can drink
water from there's no price. Even though
there's great utility, you pay a price
for this because it's produced and
there's utility. So it's scarce. Okay?
So scarcity means it's going to have a
price. Now, if something is scarce,
you're only going to buy it until such
time as the marginal utility of buying
it equals the marginal cost from buying
it. Okay? So if you we're talking in
terms of information, for example,
information's obviously got utility.
Okay? It's also scarce. Therefore, the
rational agent should only buy
information until such time as the
marginal utility of what they gained
from the information equals the marginal
cost of paying. So, from a neocclassical
point of view, information knowledge
should be bounded. We should be
boundedly rational because it's simply
stupid to pay the infinite amount of
money you'd need to pay to have perfect
information. What does Muth say instead?
He says it was at one point information
is scarce and then he should have
carried on with my stuff. He is
information is scarce and the economic
system generally does not waste it.
Therefore I assume information is either
free which is crazy or people pay an
infinite price for information which is
crazy. So there's the basis of the
definition of rationality that they use
is an irrational thing. Either
information is free, which is nonsense,
or people buy more information than they
need, which is also nonsense. So they
end up contradicting their own theory at
the foundations. And that means that
people who learn this stuff at a
superficial level. Yeah, I've got
rational expectations. You're being
conned because when you work down to the
bottom, the person who reads that
conclusion literally contradicts the
theory you think you believe in. So
that's why I've said it's just got to be
thrown away. It's it's as useful for
describing a capitalist economy as the
tomake model of the universe was for you
know plotting flights to Mars.
>> And could you argue that at the moment
information is becoming more abundant
and and freer for example um
>> oh you you also get for free is disinformation.
disinformation.
>> That's true.
>> Okay. What's the effort involved is you
know it is crazy to have that
assumption. So what they used rational
expectations for was to eliminate the
issues they should actually be
considering. Whereas Minsky back to his
idea about uh expectations you know the
the hedge speculative and Ponzi phase
most people say that have different
types of agents and so you're going to
get an increase in Ponzi over time. What
I do is say there's a business cycle and
and this is also in Minsky is working.
So he said that the way you analyze a
capitalist economy is to take it at a
point in historical time when there's
been a crisis in the recent past, but
you've actually recovered from the
crisis. So people expectations are still
scarred by a disaster in the recent
past, but you're now at the stage where
the economy is starting to recuperate.
So in that situation, firms and banks
are going to be unwilling to take on too
much debt. So the only projects they're
going to consider are those which are
conservatively funded conservative
estimations. But because the economy's
recovered all those projects are going
to succeed. So what then happens is
people look at the results and think gee
if we'd had a high level of leverage you
would have made more money. So we
actually let's take on some more debt
now. Because you take on more debt you
finance more investment. You get a
self-fulfilling prophecy which propels
you upwards. But then what happens as
you go towards the upward stages? You're
causing a boom. Workers get wage rises.
You're borrowing money from the banks.
You got to pay interest to them as well.
Your expectations don't quite work out.
You then find at the peak of the the
bubble, you're not making the profits
you expected. You cut back on
investment. You go down through a cycle again.
again.
>> It's a bit like bad times create good
people. Good people create good times.
Good times create that classic car. What
was the cartoon? You you've probably
seen it with a bloke saying this one
this this product is a good buy and
saying bye goodbye good bye bye bye bye
bye bye bye and then and then this is
crazy uh uh what I've forgotten where he
gets out of it but he says I'm going to
see you later or uh uh uh sell I say
this this stock will really excel
>> cartoon yeah
>> sell sell boom boom and bus cycle so
Minsky was correct about that being the
nature of capitalism but he tried the
nature of of of humanity. Maybe even
>> capitalism amplifies it. Yeah. Because
you don't make the same personal gains
out of other social systems. So
capitalism will amplify that instability
and we get cycles and with that that
vision he anticipated booms and slumps
and then I
>> capitalism amplifies it or is it more
like that the monetary system as we've
built it amplifies this? It's both
>> because like capitalism on a more of an
Austrian school basis with with hard
money perhaps would have less um
dramatic peaks and and
>> yeah you got to invent hard money in the
first place and this is the other thing
I mean our historical models of money
are also false just where money
originated. So but you would you know
the Austrian um you you're still going
to get a a boom out of the system. the
the Austrian idea pretty much argues
banking system doesn't create money.
Okay. Now, if you didn't have the
banking system creating money, then yes,
you would have smaller bubbles. So, the
the fact that money is created by the
banking system is what partially causes
those feedbacks because you borrow
money, you get extra debt, but you've
got the money to spend, so they get more
turnover. So, there's feedbacks between
the system.
>> So, in that sense, Minsky and Austrians
are on the same page that an excess of
bank credits would lead to a boom and
eventually bust.
>> Yeah. But the Austrians think it can be
controlled by the rate of interest. And
and what the basic point that that
Minsky makes is that when you expect a
capital gain of 20 and 30%. Interest
rates of four and five and six and
whatever percentage you like aren't
going to change your mind all that much.
So what the Austrians leave out, not all
of them, the neocclassicals are much
worse on this front. The neocclassicals
leave out uncertainty. They assume you
can predict the future. Okay. when you
have live in an uncertain world then the
possibility of gain that you expect from
you know capital gain can be far greater
than the rate of interest you have to
pay for the money. So to try to control
the level of economic activity by
modifying the interest rate which is
what central banks do is which means you
see this so fast because you'd have to
put the interest rate up enormous
amounts to get rid of those expectations
of huge capital gain. So it tends not to
be it's not so much a control mechanism,
it's a battering ram. If you want to
smash somebody in the face with a high
interest rate, then you can you can
eventually crack a bubble, but you
certainly can't fine-tune the system.
But the Austrians, I think, would like
the market to define what the interest
rates should be. Uh and on the other
hand, we have the neocclassicals who
believe central banks should um set
interest rates, at least short-term
interest rates. What does Minsky say
about who should um decide on interest rates?
rates?
>> Well, the interest rates are pretty much
controlled by the by the central bank in
terms of bond rates. Um Minsky is
actually similar to Smith on this front.
He and Smith actually argued for
controls on the rate of interest because
he's Smith's argument there was that if
you you should set a maximum rate of
interest slightly above uh like a
whether the market rate might be 8%, you
set a maximum of 10. said anybody's
willing to pay more than 10 is most
likely what he called a proflegate. Okay.
Okay.
I've forgotten the other team he term
me. This is Smith. But the idea being
that you don't want to give money to
people who are willing to pay projectors
and profit. He called them projectors.
Ponzi schemers fundamentally we'd call
them today. So only Ponzi scheme is
going to be willing to pay higher than a
controlled rate of interest. So the the
rate of interest certainly in our modern
system is set by the central bank. And
once the central bank sets the rate for
short-term interest and and bonds, that
tends to be the reference point for the
remainder of the system. So it's not a
market system in that sense. And if you
if you thought the the the thought that
the price system can control the
instability of the capacity to create
money is just nonsense. It's far more
volatile than that. And you get feedback
effects that are left out of the
equilibrium thinking that goes with that
mindset. So, uh, Minsky would argue even
if you try to have market interest rates
set, there's no way that would stop the
instability of the capacity to create
money that comes out of the current
system. But if the argument is that um,
neocclassical models are basically too
simple to fully grasp reality because
reality is very um, complex. Couldn't
that same argument then be made about
your um model as well? Because it's is
is society, the economy, the human mind
not too complex to to put into this is
where technology has enabled us to model
complex systems far more accurately than
was possible in the 19th century. Uh and
economists have excluded themselves from
those developments but their obsession
upon equilibrium modeling. So if you the
the the real starting point for the
capacity to model the uh complex systems
properly was the development of the
computer and you can see particularly J
forester playing a major role in
developing what's called system dynamics
but the you can now model something as
complicated as the weather for example
in a set of computer programs which
where we we will people attack weather
forecasts these days but they're so much
more accurate than they were 50 years
ago. Okay. So that you can actually have
a simulation of a complex system and
then get guidance from that. Now
economists because they're stuck in this
equilibrium fetish that they still have
haven't used any of those technologies.
So like the dominant model that central
banks use and treasuries are called
dynamic stoastic general equilibrium
models. There's nothing general about
equilibrium. Okay. the system the a real
complex system is always out of equilibrium.
equilibrium.
>> I've yet to find an equilibrium. I I
cannot I tried to find it if you were
there. Yeah, I know.
>> It'll last 30 seconds maybe at most if
you're lucky and probably wrong about it
anyway. Okay. So, that's the the fact we
can model complex systems is something
which economics could have adopted if
they didn't have the fetish about
believing the system is an equilibrium.
because of that the the number of people
who actually use genuine dynamic methods
in economics is mainly my friends. Okay.
No neocclassical that I know of and I
know I've read a huge amount of their work.
work.
>> And you're a postcian, right? If we if
we could label them called post, it's
just because the I mean in some ways
Kane's was a reaction to the unreality
of the economics of his day. So the fact
it's called postyn is because he was
like a a center for those critical
discussions in the 20s and 30s. Uh but
what then happened was the
neocclassicals reinterpreted him using
the work of John Hicks and what's called
the ISLM model as a as a volian. So that
happened and the people around canes
were horrified. People like Joan
Robinson and Nikki Caldor and Kleski and
so on. So they said oh that's not Canes
we're the real ones. We're post
Canesanes. were after you guys.
>> Why not neo neoconsians? Like you have
the neocclassicals and why not the neoangens?
neoangens?
>> They were
the canes was a he was a funny a funny
kettle of fishes. Brilliant writer,
brilliant thinker, but hadn't quite
escaped from his Marshallian
foundations. But he was surrounded by
people who rejected Marshall. People
like Pierro Schaffer, Joan Robinson,
Caldor and so on. So the postcanesian
tradition was more of a deviation from
the mainstream than Kanes himself was.
And what happened with the with Kanes
was he sort of attracted the mainstream
for a while and they deviated away back
to their original thoughts through John
Hicks. So the neocanesians,
neocclassicals, they're all the same
bunch. Uh they basically
still accept
a vrazian vision of how the economy
operates a general equilibrium vision
whereas the postcians are into
effectively general dynamics non-equilibrium
non-equilibrium
complex systems. And that's and you can
model much more effectively with those
tools now than you could with the
neocclassical tools.
>> I can imagine that I mean it's a fact
that we are much better now able to
forecast the weather than let's say 50
years ago. But the economy is even more
complex of course than than the weather
system like if Trump sends out a a tweet
he can crash stock markets. How can you
model that?
>> You can't model all those details.
You're going to always be having
generalizations and so on. But if you're
leaving out the major factors that cause
instability, how can you model
instability? Now, the neocclassicals
make a series of decisions that say we
don't have to include the banking system
in our model, and we don't have to
include that banks create money in our modeling.
modeling.
>> Yeah, that's an oversimplification. Of course,
course,
>> it's it's a travesty. There's there
what's called simplifying assumptions.
And and this is what neocclassical
that's just a simplifying assumption. I
I had a funny interaction with a
neocclassical, a young neocclassical at
a conference in Brisbane, the Western
Economic Association conference a couple
of decades ago and he was reacting to my
explanation of Minsk's financial
instability hypothesis. I'd seen him
present earlier so I knew if he came to
my session it could be fun. And he's
sitting in the front row and he finally
can't contain himself and he finally
says, "But but but but you're saying
you're assuming everybody's an idiot."
And I said, 'Well, did you see the
financial crisis coming?' He said, 'N
no.' I said, 'Well, on that basis, on
your own definition, you're an idiot.
Why shouldn't I model the economy of
consisting of people like you? I was
actually I realized how rude I was
being. So, he didn't say it quite as
loudly as I should have said, but he
chased me out of the room afterwards and
finally said, "We've got to make some
simplifying assumptions." And I said,
"Mate, you've got to learn the
difference between a simplifying
assumption and a fantasy." But is it
also maybe your Achilles heel then that
sometimes you can come across as rude
and perhaps a bit arrogant towards like
the mainstream economist.
>> The second the second chapter of my
first book debunking economics is no
more Mr. Nice Guy because of my
predecessors in the non-orthodox stream
had been trying to persuade
neocclassical economists and they're
getting rejected and ridiculed and so
on. I thought screw this being polite
hasn't worked so I'm going to be rude.
My actual nature is quite polite as you
know from
>> I know personally but you put me on the
wrong side and I can be as
>> unleash the beast here.
>> Unleash the beast. Yeah. And um so I I
get it if you follow Minsk's logic and
his models that it's possible to and it
was possible to predict the credit
crisis just looking at credit growth and
all of that. But uh here we are in 2025
and it seems now more focuses on public
debt and and not so much private debt
because I was
>> which is completely wrong
>> because this morning I was checking um
US private debt to GDP ratios. They
actually went down since last time we
talked. So um
>> but it's still above the government debt
ratio. But to what extent do we have now
a private debt problem still or uh do we
have a public debt problem?
>> It's a private debt problem. It's always
private debt. I mean and this is again
this is why you've got to get the
accounting right. That's why I invented
a ravel with Minsky as it used to be
called because it lets you do the double
entry bookkeeping and see what the
actual dynamics are. And when you do
that you realize the public sector debt
is not what we really call debt. Okay,
public se if debts, you know, I sign a
contract with you. Uh, you give me, you
put an entry in my bank account. I then
have an obligation to you. I've got to
service that debt. I can't print notes
and hand them to you and pay my debt
back that way. I can't get my wife to
bail me out. I get into difficulties,
etc., etc. That's private debt. Public
debt when you look at how it's created
uh is the the initial if a government
spends more than it takes back in
taxation then what it does it puts more
money into private bank accounts than it
takes out of private bank accounts.
Okay, that's that's a deficit means
you're putting more money in people's
private bank accounts. How is that
balanced? According to the
neocclassicals that's got to come out of
another private bank account, which is
not the case. They the the the the
balancing item for the government
spending more than it takes back in
taxation are the reserve accounts that
the private banks have at the central
bank. So if the government spends more
than it takes back in taxation the
amount of funds not money in the reserve
accounts at the central bank go up then
the government has to sell bonds it's
required to by law. It's not a
>> it's not needed per se
>> not a technical requirement but it's a
legal requirement. So when you sell
those bonds, how are they how are they
sold? They're sold at auctions run by
the central bank where you've got to
have an account reserve account to buy
them. So the funds that enable you to
buy those bonds are created by the
deficit itself. There's all sorts of
time issues that turn up and timing and
so on. But if you look at the what
actually happens when the bonds are sold
in the initial auctions, not the
secondary market, but the initial
auctions, the amount of money in reserve
accounts goes down. the amount of money
in the bond in the treasury account goes
up. Okay. So the reserves uh when the
reserves are used to buy the bonds it
changes the asset that backs backs the
money that was created by the deficit.
It doesn't actually take any money away.
So in that sense it's the the sale of
the reserves or the use of the reserves
to buy the buy the bonds is using funds
that were created by the deficit or the
government. in the first instance. The
only the the central bank can swap
reserves for bonds. That's open market
operations do that. But to actually
create reserves in the first instance,
the only process that does that is the
government running a deficit.
>> So what you get out of that is
government debt is not a problem. It's
and if it was a problem, there's a
simple solution. The central bank can
buy all the bonds.
>> Yeah. And this is basic modern monetary theory.
theory.
>> Yeah. in that I've got my criticisms of
modern monetary theory that's I've been
trying to be polite about them for a
long time but they decided to be rude to
me so I'm being rude back
>> what's your what's your main criticism
>> over there actually had a shoot on
international trade I think they're
crazy like the trade argument is
completely independent of their monetary
argument and wrong and I've given up on
I've been polite for a long time and not
taken that particular issue on but they
decided to provoke me so I'm just
earning the favor
>> so you're at war with another school for now
now
>> unfortunately I don't want to be Because
it it's to me this is a sign of humans
weakness. It's a generally like you were
saying earlier about human nature rather
than necessarily a capitalist system.
Humans form paradigms ways of thinking
about the world and they will do it in
such a way that often comes from a gurus
like Marxist. Markx comes out with a
labor theory of value and all the
Marxists are pro that because it argues
for capitalism collapsing etc etc. Um
they then they swallow everything else
Markx comes out with as well. Okay. Uh
they they don't say, "Oh, that's a good
idea. That's not particularly good,
Carl." They send it top the whole damn
thing. And that's what happens with
modern monetary theory and the argument
on trade as well. Brilliant argument
about the government money system. Silly
argument about trade. They adopt them both
both
>> because we're tribal in the end, right?
We choose a tribe at some point and then
we accept everything from that tribe. We
see that also with in politics, of
course. people like Trump and then they
forgive about always sins and and they
like everything does
>> but if you look at for example let's
let's focus on US debt and French debt
let's start with French debt there since
France is not a sovereign
money printer they uh with they are
actually constrained right public debt
in France is a problem
>> it's a funny it is a problem but the
funny thing is I've just worked with
Durk Hence recently who's knows his
stuff on the structure of the European
and central bank. And it turns out that
I thought the ECB was actually involved
in the physical arrangements for bond
sales. So that the ECB was needed to get
approval, for example, for the French
government to run a deficit. Turns out
that it's not the the central bank, the
ECB handles the what what they call the
tier 2 uh assets and liabilities. It
handles those, but the actual deficit is
still financed through the central
banks. So the French central bank uh can
handles the auction for French bonds.
All the transfers of money from the
French treasury go through the central
bank in the first instance. So it is
possible for the French to run as much
as a deficit as they like. It's only the
the ECB can sort of spam. ECB is like a
headmaster. Okay. Can come and say
you're a very naughty boy. We can't stop
you. Okay. So it's the headmastery
behavior of the ECB that restricts what
the French could do. They could decide
to issue those bonds anyway.
>> But when the French government issues
bonds, they're uh at first bought by
private entities like banks, right? It's
not like
>> but this the primary auction. Same story
as for the American system and the
primary auction there are plenty of
reserves available to enable those
purchase will happen. It's what happens
on the secondary market becomes a struggle.
struggle.
>> Yeah. And that's exactly when also in
Holland we have the Dutch central bank
just operating on that market itself
without supervision in that sense by so
is it is an issue for the French for the
well the master treaty is a huge
limitation but it's like a headmaster
saying you've got to do this not
actually restricting your capacity to
create debt in the first instance
>> but in in order to thrive as a country
you believe you have to be monetary
sovereign so So France, Netherlands,
Germany, they would be better off having
their own currency.
>> I I think we should. The euro was always
a mistake. Okay. Um because it meant you
can't use foreign, you can't change the
value of your currency to accommodate
different rates of inflation in
different parts of the European Union.
So Germany has always been ever since
the VHimar days, low inflation. Italy
always higher inflation. Before the Euro
came along, if you had German car makers
competing with Italian car makers, then
you know as you know Mercedes got
cheaper and the Lamborghinis got more
expensive because of because of
inflation differences in the two
countries, you could have a devaluation
at the LERA and restore competitiveness.
So you could still have viable
competition between German car
manufacturers and Italian car
manufacturers without the euro there.
That's gone. Okay. So what happens over
time is the higher inflation in Italy,
Italian cars become less competitive.
More and more Italians are buying German
cars rather than Italian cars. You
therefore get a trade imbalance between
the two and that means euro actually
flow euro created by the Italian
government end up in German bank
accounts. Okay. So that's the weak. If
you're running a trade deficit within
the euro, then you're you're
transferring your money creation to the
country you're buying the imports from,
the exporting country comes out ahead.
And that and that's the analysis. I'm
doing a bit of that work with Durk right
now. So that's the danger that
it means that you the sorts of things
that an exchange rate could prevent
happen inside the Euro region and it
therefore rather than it's supposed to
be more control but it actually ends up
being less control because you've taken
away one of the mechanisms that used to
exist for correcting imbalances.
>> Yeah. So it's been a bad deal for uh for
Italians also just if you look at
happiness in the in these days you see
that happiness Italians were
>> generally happier before the
introduction of the euro then of course it's
it's
>> I mean what what what the what I'd love
to see having done is the one of the
hassles about different currencies you
you got to go and convert your money you
know that particularly was bad 20 or 30
years ago
>> modern technology that's not a problem
at all
>> but equally the central bank could say
okay we're what what the European
central bank could have done is say
Okay, we're going to continue having LRA
for Italians and marks for Germans, but
we'll do a conversion between the
currencies when you travel at absolutely
no cost to you. Okay, you get exactly
the exchange rate between the two.
There's no loss of money. That would
have been feasible and that would have
then enabled to have the level of uh you
know mobility and crossber cooperation
that the euro European central the
European Union allows. could have had
that without people being screwed by the
>> conversion of currencies.
>> That's that's a good solution. But you
say um Germans, they were used to low
inflation, Italians to high inflation.
Would you then argue that a money system
is eventually also a cultural
manifestation that the Germans they like
their hard money and Italians perhaps
were better off with their more elastic money?
money?
>> Yeah. And like the and and like the
elasticity of money is one important
characteristic that makes it capacity
you part of where the capacity for
technological development in capitalism
has come from. Uh but yeah without if
you if you're going to have those
different national characteristics you
have to have different national monetary
systems and by making one monetary
system you scrambled the whole damn thing.
thing.
>> One size fits none.
>> Yeah exactly.
>> I talked the other day to Yanis Fufakis
I think is one of your friends.
>> Good mate. Yeah, we we might differ on
some technical details, but we're all
wise friends.
>> Yeah. So, I I talked to him online. I'd
love to meet him one day in person, but
>> he's a good bloke.
>> He's been trying to sort of correct uh
the situation and and he's trying for
for in a way for a political union or
for at least for a a um to reform
European democracy. Um but I also got a
sense that right now he's sort of he's
giving up on that in a way and he says
look it's probably better off if if
countries like Germany and the
Netherlands that would just leave the
Euro zone. So he's it seems like he's
giving up on on reforming the euro and
>> yeah I mean we we we've been trying to
reform something for 20 or 30 years and
it still exists becomes a bit
frustrating after a while. So you think
rather than saying like the poor
countries should leave the rich
countries should leave. Um,
>> so they should do that. You think they
should do that like uh soon or how?
>> Well, I mean, one of the reasons that
the Netherlands is so developed compared
to um Italy and Greece and so on is
because it's running a huge trade
surplus and then it uses that trade
surplus in the place of what would be
the restricted government deficit it's
allowed to have. So, the trade
imbalances are a huge part of what
causes that trouble. um you you'd lose
that advantage. If you left the euro,
then whatever currency the Dutch would
have would increase in value, increase
in price, and you'd lose the cost
advantage you've got. But it would just,
you know, you've got to unscramble the
euro egg somehow. And it might be easier
to get the rich to leave than telling
the poor to leave.
>> Yeah, you can try to unscramble the egg
or just throw away the omelette, right?
I think we're stuck with a few analogies
that are going crazy here, but it is is
a huge problem and all that I mean to to
to not only give away the capacity to
use foreign exchange variations to
stabilize different cultures but to also
put restrictions on what the public
sector could do as well. It was a doubly
bad deal.
>> Yeah. But I feel like if we keep on uh
continuing this project um pain will
only grow. So, uh, breaking it up right
now would be painful for everyone
involved, but probably breaking up in in
10 years would be even more painful. So, it's
it's
>> the longer we delay, um, this this
inevitable outcome, the the more
difficult it will become. And
>> but the trouble is, I mean, the current political
political
I mean, for example, the European
Parliament is the only parliament where
politicians can't draft laws. You know,
the whole thing is that it was an anti-democratic
anti-democratic
proposal. So the European I've forgotten
which which part of the European
Parliament the the bureaucrats draft the
laws and the politicians can discuss it.
>> Yeah. The commission the commission
drafts the law.
>> The commission drafts the laws. So it's
not even a genuine democracy in the
sense that the politicians aren't
allowed to even draft the bills. They
can modify them but they can't draft
them. All this stuff is it shows how anti-democratic
anti-democratic
the original ideas were. And if the
concepts had been correct, then you
could have got away with it. But the
concepts are wrong. So it's actually
stuffed you up even more. and and should
uh let's say Germany or the Netherlands
a smaller country go at it themselves
like introduce a national currency or
should certain countries form a block
and do like a
>> you can probably I mean a block is
feasible because you have to be
geographically close to each other to to
do that and economically similar as well.
well.
>> Yeah. So in that sense the Netherlands
and what Germany used to be I think
Germany's declined pretty badly over the
last 10 to 15 years but that would be
possible. Denmark and and the and the
Netherlands make sense. Uh you know you
you can do blocks to some extent. Um but
the main thing would be enable
yourselves to have adjustments for your
your currency valuations. And the
easiest way to do it was say we're going
to pull out create our own currency and
have a the zerocost conversion for
anybody converting from euros to you
know guilders I presume and guild is the
other direction make the cost zero. Yeah
>> and that enables you to have the larger
uh economic cooperation area without
having a single currency. I know you're
a big proponent of central bank digital
currencies. Um, of course, if if
implemented in the right way, in the US,
Trump is very much against the whole
concept and he's focusing more stable
coins. We'll talk about the US later,
but uh in in Europe, they're they're
moving forward with introducing the
digital euro, the CBDC within a few years.
years.
>> Um, do you think it makes sense in
Europe? My personal view is that given
the fact that the euro is unsustainable,
it doesn't really matter much and they
should just digital project instead of
building an extra layer on top of it.
But what's your view on on that?
>> Well, I mean the only thing that the I
like about digital central bank
currencies is that it's an alternative
payment system to the private banks. And
that's one reason that the central banks
haven't gone ahead with it. They're
worried about undermining the
profitability of the private banking
system, which is obviously is a serious
worry. But the private banking system
has done so badly. It's finance bubbles
like the subprime bubble in the states.
Uh level of private debts been
dramatically increased and nobody's
benefit, you know, none of the
recipients of the debts benefit. Uh so
there's all these arguments saying we
should have a payment system that goes
straight to individuals. And if you have
a digital currency, then the payments
can go at the they don't have to go
through the private banks, they could go
through the central bank. So that's one
feasible reason that I like the idea. Um
but I'm also concerned about, you know,
the viability of our payment system, the
private banking system in the context of
global warming and climate change. And I
think at some point, I know I've lost
half your viewers that way, but I'll put
up with it anyway. um the the dangers
are that our payment system could
collapse the private system. So I want
to have something which is could survive
back up.
>> Yeah. And that's one reason I you know
that's but I think at the same time
some of the economists who put forward
the idea of central bank digital
currencies were in favor of abolishing
cash because they wanted to try to use
it to modify people's consumption
>> like a rob
I don't want people who don't even
understand money in the first place to
be abolishing cash. The rogoff doesn't
understand money. >> Sorry,
>> Sorry,
>> Rogoff. Can it rogue off? Because in his
book, the curse of cash, he is also in
favor of abolishing cash.
>> Yeah, it's nonsense because I mean, you
know, the if if neocclassical economists
actually understood the monetary system,
then I could handle some of their
proposals, but they're completely wrong
about it and they want to change it at
the same time. They have no idea of what
the impact would be of those changes.
>> Yeah. So, let's talk about climate
change uh later in the conversation, but
I first want to I get it. In Europe, you
say basically most countries should just
either themselves or through an alliance
settle their own currencies. And in that
scenario, central bank digital
currencies could add something to uh to
a new national system in order to
constrain banks and uh and credit
growth. But in the US then uh there's
also a lot of people that worry about
the US debt being now 37 trillion and
120% of GDP
>> which is about 30% less than the private
debt level.
>> Yeah. So private debt's 150% of GDP and
it was 165%.
>> So in your view, private debt is still
the big problem.
>> Then that's that's the limitation. The
public debt is a record of how much how
many bonds the government's issued over
time. Okay. It's it's not that it's
borrowed the money. It actually creates
the money. And this is one reason that I
the neocclassical obsession with the
private debt is mistaken because their
obsession only makes sense if banks are intermediaries
intermediaries
of loanable funds. And I can model that
in my Ravvel software and it takes me 30
seconds to go from their vision that in
which the uh the banks are just
intermediaries who don't actually borrow
don't actually lend and therefore of
course in that situation they don't buy
government bonds either. So in that
situation when you model the world
they've got yes a government deficit
leads to a catastrophe guaranteed. But
when you say the banks actually lend
they also buy government bonds the
catastrophe disappears. So the private
private debt is the dangerous one
because you you can't repay a private
bank with money you print. Okay.
>> I've tried but this doesn't work.
>> Doesn't work. They tend to they check
the notes too carefully. Bastards. Um
whereas with the government doing it, I
guess the if if the government wanted to
eliminate all all its worries with
private government debt, the central
bank could buy the lot tomorrow.
This this is the thing you your wife
can't buy your private debt and get you
out of having to service it. But if a
central bank buys all the outstanding
bonds and all it to do all it's got to
do is say $40 trillion worth of bonds.
Okay, we're going to put 40 trillion in
your reserve accounts and you're going
to transfer the bonds to us. We're going
to put 40 trillion as the assets we've
got. Problem solved. And then because
the central bank is actually owned by
the Treasury, one of two things happens.
Either the Treasury stops paying
interest on those bonds or the central
bank gets the interest and remits it
back to the Treasury.
>> But so if you're worried about
government debt, let the central bank quite a lot. What's
quite a lot. What's >> it's a bit like what what Japan has been
>> it's a bit like what what Japan has been doing for decades, of course.
doing for decades, of course. >> Yeah. 250% of GDP. Uh it it's got other
>> Yeah. 250% of GDP. Uh it it's got other issues, a demographic decline and so on,
issues, a demographic decline and so on, but government debts is not a problem
but government debts is not a problem and they've shown it by getting to two
and they've shown it by getting to two and a half times GDP. America's freaking
and a half times GDP. America's freaking out about one. It was about 40% of GDP
out about one. It was about 40% of GDP when the financial crisis hit as they
when the financial crisis hit as they ignored private debt which was 170% of
ignored private debt which was 170% of GDP. So all this stuff I if to just you
GDP. So all this stuff I if to just you know think think clearly about it. If if
know think think clearly about it. If if somebody you own the Treasury owns a
somebody you own the Treasury owns a central bank could buy all your debt
central bank could buy all your debt tomorrow and therefore you owe your debt
tomorrow and therefore you owe your debt to somebody you you your debt is owned
to somebody you you your debt is owned by somebody you own.
by somebody you own. >> Yeah.
>> Yeah. >> Have you got a problem?
>> Have you got a problem? >> So ultimately then the Fed will probably
>> So ultimately then the Fed will probably uh over the next few years or so buy up
uh over the next few years or so buy up a lot more of of the the US government
a lot more of of the the US government debt than uh especially if BRICS nations
debt than uh especially if BRICS nations also for geopolitical
also for geopolitical reasons start selling more then
reasons start selling more then >> Yeah. And the Fed will just absorb that.
>> Yeah. And the Fed will just absorb that. >> Yeah. The I mean this this is why they
>> Yeah. The I mean this this is why they say don't fight the Fed because when
say don't fight the Fed because when again this is where you've got to do the
again this is where you've got to do the double entry bookkeeping to understand
double entry bookkeeping to understand this but because all the private banks
this but because all the private banks have their reserve accounts at the
have their reserve accounts at the central bank. Um and because the central
central bank. Um and because the central bank itself doesn't have to maintain
bank itself doesn't have to maintain positive equity. The central bank can
positive equity. The central bank can lose money. Doesn't matter because it's
lose money. Doesn't matter because it's yeah part of the government system. It
yeah part of the government system. It can be replenished by the treasury.
can be replenished by the treasury. they can literally buy all the
they can literally buy all the outstanding government debt tomorrow and
outstanding government debt tomorrow and that in some ways if I was central bank
that in some ways if I was central bank governor I'd do that okay just to say
governor I'd do that okay just to say okay now what are you going to complain
okay now what are you going to complain about and the answer would they say
about and the answer would they say we're going to complain about the fact
we're going to complain about the fact that you're not issuing bonds because
that you're not issuing bonds because you've taken all the bonds away from the
you've taken all the bonds away from the bond market and that's our our biggest
bond market and that's our our biggest playground and you've emptied the
playground and you've emptied the playground we want our we want our bonds
playground we want our we want our bonds back daddy so I
back daddy so I >> right because the differential system is
>> right because the differential system is using the bonds as cornerstone so they
using the bonds as cornerstone so they they need the bonds as they need them.
they need the bonds as they need them. So if you actually if you eliminated all
So if you actually if you eliminated all government debt by having the treasury
government debt by having the treasury the central bank buy all the outstanding
the central bank buy all the outstanding debt tomorrow then the bond market would
debt tomorrow then the bond market would disappear and the banks would scream
disappear and the banks would scream like crazy saying issue us more bonds
like crazy saying issue us more bonds sell some of those bonds back to us.
sell some of those bonds back to us. Yeah. So it's ironic if if you think
Yeah. So it's ironic if if you think about it in a serious sense making that
about it in a serious sense making that a particular analogy it's not a problem
a particular analogy it's not a problem if if part of the government could buy
if if part of the government could buy all the government bonds and like when
all the government bonds and like when you look at the level of government debt
you look at the level of government debt in America as well about half of it is
in America as well about half of it is owned by government agencies anyway.
owned by government agencies anyway. >> Yeah. So the actual actual amount like
>> Yeah. So the actual actual amount like the the recorded level of government
the the recorded level of government debt is about 100% of GDP. About 20%
debt is about 100% of GDP. About 20% owned by the Fed and another 20 or 30%
owned by the Fed and another 20 or 30% by the government departments. So you
by the government departments. So you say well who's you actually own the debt
say well who's you actually own the debt to that's not you. It falls by a factor.
to that's not you. It falls by a factor. >> It used to be much more of course but
>> It used to be much more of course but countries like like China, Russia have
countries like like China, Russia have already um reduced their le their
already um reduced their le their relative positions a lot over the past
relative positions a lot over the past few years. So what's the main reason why
few years. So what's the main reason why the Fed is not buying up more bonds? Is
the Fed is not buying up more bonds? Is that on the one hand because the banking
that on the one hand because the banking system needs those bonds or also because
system needs those bonds or also because uh they fear like they say that it could
uh they fear like they say that it could lead to more inflation?
lead to more inflation? >> It's because well partly the they know
>> It's because well partly the they know the the financial markets need those
the the financial markets need those bonds for trading for the whole bond
bonds for trading for the whole bond operations also because they're staffed
operations also because they're staffed by economists who don't understand the
by economists who don't understand the system which helps but like a major part
system which helps but like a major part of it is pension funds and so have
of it is pension funds and so have bought all these bonds. If the if the
bought all these bonds. If the if the central bank buys bonds off the private
central bank buys bonds off the private banks, that doesn't change the amount of
banks, that doesn't change the amount of money in circulation. But if they buy
money in circulation. But if they buy bonds off non-banks, pension funds and
bonds off non-banks, pension funds and rich individuals, that does increase the
rich individuals, that does increase the money in circulation. The given why
money in circulation. The given why you've got to do the accounting
you've got to do the accounting properly. So if you did do that, if you
properly. So if you did do that, if you all the outstanding bonds, you
all the outstanding bonds, you drastically increase the amount of money
drastically increase the amount of money in non-bank finance.
in non-bank finance. >> So it could be inflationary.
>> So it could be inflationary. >> What what would actually most likely
>> What what would actually most likely cause and this is what's happened of
cause and this is what's happened of course it would inflate asset price.
course it would inflate asset price. >> Exactly. Because the financial
>> Exactly. Because the financial institutions are required to buy
institutions are required to buy financial instruments with the money
financial instruments with the money that they have. So if you took all the
that they have. So if you took all the bonds away from them, they'd have a huge
bonds away from them, they'd have a huge pile of cash that have to spend buying
pile of cash that have to spend buying assets and they'd buy real estate and
assets and they'd buy real estate and shares and you'd have a asset price
shares and you'd have a asset price bubble, which of course we've had.
bubble, which of course we've had. >> Yeah. Because that was one of your main
>> Yeah. Because that was one of your main criticisms with regular QE, quantitative
criticisms with regular QE, quantitative easing. It led to um even more
easing. It led to um even more inequality and the wealthy got wealthier
inequality and the wealthy got wealthier because asset prices the prices went up.
because asset prices the prices went up. Yeah. Yeah.
Yeah. Yeah. >> And that's why you're a big fan of uh
>> And that's why you're a big fan of uh people's QE or modern debt jubilee
people's QE or modern debt jubilee using a using a government's money
using a using a government's money creation capacity not to make the rich
creation capacity not to make the rich richer but to reduce the level of
richer but to reduce the level of private debt.
private debt. >> Yeah. And how would it work in practice?
>> Yeah. And how would it work in practice? >> It would be again ex exactly the same
>> It would be again ex exactly the same way that a government deficit works. The
way that a government deficit works. The de the government creates money by going
de the government creates money by going to negative financial equity for itself
to negative financial equity for itself and that creates identical positive
and that creates identical positive financial equity for the remainder of
financial equity for the remainder of the system. But you could do it in such
the system. But you could do it in such a way with the modern debt jubilee to
a way with the modern debt jubilee to say give everybody say $100,000. Let's
say give everybody say $100,000. Let's use the America as our example and you
use the America as our example and you get that money on condition that if
get that money on condition that if you're in debt you pay the debt down.
you're in debt you pay the debt down. >> How would you monitor that? How would
>> How would you monitor that? How would you make sure that would happen?
you make sure that would happen? >> You'd have you've got bank records.
>> You'd have you've got bank records. Okay. Yeah. you don't actually know. You
Okay. Yeah. you don't actually know. You you you have all the accounts. If
you you have all the accounts. If anybody got money paid into account who
anybody got money paid into account who also had a debt account, then you could
also had a debt account, then you could say that money now has to be used to pay
say that money now has to be used to pay the debt down. But if you don't have
the debt down. But if you don't have debt, and this is why they call it a
debt, and this is why they call it a modern debt jubilee, because in the old
modern debt jubilee, because in the old days of debt jubilees, you the debt is
days of debt jubilees, you the debt is off, but anybody who didn't get hadn't
off, but anybody who didn't get hadn't borrowed money wasn't part of the
borrowed money wasn't part of the action. With a modern debt jubilee,
action. With a modern debt jubilee, everybody gets the same amount of cash.
everybody gets the same amount of cash. So, Ripet Murdoch could get 100,000 and
So, Ripet Murdoch could get 100,000 and I'd get a h 100,000. Okay? I know who it
I'd get a h 100,000. Okay? I know who it would matter who the money would matter
would matter who the money would matter for.
for. >> Buffett would also get but you then pay
>> Buffett would also get but you then pay your debt down by that amount. You could
your debt down by that amount. You could actually almost eliminate private debt
actually almost eliminate private debt in America by doing that and then it
in America by doing that and then it turns up as government debt. Now that
turns up as government debt. Now that has all sorts of secondary effects
has all sorts of secondary effects because one of the reasons people don't
because one of the reasons people don't spend much these days is they're worried
spend much these days is they're worried about paying their debt. So the velocity
about paying their debt. So the velocity of money has slowed down over time
of money has slowed down over time because individual thinking oh I've got
because individual thinking oh I've got to hang on to this money for myself.
to hang on to this money for myself. >> It's gone up since co that the velocity
>> It's gone up since co that the velocity >> not a lot. Not a lot. It's far below
>> not a lot. Not a lot. It's far below what it was back like the the average
what it was back like the the average rate of turnover of dollars in America
rate of turnover of dollars in America up to 1972 or 73 was 1.8 times. Okay,
up to 1972 or 73 was 1.8 times. Okay, it's down about one now. Okay, now if
it's down about one now. Okay, now if you could the large reason for that
you could the large reason for that decline in velocity is people are much
decline in velocity is people are much more in debt than they used to be. So
more in debt than they used to be. So the response of individuals in debt is
the response of individuals in debt is to spend more slowly. Now that means the
to spend more slowly. Now that means the individual accumulates money in their
individual accumulates money in their bank account but they're not creating
bank account but they're not creating any additional
any additional economic activity. They're actually
economic activity. They're actually reducing it. So the fact that you save
reducing it. So the fact that you save money doesn't mean there's money saved
money doesn't mean there's money saved collectively. Okay. You slow down the
collectively. Okay. You slow down the rate of turnover of money. What it means
rate of turnover of money. What it means is and this is Kane's point about the
is and this is Kane's point about the widow's cruise is that by slowing down
widow's cruise is that by slowing down the velocity of money you reduce GDP.
the velocity of money you reduce GDP. Yeah. It's like the paradox of thrift.
Yeah. It's like the paradox of thrift. >> Paradox of thrift. That's right. So if
>> Paradox of thrift. That's right. So if you could actually get rid of the
you could actually get rid of the people's fear of the huge amount of
people's fear of the huge amount of private debt there in eliminated the
private debt there in eliminated the velocity of money could go up from down
velocity of money could go up from down about one to about 1.8 again. So in this
about one to about 1.8 again. So in this case by reducing the level of private
case by reducing the level of private debt you'd increase the level of
debt you'd increase the level of economic activity and that's you know
economic activity and that's you know that that's a major issue we've had over
that that's a major issue we've had over the last 40 years the rate of economic
the last 40 years the rate of economic growth has slowed down. All sorts of
growth has slowed down. All sorts of problems about economic growth in
problems about economic growth in general but a huge reason for it is the
general but a huge reason for it is the level of private indebtedness. you get
level of private indebtedness. you get rid of that private indebtedness and
rid of that private indebtedness and you'd get back to the attitude people
you'd get back to the attitude people had in the 50s and 60s. You didn't worry
had in the 50s and 60s. You didn't worry about the amount of private debt you had
about the amount of private debt you had because it was a small amount of debt
because it was a small amount of debt and you could service it fairly easily.
and you could service it fairly easily. So the mentality we had in the 50s and
So the mentality we had in the 50s and 60s in America in particular, the sort
60s in America in particular, the sort of can do and let's you know get out and
of can do and let's you know get out and get this stuff done. That's been
get this stuff done. That's been eliminated by the mountain of private
eliminated by the mountain of private debt and all the obsession with public
debt and all the obsession with public debt is completely ignored. the real
debt is completely ignored. the real problem which is the level of private
problem which is the level of private debt
debt >> and uh but that would also be
>> and uh but that would also be potentially inflationary then.
potentially inflationary then. >> Yeah. Yeah. Because
>> Yeah. Yeah. Because >> so how the other side again this this is
>> so how the other side again this this is again where having a knowledge of the
again where having a knowledge of the actual
actual structure of the economy rather than
structure of the economy rather than neocclassical myths. So the
neocclassical myths. So the neocclassical micro myth is that firms
neocclassical micro myth is that firms are constrained by rising marginal cost.
are constrained by rising marginal cost. So if you actually increase the level of
So if you actually increase the level of economic activity that would cause
economic activity that would cause prices to rise. supply and demand will
prices to rise. supply and demand will tell you that and it's wrong because
tell you that and it's wrong because most factories in America in particular
most factories in America in particular in this situation now have substantial
in this situation now have substantial excess capacity. They're not using that
excess capacity. They're not using that capacity because the demand's not there
capacity because the demand's not there but they've got capacity to expand. So
but they've got capacity to expand. So like in America if you go back to the
like in America if you go back to the 1960s the statistical average level of
1960s the statistical average level of capacity utilization of American
capacity utilization of American factories is about 90%. Now it's about
factories is about 90%. Now it's about 70%. So you I'm not saying you can hire
70%. So you I'm not saying you can hire all the workers that are necessary there
all the workers that are necessary there but the machinery is idle. So it's
but the machinery is idle. So it's possible to expand the level of economic
possible to expand the level of economic activity and if you do it you reduce
activity and if you do it you reduce prices you reduce costs because uh again
prices you reduce costs because uh again for the average firm the real firm
for the average firm the real firm they've got they've got fixed costs of
they've got they've got fixed costs of course which are fixed costs per year
course which are fixed costs per year it's not a you've got a everything's got
it's not a you've got a everything's got a dimension by time. Let's say you got a
a dimension by time. Let's say you got a factory which can cost you 10 billion to
factory which can cost you 10 billion to make and a billion dollars a year of
make and a billion dollars a year of fixed cost to maintain it. All that sort
fixed cost to maintain it. All that sort of stuff as you increase the output that
of stuff as you increase the output that billion dollars is divided by larger and
billion dollars is divided by larger and larger number of units of output. So
larger number of units of output. So your fixed cost fall your variable costs
your fixed cost fall your variable costs are constant or falling. Okay. So if you
are constant or falling. Okay. So if you can expand output you actually increase
can expand output you actually increase your profit margins. You can actually
your profit margins. You can actually even reduce prices as a result of
even reduce prices as a result of economic expansion. So it's it's other
economic expansion. So it's it's other things you're going to cause asset price
things you're going to cause asset price inflation and that that's more of an
inflation and that that's more of an issue. But if you know the actual cost
issue. But if you know the actual cost structure then the fear that increasing
structure then the fear that increasing money supply is going to cause inflation
money supply is going to cause inflation can be wrong.
can be wrong. >> Yeah. I mean you also had as a solution
>> Yeah. I mean you also had as a solution then I think the proposal that people
then I think the proposal that people should uh people without debt that would
should uh people without debt that would also receive the cash injection should
also receive the cash injection should use part of that to buy corporate shares
use part of that to buy corporate shares for
for >> that sort of possibility is there. So
>> that sort of possibility is there. So you um you give there's a whole you know
you um you give there's a whole you know the this is one thing like the guy was
the this is one thing like the guy was Gary's economics and the UK makes a
Gary's economics and the UK makes a large song and dance about picity as
large song and dance about picity as well inequality it's huge the the whole
well inequality it's huge the the whole system for the last 50 years has boosted
system for the last 50 years has boosted the wealth of the rich and pushed down
the wealth of the rich and pushed down the wealth of the poor. This is why I
the wealth of the poor. This is why I say we've got to correct that mistake.
say we've got to correct that mistake. Okay. uh it's great for the wealthy for
Okay. uh it's great for the wealthy for the time that it uh occurred but we've
the time that it uh occurred but we've got a you know slerotic capitalist
got a you know slerotic capitalist system these days where it was a vibrant
system these days where it was a vibrant one in the 50s. We need to return to
one in the 50s. We need to return to that situation if you reduce the level
that situation if you reduce the level of private debt. That's one way to go
of private debt. That's one way to go about it. But you'll also people who've
about it. But you'll also people who've missed out would get a cash injection
missed out would get a cash injection which means they can buy shares which
which means they can buy shares which means you get more of a stake in the
means you get more of a stake in the system than the people have at the
system than the people have at the moment. And of course, a large part of
moment. And of course, a large part of the conflict we can see in the states is
the conflict we can see in the states is people no longer have any sense of a
people no longer have any sense of a stake in the system. They can't afford a
stake in the system. They can't afford a house. They're locked out of the housing
house. They're locked out of the housing market. Houses are too expensive.
market. Houses are too expensive. They're not in the share market. They're
They're not in the share market. They're not benefiting from all this stuff. This
not benefiting from all this stuff. This is a way of correcting that mistake.
is a way of correcting that mistake. Interesting. To summarize, so we need to
Interesting. To summarize, so we need to alleviate private debt, removing the
alleviate private debt, removing the shekels of debt by introducing people's
shekels of debt by introducing people's QE and and not worry so much about
QE and and not worry so much about public debt. If need be, the Fed can
public debt. If need be, the Fed can just uh absorb most of that just like
just uh absorb most of that just like Japan has done over the years.
Japan has done over the years. >> Yeah.
>> Yeah. >> And and um but what kind of other
>> And and um but what kind of other monetary reforms would you u propose in
monetary reforms would you u propose in in US then because we still have Minsk's
in US then because we still have Minsk's problem here where there's thereabouts
problem here where there's thereabouts of uh of of credit growth? I mean, you
of uh of of credit growth? I mean, you you've got to banks have been allowed to
you've got to banks have been allowed to lend whatever they want to lend for and
lend whatever they want to lend for and like what banks did during the subprime
like what banks did during the subprime obviously is lend massive amounts of
obviously is lend massive amounts of money for mortgages to people who should
money for mortgages to people who should never have been given the money because
never have been given the money because the short-term feedbacks were great for
the short-term feedbacks were great for people involved the whole big short
people involved the whole big short situation. So you you you you don't want
situation. So you you you you don't want banks to be creating money to drive up
banks to be creating money to drive up asset prices. You want them to be
asset prices. You want them to be creating money to create assets. Okay?
creating money to create assets. Okay? So I would uh put limitations on the
So I would uh put limitations on the amount of money that banks could lend
amount of money that banks could lend for buying houses. And the the idea I
for buying houses. And the the idea I call that the pill, the property income
call that the pill, the property income limited leverage. Uh banks have
limited leverage. Uh banks have pretended that they based the lending on
pretended that they based the lending on the income of the borrower. Now my
the income of the borrower. Now my father was a bank manager in the 50s and
father was a bank manager in the 50s and 60s. If you didn't have a 30% deposit,
60s. If you didn't have a 30% deposit, you didn't even get to go to meet him.
you didn't even get to go to meet him. Okay? These days, the Australian
Okay? These days, the Australian government's giving a 5% deposit,
government's giving a 5% deposit, meaning they're encouraging more and
meaning they're encouraging more and more people to get in there. I would I
more people to get in there. I would I would limit the amount of lending that
would limit the amount of lending that can be done against a property to some
can be done against a property to some multiple of its rental income. At the
multiple of its rental income. At the moment in um the UK, it looks like
moment in um the UK, it looks like houses in in London uh cost 25 times
houses in in London uh cost 25 times what they can be rented for on an annual
what they can be rented for on an annual basis.
basis. That should be and the mortgage
That should be and the mortgage therefore is going to be say 20 times. I
therefore is going to be say 20 times. I think the mortgage should be no more
think the mortgage should be no more than 10 times. But you don't want to
than 10 times. But you don't want to drop it like a like a brick like that.
drop it like a like a brick like that. I'd put a rule saying at the moment,
I'd put a rule saying at the moment, this year you can lend 20 times the uh
this year you can lend 20 times the uh rental income. Next year it's 19. The
rental income. Next year it's 19. The year after that it's 18 and we're
year after that it's 18 and we're heading down towards 10. That was
heading down towards 10. That was obviously going to reduce the amount of
obviously going to reduce the amount of leverage people can buy get to buy
leverage people can buy get to buy prices and that would make make house
prices and that would make make house prices fall
prices fall >> and then you would sort of avoid the
>> and then you would sort of avoid the speculative bounty phase of Minsk's
speculative bounty phase of Minsk's model then.
model then. >> Yeah. you get rid of the you you could
>> Yeah. you get rid of the you you could no longer have banks funding asset price
no longer have banks funding asset price speculation and giving you a monetary
speculation and giving you a monetary bubble out of asset asset price
bubble out of asset asset price inflation. So get rid of that and and
inflation. So get rid of that and and banks should and this is this is the
banks should and this is this is the defense that Schumpeder made of the
defense that Schumpeder made of the banking system. He said banks provide
banking system. He said banks provide money to entrepreneurs. No, they don't.
money to entrepreneurs. No, they don't. Okay, they should. Okay. But the reason
Okay, they should. Okay. But the reason a bank won't give an entrepreneur
a bank won't give an entrepreneur uh money is that five out of six
uh money is that five out of six entrepreneurs are going to fail. Okay.
entrepreneurs are going to fail. Okay. So if you just gave debt to
So if you just gave debt to entrepreneurs, you'd lose let's say you
entrepreneurs, you'd lose let's say you gave the same amount of money to five
gave the same amount of money to five six people, you'd lose, you know, nine
six people, you'd lose, you know, nine out of 10. It's it's easy that way.
out of 10. It's it's easy that way. You'd lose 90% and you get interest on
You'd lose 90% and you get interest on 10% which is a terrible deal. But if you
10% which is a terrible deal. But if you could actually take an equity stake and
could actually take an equity stake and a silent equity state, I might add. I've
a silent equity state, I might add. I've had plenty of people who are capitalists
had plenty of people who are capitalists and entrepreneurs saying the last thing
and entrepreneurs saying the last thing I want is a bank person actually on
I want is a bank person actually on their board making decisions. But let
their board making decisions. But let them take an what I call an
them take an what I call an entrepreneurial equity loan at EEL.
entrepreneurial equity loan at EEL. Okay. So the bank would still make loans
Okay. So the bank would still make loans to entrepreneurs. Nine out of 10 could
to entrepreneurs. Nine out of 10 could still fail, but the one who succeeded
still fail, but the one who succeeded could be Nvidia. and then the bank would
could be Nvidia. and then the bank would benefit from the capital appreciation
benefit from the capital appreciation which at the moment they can't get
which at the moment they can't get because the principle of the loan is all
because the principle of the loan is all they ever get back. So you there ways
they ever get back. So you there ways you can modify what banks can do to mean
you can modify what banks can do to mean that banks would actually potentially
that banks would actually potentially provide funding to entrepreneurs which
provide funding to entrepreneurs which is what that's what banking should do.
is what that's what banking should do. So I take it then that you don't agree
So I take it then that you don't agree with positive money and all these reform
with positive money and all these reform groups to completely uh cut the wings of
groups to completely uh cut the wings of the banks and and and make them
the banks and and and make them intermediaries again like like the
intermediaries again like like the neocclassical thing.
neocclassical thing. >> The neocclassical a lot of the the
>> The neocclassical a lot of the the intentions of things like positive money
intentions of things like positive money is to make the banking sector behave the
is to make the banking sector behave the way the textbook say they do. That's
way the textbook say they do. That's true.
true. >> Um
>> Um >> it's feasible. I mean I'm when you see
>> it's feasible. I mean I'm when you see the extent to which banks have
the extent to which banks have mismanaged the power they have in the
mismanaged the power they have in the society over time that makes me more
society over time that makes me more willing to say let's take the power away
willing to say let's take the power away from them if we can do it. Um but this
from them if we can do it. Um but this is like Richard Verer's point which
is like Richard Verer's point which Richard and I have our conflicts but I
Richard and I have our conflicts but I think he knows his stuff on private
think he knows his stuff on private money.
money. >> I like Richard a few times.
>> I like Richard a few times. >> Yeah. He um he argues that the the
>> Yeah. He um he argues that the the German regional smallcale banking system
German regional smallcale banking system is a large reason why Germany was
is a large reason why Germany was successful. And what you then have is
successful. And what you then have is bank managers knowing the local people,
bank managers knowing the local people, knowing who's creditworthy, knowing
knowing who's creditworthy, knowing who's likely to have a good idea versus
who's likely to have a good idea versus a stupid idea
a stupid idea >> with skin in the game.
>> with skin in the game. >> Skin in the game. And they then finance
>> Skin in the game. And they then finance the local. So there's a there's a reason
the local. So there's a there's a reason for having a private provision of funds
for having a private provision of funds for investment which I can understand
for investment which I can understand that. But equally these days you could
that. But equally these days you could do it through crowdfunding. I mean banks
do it through crowdfunding. I mean banks if you go back far enough when banks
if you go back far enough when banks actually
actually seriously analyzed who they should give
seriously analyzed who they should give money to in terms of existing
money to in terms of existing corporations. Some of my friends for
corporations. Some of my friends for example a mining engineer
example a mining engineer he became a major um bank official
he became a major um bank official because he could understand mining
because he could understand mining projects and therefore they used him to
projects and therefore they used him to assess mining projects. These days uh
assess mining projects. These days uh people are saying is there a building on
people are saying is there a building on that block of land? Yeah, we'll lend
that block of land? Yeah, we'll lend we'll lend somebody to the house because
we'll lend somebody to the house because there happens to be, you know, a block
there happens to be, you know, a block of land there with a with a shack on it.
of land there with a with a shack on it. Uh the intelligence that banks apply to
Uh the intelligence that banks apply to making loans has declined over time.
making loans has declined over time. It's all point scoring and asset
It's all point scoring and asset valuation and that sort of thing. We
valuation and that sort of thing. We need them to actually saying who's a
need them to actually saying who's a worthwhile person to give money to for
worthwhile person to give money to for investment. What's a good investment
investment. What's a good investment idea? Now, we could do that through the
idea? Now, we could do that through the private banking system, but these days
private banking system, but these days with, you know, I've got my complaints
with, you know, I've got my complaints about crowdfunding, but the fact that it
about crowdfunding, but the fact that it exists, you can we can say, "Okay, we're
exists, you can we can say, "Okay, we're going to give everybody a certain amount
going to give everybody a certain amount of money which they can only use to
of money which they can only use to crowdfund entrepreneurs, and then you
crowdfund entrepreneurs, and then you make the decisions, and you take it away
make the decisions, and you take it away from the banking system, and then you
from the banking system, and then you can have that as a latched on to the
can have that as a latched on to the sort of proposals that positive money
sort of proposals that positive money makes because I don't want a bunch of
makes because I don't want a bunch of government bureaucrats deciding who gets
government bureaucrats deciding who gets that money. I do want the intelligence
that money. I do want the intelligence of the private individuals involved, but
of the private individuals involved, but the banking system is so compromised
the banking system is so compromised that that's another potential way to go
that that's another potential way to go about it. But these things won't happen.
about it. But these things won't happen. >> It's such a preferred system because the
>> It's such a preferred system because the um also in Holland most of the income
um also in Holland most of the income that banks uh make is because of their
that banks uh make is because of their real estate lending. Exactly. And the
real estate lending. Exactly. And the moment prices go up, um, it's it's it
moment prices go up, um, it's it's it looks better to issue another real
looks better to issue another real estate loan, which makes the price go up
estate loan, which makes the price go up again, which makes it more interesting
again, which makes it more interesting to So, it's this positive feedback.
to So, it's this positive feedback. >> Yeah, it's an amplifying. It's an
>> Yeah, it's an amplifying. It's an unstable amplifying. There's in system
unstable amplifying. There's in system dynamics, they talk about positive and
dynamics, they talk about positive and negative feedbacks. I don't like the
negative feedbacks. I don't like the terms because positive implies good,
terms because positive implies good, negative implies bad. if amplifying and
negative implies bad. if amplifying and dampening feedbacks. So when the banking
dampening feedbacks. So when the banking system provides money for people to buy
system provides money for people to buy properties, uh that's an amplifying
properties, uh that's an amplifying feedback because it will cause prices to
feedback because it will cause prices to rise which causes to happen again. And
rise which causes to happen again. And it's just like you know the sound system
it's just like you know the sound system where the the sound system and
where the the sound system and microphone's too close to the speaker
microphone's too close to the speaker and bang you get you know that horrible
and bang you get you know that horrible that's what we've allowed the banking
that's what we've allowed the banking system to be. It's that's a badly
system to be. It's that's a badly designed acoustic system. You want to
designed acoustic system. You want to have a dampened system inside there. So
have a dampened system inside there. So these ideas are ways about you dampen
these ideas are ways about you dampen that behavior and you'd also get the
that behavior and you'd also get the money to people actually do creative
money to people actually do creative things with it. Rather than driving up
things with it. Rather than driving up houses, we invent a new form of
houses, we invent a new form of locomotion or a new way of tapping
locomotion or a new way of tapping energy. That's what we need.
energy. That's what we need. >> Yeah. And most of your solutions are
>> Yeah. And most of your solutions are based on trust and cohesion within a
based on trust and cohesion within a country or community or internationally
country or community or internationally even. Um currently we see a lot of
even. Um currently we see a lot of distrust which is also reflected I think
distrust which is also reflected I think in for example the the rise in the price
in for example the the rise in the price of gold. Um I also read David Greyber's
of gold. Um I also read David Greyber's great work that 500 years
great work that 500 years >> I think he was one of your friends right
>> I think he was one of your friends right because he he passed away a few years
because he he passed away a few years ago
ago >> was really yeah a big shock when he
>> was really yeah a big shock when he >> and and he um he explains how money came
>> and and he um he explains how money came about how it was um especially uh when
about how it was um especially uh when we were still tribes and everything was
we were still tribes and everything was based on trust and
based on trust and >> but right now we see a lot of mistrust
>> but right now we see a lot of mistrust distrust between countries and and
distrust between countries and and that's uh people are are therefore
that's uh people are are therefore investing in gold central banks are
investing in gold central banks are doing that as well
doing that as well >> um how do you look at with with your um
>> um how do you look at with with your um >> it's a sign of a dysfunctional society.
>> it's a sign of a dysfunctional society. >> It's it's hardly a good sign that people
>> It's it's hardly a good sign that people are making money out of speculating on
are making money out of speculating on non-financial assets like gold. Uh it's
non-financial assets like gold. Uh it's a sign that you know people are sensing
a sign that you know people are sensing a system breakdown and in that world
a system breakdown and in that world things like gold assets of that nature
things like gold assets of that nature do well when there's social breakdown.
do well when there's social breakdown. The thing is you should be trying to
The thing is you should be trying to address the social breakdown rather than
address the social breakdown rather than celebrating the rising price of gold.
celebrating the rising price of gold. Yeah, it's it's a canary in a coal mine
Yeah, it's it's a canary in a coal mine in that sense. It's a barometer. Yeah,
in that sense. It's a barometer. Yeah, >> it's a gold canary, but nonetheless.
>> it's a gold canary, but nonetheless. >> Yeah. Um, but do you see you've been
>> Yeah. Um, but do you see you've been advocating for some of these solutions
advocating for some of these solutions for decades? Um, and like I said at the
for decades? Um, and like I said at the start of the conversation, uh, in our in
start of the conversation, uh, in our in our time spent before the conversation,
our time spent before the conversation, um, everything seemed quite gloomy and
um, everything seemed quite gloomy and and, um, you've become a bit of a cynic
and, um, you've become a bit of a cynic in a sense, but do you still see room
in a sense, but do you still see room for your solutions to be implemented?
for your solutions to be implemented? No.
No. >> And this is one thing about being, you
>> And this is one thing about being, you know, having cracked 70. I've been
know, having cracked 70. I've been trying to reform economics since I was
trying to reform economics since I was 20, okay? And you're 50 years later, you
20, okay? And you're 50 years later, you see it's even more extremely bad than it
see it's even more extremely bad than it was when I began attacking the economic
was when I began attacking the economic theory back in the 1970s. And you see
theory back in the 1970s. And you see all the people talking about reforming
all the people talking about reforming the monetary system or reforming
the monetary system or reforming taxation system and so on. None of them
taxation system and so on. None of them have happened. our capacity not to
have happened. our capacity not to reason sensibly about the dilemmas we
reason sensibly about the dilemmas we face is gigantic. So I think what what
face is gigantic. So I think what what happens is we're going to have a
happens is we're going to have a catastrophe and then we'll try to fix it
catastrophe and then we'll try to fix it up in the aftermath. So I warned about
up in the aftermath. So I warned about the global financial crisis starting in
the global financial crisis starting in 2005 a bit late obviously but
2005 a bit late obviously but nonetheless I did but if you said hey we
nonetheless I did but if you said hey we shouldn't allow banks to lend for asset
shouldn't allow banks to lend for asset price speculation you could have stopped
price speculation you could have stopped the bubble before it started. Now that
the bubble before it started. Now that didn't happen and it is because if you
didn't happen and it is because if you go back when that was feasible the 50s
go back when that was feasible the 50s and 60s we had these crazy neocclassical
and 60s we had these crazy neocclassical ideas about banks being intermediaries
ideas about banks being intermediaries which is false. We had the correct
which is false. We had the correct understanding back then we could have
understanding back then we could have stopped it happening in the first place.
stopped it happening in the first place. We didn't. We now have to deal with the
We didn't. We now have to deal with the aftermath. And I I find humans you know
aftermath. And I I find humans you know like very very rarely do humans solve a
like very very rarely do humans solve a problem preemptively. They experience
problem preemptively. They experience the problem and then try to survive the
the problem and then try to survive the aftermath. And that's what I expect.
aftermath. And that's what I expect. >> And that's the same thing you expect
>> And that's the same thing you expect with with climate change then because
with with climate change then because that's one of your other worries. I
that's one of your other worries. I think that those are the two things you
think that those are the two things you you focus on most, right? Our our
you focus on most, right? Our our monetary uh challenges and and how that
monetary uh challenges and and how that can be solved and and climate change.
can be solved and and climate change. And I guess also our
And I guess also our >> inability to really do something about
>> inability to really do something about it. But could you um explain uh again
it. But could you um explain uh again maybe briefly u why it is so important
maybe briefly u why it is so important we uh do something about that? Well,
we uh do something about that? Well, um I didn't want to work in climate
um I didn't want to work in climate change. Okay, it was not a conscious
change. Okay, it was not a conscious choice to do it. Um but what I wanted to
choice to do it. Um but what I wanted to do was have an economic theory that
do was have an economic theory that understood the role of energy. So if you
understood the role of energy. So if you look at conventional economic theory, it
look at conventional economic theory, it has output being produced by combining
has output being produced by combining labor and capital and what they call
labor and capital and what they call technology. Uh now
technology. Uh now that's always been a flaw to me because
that's always been a flaw to me because you had to have a role for energy
you had to have a role for energy somehow somewhere in your model. And so
somehow somewhere in your model. And so I spending
I spending it's you needed a model of production
it's you needed a model of production which explained the role of energy. We
which explained the role of energy. We didn't have it. When I finally worked it
didn't have it. When I finally worked it out, it was by simply a little insight
out, it was by simply a little insight that came to me um in working in a
that came to me um in working in a colleague's home which was full of
colleague's home which was full of statues and that was labor without
statues and that was labor without energy is a corpse, capital without
energy is a corpse, capital without energy is a sculpture. So rather than
energy is a sculpture. So rather than energy being an additional factor of
energy being an additional factor of production, which is how neocclassicals
production, which is how neocclassicals think about it, if they ever do, energy
think about it, if they ever do, energy is an input to both machinery and humans
is an input to both machinery and humans without which they can do no work. Now
without which they can do no work. Now that once I did that, I then thought,
that once I did that, I then thought, okay, now I can have a look at what's
okay, now I can have a look at what's being done on climate change by
being done on climate change by economists because I felt like I had to
economists because I felt like I had to make a positive contribution before I
make a positive contribution before I did it. Then I read Nordous's work and
did it. Then I read Nordous's work and Richard Tol's work to mention a Dutch
Richard Tol's work to mention a Dutch person. Greatest load of I've read
person. Greatest load of I've read in 50 years of reading garbage
in 50 years of reading garbage by economists. That's being polite.
by economists. That's being polite. >> Cuz Nord is a Nobel Prize winner, right?
>> Cuz Nord is a Nobel Prize winner, right? He
He >> He doesn't deserve a Nobel Prize.
>> He doesn't deserve a Nobel Prize. If if if your if your six-year-old
If if if your if your six-year-old submitted what Nord wrote and got
submitted what Nord wrote and got published in the Economic Journal in
published in the Economic Journal in 1991, the best I wouldn't let him go to
1991, the best I wouldn't let him go to school until he changed the essay.
school until he changed the essay. >> Could you summarize Nord's main points?
>> Could you summarize Nord's main points? >> Well, his main point is that a roof will
>> Well, his main point is that a roof will protect you from climate change.
protect you from climate change. >> Okay, that's his main point. His first
>> Okay, that's his main point. His first paper is called to slow or not to slow.
paper is called to slow or not to slow. not not his first paper but the first
not not his first paper but the first one where he tried to quantify the
one where he tried to quantify the impact of climate change called to slow
impact of climate change called to slow or not to slow and it's in the economic
or not to slow and it's in the economic journal which is sort of number three
journal which is sort of number three journal in the world and in that he
journal in the world and in that he assumed that 87% of the American economy
assumed that 87% of the American economy would be unaffected by climate change
would be unaffected by climate change because it takes what he called
because it takes what he called carefully controlled environments
carefully controlled environments 87% of the economy okay he included all
87% of the economy okay he included all of manufacturing
of manufacturing all of wholesale and retail services all
all of wholesale and retail services all of the government sector, all of the
of the government sector, all of the finance and insurance and real estate
finance and insurance and real estate except for some coastal houses and
except for some coastal houses and mining.
mining. He actually had mining would be
He actually had mining would be unaffected by climate change to get that
unaffected by climate change to get that 87% figure. Now, somebody must have
87% figure. Now, somebody must have tapped him on the shoulder and said,
tapped him on the shoulder and said, "Oh, William, what about open cut
"Oh, William, what about open cut mining?" So, the next time he published
mining?" So, the next time he published a paper on that topic, he said, "Under
a paper on that topic, he said, "Under mining is unaffected. underground mining
mining is unaffected. underground mining takes place in carefully controlled
takes place in carefully controlled environment and reduce the damage
environment and reduce the damage percentage from 87% to 85%. That showed
percentage from 87% to 85%. That showed that he thinks that you're only exposed
that he thinks that you're only exposed to climate change if you're exposed to
to climate change if you're exposed to the weather. Yeah. So basically he says
the weather. Yeah. So basically he says there there's you have to make there's
there there's you have to make there's there's cost involved with climate
there's cost involved with climate change if the climate changes it could
change if the climate changes it could um have uh all sorts of economic impacts
um have uh all sorts of economic impacts on on on us. At the same time, he says
on on on us. At the same time, he says there's cost involved while uh trying to
there's cost involved while uh trying to um lower emissions and so you need to
um lower emissions and so you need to find a balance there. You need the
find a balance there. You need the balance is completely wrong because he
balance is completely wrong because he basically says um you only u activities
basically says um you only u activities that depend upon the weather are going
that depend upon the weather are going to be affected by climate change. Now he
to be affected by climate change. Now he he he said 3% of the economy was going
he he said 3% of the economy was going to be seriously affected which is
to be seriously affected which is basically agriculture and then 10% might
basically agriculture and then 10% might be moderately affected and 87% not
be moderately affected and 87% not affected at all.
affected at all. But that's not what climate climate
But that's not what climate climate change
change uh to me it's so childish that you have
uh to me it's so childish that you have to say listen kid we need to teach you
to say listen kid we need to teach you what climate actually means. Climate is
what climate actually means. Climate is not just the weather. Well, the the main
not just the weather. Well, the the main way I can put a a brick through his
way I can put a a brick through his arguments is that he he said that
arguments is that he he said that manufacturing will be unaffected because
manufacturing will be unaffected because it happens in carefully controlled
it happens in carefully controlled environments. Well, there's no factory
environments. Well, there's no factory that has all the inputs it needs. It's
that has all the inputs it needs. It's got to get inputs from other factories.
got to get inputs from other factories. That means that so your model might have
That means that so your model might have output as a function of labor and
output as a function of labor and capital. The real world's got factories
capital. The real world's got factories everywhere that needs goods from other
everywhere that needs goods from other factories and raw materials. He assumed
factories and raw materials. He assumed that that would be unaffected by climate
that that would be unaffected by climate change, which would be only true if
change, which would be only true if roads and railways and airplanes were
roads and railways and airplanes were unaffected by the weather.
unaffected by the weather. >> Yeah.
>> Yeah. >> Okay. That it is it is juvenile. It is
>> Okay. That it is it is juvenile. It is so bad that the fact that it was even
so bad that the fact that it was even published is an insult. And so, but
published is an insult. And so, but that's the basis of all the work that
that's the basis of all the work that have been done since by neocclassical
have been done since by neocclassical economists saying that climate change is
economists saying that climate change is going to have a trivial impact upon the
going to have a trivial impact upon the economy. They're completely dissociated
economy. They're completely dissociated from the climate scientists. And
from the climate scientists. And therefore, what's happening at the
therefore, what's happening at the climate, which the climate scientists
climate, which the climate scientists know downside more about than economists
know downside more about than economists do. What economists are saying will have
do. What economists are saying will have a minor impact upon the economy, has
a minor impact upon the economy, has scientists terrified.
scientists terrified. And the best example of the gap between
And the best example of the gap between them I can give is that um the the the
them I can give is that um the the the there was a survey of roughly 2,000
there was a survey of roughly 2,000 economists who work on climate change
economists who work on climate change and they asked about what's the impact
and they asked about what's the impact of a 7°ree increase in temperature by
of a 7°ree increase in temperature by 2220. So trajectory towards 7° warming
2220. So trajectory towards 7° warming by 2220.
by 2220. They the the average prediction they
They the the average prediction they made was that GDP in 2220 would be 25%
made was that GDP in 2220 would be 25% lower than it would have been in the
lower than it would have been in the absence of global warming at all. Now
absence of global warming at all. Now when you convert that to a rate of
when you convert that to a rate of economic growth that's saying a
economic growth that's saying a trajectory towards 7° of warming reduce
trajectory towards 7° of warming reduce the annual rate of economic growth by
the annual rate of economic growth by 0.14%.
0.14%. >> Nothing which is nothing. Okay. Now you
>> Nothing which is nothing. Okay. Now you look at climate scientists and they say
look at climate scientists and they say anything over 5° we can't we we we don't
anything over 5° we can't we we we don't know whether humanity will survive as a
know whether humanity will survive as a species. So on the one hand you got
species. So on the one hand you got economists saying 7° tiny drop in the
economists saying 7° tiny drop in the rate of economic growth. You got climate
rate of economic growth. You got climate scientists saying 5° we probably go
scientists saying 5° we probably go extinct as a species. That's the gap
extinct as a species. That's the gap between what economists are telling
between what economists are telling people and most people don't again they
people and most people don't again they don't realize and see where did these
don't realize and see where did these numbers come from. They think the
numbers come from. They think the economists have taken work of scientists
economists have taken work of scientists and put a No, they haven't. They've made
and put a No, they haven't. They've made up their own numbers and they're crazy.
up their own numbers and they're crazy. >> But help me out here. Like in the
>> But help me out here. Like in the Netherlands, for example, um we're
Netherlands, for example, um we're taking all sorts of measures in order to
taking all sorts of measures in order to lower emissions and to basically help
lower emissions and to basically help out uh in the world with uh
out uh in the world with uh um reaching at some point lower
um reaching at some point lower emissions and and there we're trying to
emissions and and there we're trying to stop the warming of the of the planet.
stop the warming of the of the planet. But if it seems like we are doing um
But if it seems like we are doing um much more than most other countries
much more than most other countries which actually leads to companies for
which actually leads to companies for example leaving the Netherlands because
example leaving the Netherlands because it becomes too prohibitive and too
it becomes too prohibitive and too expensive to produce here because we add
expensive to produce here because we add all sorts of taxes on energy and all
all sorts of taxes on energy and all that. Um is is that a smart way to deal
that. Um is is that a smart way to deal with this problem because it
with this problem because it it leads to uh people getting very
it leads to uh people getting very grumpy to economic slowdown economic
grumpy to economic slowdown economic we're actually shrinking the economy in
we're actually shrinking the economy in that way is in that in that way you
that way is in that in that way you could end up with with a poor country in
could end up with with a poor country in Netherlands without having contributed
Netherlands without having contributed to to climate change.
to to climate change. >> Those the sorts of arguments that show
>> Those the sorts of arguments that show we don't know what they're all talking
we don't know what they're all talking about either because it's all about cost
about either because it's all about cost and benefits that sort of thing.
and benefits that sort of thing. It's an existential threat. Okay. It it
It's an existential threat. Okay. It it it's so hard to deal with people on this
it's so hard to deal with people on this front because people have this the same
front because people have this the same sort of naive idea about the climate
sort of naive idea about the climate that economists themselves have. You
that economists themselves have. You know, it's 7° warmer. I remember having
know, it's 7° warmer. I remember having some bloody famous economist talking to
some bloody famous economist talking to us in in Australia back when I was doing
us in in Australia back when I was doing my master's degree and he said, "Oh, if
my master's degree and he said, "Oh, if it gets warmer, I'll wear one less
it gets warmer, I'll wear one less cardigan during winter." That's how we
cardigan during winter." That's how we assess it. what we are actually playing
assess it. what we are actually playing with are the circulation systems of the
with are the circulation systems of the entire planet. Now the most dangerous
entire planet. Now the most dangerous one of those for the Europe is the
one of those for the Europe is the called the Atlantic medional overturning
called the Atlantic medional overturning circulation or amoch which is a great
circulation or amoch which is a great >> it's well it's not the same thing but
>> it's well it's not the same thing but that's what people identify it with. But
that's what people identify it with. But if that breaks down
if that breaks down then temperature in Europe would fall by
then temperature in Europe would fall by 3° per decade to about 10° colder than
3° per decade to about 10° colder than it is now which would mean Europe
it is now which would mean Europe becomes uninhabitable. Okay. Now, that's
becomes uninhabitable. Okay. Now, that's not a costbenefit calculation.
not a costbenefit calculation. You don't want to have glacias over
You don't want to have glacias over Stockholm, okay? But that's what we're
Stockholm, okay? But that's what we're playing with. So, it's the scale of
playing with. So, it's the scale of damage we could do to the circulation
damage we could do to the circulation systems of the planet are is immense.
systems of the planet are is immense. And people are just simply not aware
And people are just simply not aware that that's what we're playing with. So,
that that's what we're playing with. So, if you if this if if we
if you if this if if we again, we we didn't know how complex
again, we we didn't know how complex these systems were when this research
these systems were when this research first began. So if you look back at
first began. So if you look back at 2008, one of the first studies to say
2008, one of the first studies to say what are the tipping points that higher
what are the tipping points that higher temperatures could cause the expectation
temperatures could cause the expectation for the people who were then focusing
for the people who were then focusing upon the AMO was that it would take 3 to
upon the AMO was that it would take 3 to 5° of warming and it might take two or
5° of warming and it might take two or three centuries. Most recent research
three centuries. Most recent research says 1.1°ree
says 1.1°ree is enough. Maybe one one between 1.1°ree
is enough. Maybe one one between 1.1°ree warming to 1.8 could trip the AMO and it
warming to 1.8 could trip the AMO and it could happen in the next 70 years. Yeah,
could happen in the next 70 years. Yeah, but people would say say for example in
but people would say say for example in Holland if you would have followed Al
Holland if you would have followed Al Gore's advice you would have he should
Gore's advice you would have he should have left the country because we would
have left the country because we would have been flooded by now. And of course
have been flooded by now. And of course they didn't Al Gore is not a scientist
they didn't Al Gore is not a scientist for Estoner. These are stuff
for Estoner. These are stuff people take out of the press. You got to
people take out of the press. You got to read the actual original papers by the
read the actual original papers by the economists and by the climate scientists
economists and by the climate scientists to see what they were claiming. Um
to see what they were claiming. Um nobody was saying sea rise is going to
nobody was saying sea rise is going to be at that scale. In fact, sea rise, I
be at that scale. In fact, sea rise, I don't even talk about it most of the
don't even talk about it most of the time because obviously it's going to
time because obviously it's going to take a long time for West Antarctica to
take a long time for West Antarctica to melt. Okay, Greenland, we're talking
melt. Okay, Greenland, we're talking centuries for the melt to occur. But
centuries for the melt to occur. But it's the things which could happen
it's the things which could happen almost instantly that are the the scary
almost instantly that are the the scary ones. And one of those is is the Amok.
ones. And one of those is is the Amok. Another is, again, you're going to love
Another is, again, you're going to love this, damage to the ozone layer, but
this, damage to the ozone layer, but this time not over Antarctica, over the
this time not over Antarctica, over the American plains. And the the guy who
American plains. And the the guy who discovered the hole in the ozone layer
discovered the hole in the ozone layer has argued that if we get past 500 parts
has argued that if we get past 500 parts per million in the atmosphere of carbon
per million in the atmosphere of carbon dioxide and other warm
dioxide and other warm >> 420 or so.
>> 420 or so. >> That's right. Okay. Then the a it will
>> That's right. Okay. Then the a it will basically cause a storms to penetrate
basically cause a storms to penetrate from the troposphere which is where we
from the troposphere which is where we are to the stratosphere taking moisture
are to the stratosphere taking moisture and broomemide and chlorine with them
and broomemide and chlorine with them and that will increase the destruction
and that will increase the destruction rate of ozone by two orders of magnitude
rate of ozone by two orders of magnitude which would mean you'd lose the ozone
which would mean you'd lose the ozone layer which means it would be dangerous
layer which means it would be dangerous to go out during the daylight. But let
to go out during the daylight. But let me let me rephrase my my point because I
me let me rephrase my my point because I I understand that as humanity we need to
I understand that as humanity we need to cooperate in order to um tackle those
cooperate in order to um tackle those problems even though it's it's of course
problems even though it's it's of course uncertain and when what will happen
uncertain and when what will happen exactly but for an ordinary person in
exactly but for an ordinary person in Europe or or the Netherlands for example
Europe or or the Netherlands for example he sees his economy being uh destroyed
he sees his economy being uh destroyed basically because we're taking all sorts
basically because we're taking all sorts of measures while other countries
of measures while other countries especially the US for example they of
especially the US for example they of course Trump withdrew from from from
course Trump withdrew from from from Paris um treaty we see China still
Paris um treaty we see China still opening up new coal um power plants. So
opening up new coal um power plants. So does it make sense or do you understand
does it make sense or do you understand for an ordinary European
for an ordinary European >> Oh yeah like in a way Europe is is doing
>> Oh yeah like in a way Europe is is doing too much um destroying its own economy
too much um destroying its own economy people get upset you're not going to
people get upset you're not going to sell no
sell no >> that vision vision to to the
>> that vision vision to to the organization
organization >> we should have done this 50 years ago
>> we should have done this 50 years ago >> okay and this is when you look back and
>> okay and this is when you look back and see where the limits to growth came out
see where the limits to growth came out 1972 the main person who sabotaged the
1972 the main person who sabotaged the reception of limits to growth was
reception of limits to growth was William Nordhouse he rubbished the
William Nordhouse he rubbished the theory without knowing the technology
theory without knowing the technology techology behind the uh estimates that
techology behind the uh estimates that were made by the MIT engineers. People
were made by the MIT engineers. People think it's a bunch of hippies who wrote
think it's a bunch of hippies who wrote the limits to growth. It's a bunch of
the limits to growth. It's a bunch of MIT engineers who wrote the limits to
MIT engineers who wrote the limits to growth report using the latest
growth report using the latest technology at the time. And they
technology at the time. And they predicted basically if we didn't start
predicted basically if we didn't start acting by 1975,
acting by 1975, which is now 50 years ago, then we'd
which is now 50 years ago, then we'd face a breakdown of the ecosystem
face a breakdown of the ecosystem sometime in the 21st century. Now we did
sometime in the 21st century. Now we did nothing. So if we started doing it 50
nothing. So if we started doing it 50 years ago, there's a slight chance we
years ago, there's a slight chance we would have avoided total breakdown now
would have avoided total breakdown now because we've done nothing of
because we've done nothing of significance for 50 years. We're going
significance for 50 years. We're going to wear the consequences. And people
to wear the consequences. And people still think we're talking two and three
still think we're talking two and three centuries in the future. We're talking
centuries in the future. We're talking the next two or three decades. And in if
the next two or three decades. And in if that does actually if you do get for
that does actually if you do get for example the amot breaking down then you
example the amot breaking down then you okay the Dutch people saved a large
okay the Dutch people saved a large amount of money by not doing about
amount of money by not doing about climate change and now they've got to go
climate change and now they've got to go and ask ask some Africans if they can
and ask ask some Africans if they can move in in Africa. Um the the the
move in in Africa. Um the the the potential for catastrophe is enormous
potential for catastrophe is enormous and people are naive about it. They say
and people are naive about it. They say oh it's going to cost too much to make
oh it's going to cost too much to make an adjustment. Yes, that's true.
an adjustment. Yes, that's true. And the potential for anarchy and and
And the potential for anarchy and and civil breakdown is is immense, you say,
civil breakdown is is immense, you say, which could lead to all sorts of other
which could lead to all sorts of other problems because even maybe there's safe
problems because even maybe there's safe countries to to to live once that
countries to to to live once that happens. But once we have also uh
happens. But once we have also uh western societies breaking down that
western societies breaking down that could lead to even world wars and all
could lead to even world wars and all that, right? So basically in the end
that, right? So basically in the end even if your only Europe goes down at
even if your only Europe goes down at first, then the rest of the world is
first, then the rest of the world is going to be affected as well.
going to be affected as well. >> That's right. So it is it is just
>> That's right. So it is it is just totally misunderstanding what climate
totally misunderstanding what climate change actually means and not realizing
change actually means and not realizing how what a existential threat it is and
how what a existential threat it is and therefore we're trivializing it and
therefore we're trivializing it and saying oh you should pay for it I'm not
saying oh you should pay for it I'm not going to pay for it ultimately it
going to pay for it ultimately it happens and basically doesn't matter who
happens and basically doesn't matter who paid for it because you're both dead. So
paid for it because you're both dead. So the classical prisoners dilemma in that
the classical prisoners dilemma in that sense
sense >> in a sense I mean prisoners dilemma
>> in a sense I mean prisoners dilemma charact caricatures these sorts of
charact caricatures these sorts of dynamic situations but yes it's
dynamic situations but yes it's something which the only way we can
something which the only way we can really address it as a collective
really address it as a collective decision. It's also one of the reasons
decision. It's also one of the reasons why you admire Elon Musk despite all his
why you admire Elon Musk despite all his his um
his um as well because he wants to colonize
as well because he wants to colonize Mars and I think that could be done in
Mars and I think that could be done in your
your >> That was my get out of free jail card
>> That was my get out of free jail card because again like I I really do think
because again like I I really do think because we've trivialized what we've the
because we've trivialized what we've the dangers of climate change. We're not
dangers of climate change. We're not aware of the dependence of the economy
aware of the dependence of the economy upon energy again because of economists.
upon energy again because of economists. We don't realize how close we are to a
We don't realize how close we are to a complete breakdown. I thought it's going
complete breakdown. I thought it's going to happen. There's no way our decision
to happen. There's no way our decision processes are going to save us. The only
processes are going to save us. The only uh hope to maintain intelligence over
uh hope to maintain intelligence over time is to have an outpost that's not on
time is to have an outpost that's not on this planet. And I thought Musk might
this planet. And I thought Musk might get us there. Now with all the garbage
get us there. Now with all the garbage he's done over the American election and
he's done over the American election and you know everything else, maybe the
you know everything else, maybe the Chinese will get there before he does.
Chinese will get there before he does. >> You're 72 now. Final question. If if
>> You're 72 now. Final question. If if Musk would ask you in 8 years to join
Musk would ask you in 8 years to join him on a mission to Mars in order to at
him on a mission to Mars in order to at least instead of have a proper monetary
least instead of have a proper monetary system there, would you uh
system there, would you uh >> Yeah, I would.
>> Yeah, I would. >> You would go along.
>> You would go along. >> I'm 72. I mean, I've seen all I can see
>> I'm 72. I mean, I've seen all I can see of the planet. My bucket list is
of the planet. My bucket list is basically to stay at home, but if I got
basically to stay at home, but if I got an offer for Mars, yeah, why not? It'd
an offer for Mars, yeah, why not? It'd be an interesting place to die on, just
be an interesting place to die on, just as Musk himself says, preferably not on
as Musk himself says, preferably not on impact.
impact. >> Good one. Well, thanks so much, Steve,
>> Good one. Well, thanks so much, Steve, for your time. It was a pleasure talking
for your time. It was a pleasure talking to you again. Since you're in Holland,
to you again. Since you're in Holland, we should do this on a regular basis.
we should do this on a regular basis. >> Absolutely. Yeah. Yeah. Um, where can
>> Absolutely. Yeah. Yeah. Um, where can people find more about how can they
people find more about how can they support?
support? >> Oh, yeah. Cool. There's three there's u
>> Oh, yeah. Cool. There's three there's u I'm giving online courses now, by the
I'm giving online courses now, by the way, which are being marketed through
way, which are being marketed through YouTube. So, there's a I I've got to
YouTube. So, there's a I I've got to apologize for the marketing. It's over
apologize for the marketing. It's over the top. It's not the sort of thing I'd
the top. It's not the sort of thing I'd put together, but it does lead to an
put together, but it does lead to an online course with me that has about 800
online course with me that has about 800 people have signed up so far, and it's a
people have signed up so far, and it's a fabulous discussion group. I really
fabulous discussion group. I really enjoy the people who are part of the
enjoy the people who are part of the group. So, that's stevekain.com.
group. So, that's stevekain.com. Uh but the main if you want to support
Uh but the main if you want to support me directly then I have two uh websites.
me directly then I have two uh websites. So Patreon which is ww
So Patreon which is ww patreon.com/profstavekane
patreon.com/profstavekane and then substack which is
and then substack which is profkane.substack.com.
profkane.substack.com. I'll put them all in the show notes. Uh
I'll put them all in the show notes. Uh so thank you Stephen. Also thank you for
so thank you Stephen. Also thank you for the audience. Uh please don't forget to
the audience. Uh please don't forget to like the video, follow me uh follow this
like the video, follow me uh follow this channel and um and support Steve and
channel and um and support Steve and what he does and u talk to you again. Uh
