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"People are Sensing a System Breakdown" - Steve Keen

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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

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

>> 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

what he does and u talk to you again. Uh Steve,

Steve, >> that'd be great. Okay. Thank you.

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YouTube Transcript:"People are Sensing a System Breakdown" - Steve Keen