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Steve Keen on why the Greek finance minister is fantastic, Euro QE will not work and how conventional economists have no idea how the real world works.
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- about 2 years ago
As far as Greece is concerned, your approach of expecting a problem of private debt and "modern debt jubilee" financing the private sector to correct bank insolvency, well, it will just not work! The case of Greece has the problem of capital flight making banks insolvent; and capital flew because of government insolvency and inability to bail them out. So, your approach sees the problems backwards!
The chances of "QE for the people" working are very slim. It needs to combine its sterilization with a financial transactions tax... Otherwise, it's not QE; it's sovereign money, as Positive Money UK is advocating.
I am sorry that this cannot solve the problem in the case of the Eurozone; no monetarily sovereign countries there (I suppose you are sorry too, but not as much as I am)! Eurozone, supposedly, cannot print money. Unfortunately again, Greek debt troubles, which keep the problems of the monetary and banking system under discussion, were never those of significant private debt.
Thus, the real problem, along with convincing of a solution, goes around you and knocks you on your back. You are trying to tempt the bankers: they will not bite. If I (being no economist) can understand your approach, they definitely can too.
Professor Keen, I do not like saying this, but it is not good that you are discussing the case of Eurozone debt (trying to account it to the EU).
Your claim, of private debt beibng the problem, is not telling us why this happened. It does not discuss that bank lending was profligate. The reason you are not telling us is, in fact, very clever: you want to avoid being that radical as to have to say that it is the banks' fault, so that there is a chance that we can get policies of debt relief for the private sector, and "kick the can down the road". This is, also, very clever, because for national debts, usually, there is another "solution": devaluation, i.e., money printing by the central bank, without countermeasures to downscale bank lending. This only works with sovereigns.
Prof. Steve Keen, I have to tell you that you have it all wrong for the Greek private debt! Maybe you love telling stories about private debt being the problem --and I do not disagree with you on that-- that is not making it the case everywhere!!!
Greek private debt at the beginning of 2010 was just about 125%.