Professor Steve Keen Talks Modern Banking And Massive Money Creation
Professor Steve Keen is one of the few rebel economists there are. He's a mathematician and a true expert. In this interview, he breaks down the modern banking system and dives deep into money creation.
From a very critical, researched, and informed standpoint he also offers his opinion and knowledge on the global economic crisis, U.S. deficits, and the stock market crash.
He is willing to think critically. Are you?
What you've been taught in the textbook is a myth – Professor Steve Keen
Introduction to Monetary Post Keynesian Economics https://t.co/ruBUnM0aKu @SussexPEAS @rethinkecon @PostCrashEcon @PositiveMoneyUK @Renegade_Inc @UnlearnEcon @Lprochon. Like most posts on my @Patreon page, this is free access–no paywall.
— Steve Keen (@ProfSteveKeen) April 28, 2020
If you’re interested in hearing eye-opening facts on the future of the economy, this is a must-read. Hit the play button on the video above so you can follow along in real-time.
Professor Steve Keen’s background
George: All right guys, it gives me a great amount of pleasure to bring someone to the Rebel Capitalist Show that I have a tremendous amount of respect for.
He's someone that I've been watching for a long time. He always is with Erik on MacroVoices and he always has incredible insight.
He's kind of the antithesis of your “normal” economist. His name is Professor Steve Keen.
Steve, thanks for being on the Rebel Capitalist show.
Steve Keen: Good to be here. I like the title too, by the way.
George: Now, for those of my viewers who might not be familiar with your background, can you fill us in on that?
Steve Keen: The simple thing is I was a professor of economics at Kingston University and head of school there. I'm now a distinguished research fellow and an honorary professor at UCL.
That's just the formal academic stuff. The informal stuff is that I started rebelling against mainstream economics in 1971 when I was doing my undergraduate degree.
And I also have a background in mathematics. Not as deep as I'd like it to be, but I did undergraduate mathematics and I then did, effectively, a full honors degree in maths while I was doing my Ph.D.
So I'm a mathematical critic of mainstream economics. And that's unusual because most people think that they don't like the fact that they use mathematics and they say that what's wrong with economics is using math.
My position is that calling what a neoclassical economist do mathematics is an insult to mathematicians.
I call what they do ‘mythmatics', not mathematics. And so I've been critiquing, partly providing my own critiques.
But mainly providing critiques that have been done for a century of this mythical school and they continue refusing to acknowledge them.
So I basically go for the jugular. I think that they delude themselves into believing they're doing decent analysis of capitalism, what they're describing has got bugger all to do with real capitalism.
I call what they do ‘mythmatics', not mathematics. – Professor Steve Keen
And ends up leading us to distort and damage the real system, rather than preserve it.
That's the background. Main book: Debunking Economics and a couple of others as well.
George: Yeah and I just want to point out, we'll go over this at the end of the interview.
But, you've got an amazing page on Patreon with an incredible amount of content and research, so for any of my viewers who are interested in that, I'd strongly suggest checking that out after this interview.
Steve Keen: I'll just add one more thing too, on there George, it's 99% of my posts there are free.
Most people think Patreon is per charge. I charge my podcast because my podcast guy has to make a living, but otherwise, everything on the site is pretty much free.
So don't think you can't… if you go there don't bother going because he's got a firewall, there ain't no firewall except for the podcasts.
George: Okay. And that's just your name? Is that how they find it on Patreon.
Steve Keen: It's www.patreon.com/profstevekeen, all one word. So profstevekeen.
How the modern-day banking system works
George: Okay, got it. So one of the things that you really know a lot about is how the modern-day banking system works.
And this is something that is extremely complex and very foggy for the majority of the people.
And I know I heard you and Erik on MacroVoices the other day talk about this paper, this 2014 paper from the Bank of England.
That's something that I've really been studying as much as I possibly can. And for the viewers, you're going to have to forgive me because I'm going to ask Steve some personal questions here, and just try to get over my struggles.
Then we'll get onto the main part of the interview. But I'm sure you'll enjoy this.
So, just going back to that 2014 paper, can you tell us:
What are the big differences between the stereotypical fractional reserve banking, the way it's taught, and the way we think of it, and this new form of modern money creation?
Steve Keen: What you've been taught in the textbook is a myth. It doesn't happen. Fractional reserve banking, as described in the textbooks, does not exist.
It's a bit like, if you've read fractional reserve banking, it's exactly the same thing as being taught Ptolemy's epicycles and believing Mars and Venus that run on circles, that rotate around the Earth.
And that people who rail against fractional reserve banking are like people railing against Ptolemy's astronomy. Ptolemy's astronomy is false.
So, that's the first thing to get. Just get used to it, it's wrong. What is actually going on is that the fractional reserve banking argues that banks effectively lend out of a pot of some sort.
The pot being the reserves that are created when a depositor puts money in the bank account.
So the argument is, you've deposited $100 at a bank, that increases the reserves, so the bank has about $100, they'll then hang on to 10 of those dollars and lend out 90.
That's the philosophy, okay? That's the argument. And then they have a chain reaction where that 90 is deposited in another bank and it becomes 81 is lent out, probably with a 10% reserve ratio, and $100 deposit, you create $1000 out of it.
Now that is simply impossible, okay? It's simply impossible unless all bank loans are in cash.
So if you went into a bank and said, “I want to buy this apartment in Manhattan for 10 million.” And they think, “Yeah it's a great idea, you've got a good credit rating, it's probably going to increase in value.
Just give me a moment while I go out and get 100,000 $100 bills for you.” That's not what they do.
They simply say, “That's a great idea. We're going to make an entry of $10 million in your deposit account, which we expect you to pass over to the property, and we're going record that we've got an asset, which is the $10 million loan we've made for you.”
Now, in the standard case, they say that an individual bank can't create money but it's the chain reaction that does it. Garbage.
An individual bank can create money directly when it creates a loan, it creates a deposit.
So rather than the more logic says you need deposits to lend, it's the other way around, lending creates the deposits.
And the long term punchline of that is that under the mythical model, the fractional reserve banking, the amount of money being created is controlled by the government.
Because the government creates the initial $100 that the dollar recipient goes and deposits in their bank account, and the government sets the 10% ratios, so the government's got control of both leaders.
And that's why when you see a textbook model of something like loanable funds, which is a myth built on a myth, what they draw is they show the money supply as a vertical line.
That basically said it's outside of the control of the market economy itself and the government can move the position of that line by either changing the number of reserves or by changing, pardon me, the reserve ratio.
That's completely wrong.
Steve Keen: The money supply is under the control of the private banks.
Because they make the loans, they make the deposits, and what they're really doing is leveraging up their equity side. And here the language gets in the way.
We talk about equity and capital as interchangeable. But equity is actually the gap between the assets the bank has and the liabilities it has.
So when a bank starts out, it has to raise initial equity and, if you want to start a small bank you need something to the order of 10 to $100 million.
Which you then you get, okay, okay let's say you've got 100 million. That means with 100 million in equity and no loans, you have 100 million in reserves as well. Okay?
But then if you make a loan, you make a loan of 10 million, you then have access to 110 million. Your equity is still the same, but you've got liabilities of 10 million.
Steve Keen: So what actually controls the amount of money you can create is the bank's willingness to leverage up its equity base.
And if a bank is conservative and says we don't want to have a high level of gearing, then they might leverage up that 100 million by a factor of 10.
That's what gives you the 100 million in equity, over time why one bank can create a billion dollars worth of loans.
But if you get ecstatic, euphoric, and believe that the world's taking off on a rocket called the internet, or telecommunications, or God knows what, you can lever it up by a factor of 30.
How does that play outside of the United States where they might not have reserve requirements?
Steve Keen: It's exactly the same way it does in the United States only a bit more flexible.
They don't have to worry about reserves at all. See there's a great paper by John Carney, and I can highly recommend this.
John Carney, the financial commentator, wrote a paper called Lending Creates More Than Deposits. And he goes through the actual sequences involved in all this stuff.
There's also a fabulous paper by a Federal Reserve researcher called O'Brian, from 2007 I think.
That goes through reserve requirements in OECD nations and goes through them in great detail, as of 2007.
And just a couple of things about reserves that people don't realize. First of all, about half the OECD has no reserve requirements.
Steve Keen: They've given up on it. Of the other half that has reserve requirements, they're lagged.
If you make a loan and you're required to have reserves to back that loan, but you've got 28 days to get there. I think actually America's now 45 days.
Thirdly, the number of deposits for which you're required to have reserves is trivial. This is a paper by, I think it's Carpenter and Demiralp, two other Federal Reserve researchers.
And they went through how much of the American money supply is actually subject to the 10% reserve requirement that people think is the standard.
It's about 1 or 2% of the total money supply. The reason being, they only require reserves for household deposits.
There's no requirement for reserves for commercial deposits. There's no requirement for reserves for international related exchange, and contracts and so on.
So consequently, even countries that think they've got a reserve requirement controlling it, give 45 days I think it is in America's case, before you've actually got to have the reserves.
And it's only for 2% of the money supply. So what's really going on, the real role of the reserves is to have money on hand in case the public panics.
If you have reserves equivalent to roughly 10% of households in your bank, then 10% of your household customers can turn up in one day and demand money in cash and you can say here it is.
And then in the meantime you're making frantic calls to the Federal Reserves saying, “We need more cash now.” And they're going, “Holy hell, yeah. We've got to get it out to you as fast as we can.”
Then the next day another 10% arrives from the Federal Reserves and you'll pay a trivial interest rate on that. So you can break your panic. That's the real role of reserves.
George: Yeah, in that situation that you just outlined.
Would that bank that was in the panic, have to give the Federal Reserves some form of assets off their balance sheet?
Maybe treasuries, mortgage-backed securities, if you want to call those assets, for that cash?
Steve Keen: Yeah something like that, yeah. Or they just borrow from the Federal Reserve.
They borrow at the going rate. It's quite trivial. You've got to borrow at 1 or 2% and if it's a trivial… and it's 1 or 2% per annum, okay? We're not talking per day. So it's a trivial load.
And the way that I describe reserves is, it's a bit like oil in the tank. People think reserves are the petrol that fuels the car, and if you don't put reserves in, then you can't run the car.
No, it's like oil in the car. If you don't put oil in the car, the engine will jam up.
So think about the money system as a hierarchy, a triangle. You and I, if I wanted to pay some money to you, or vice versa, then I'd make a transfer from my bank to your bank.
Now for that to be effective… If we're in the same bank, no problem. Your deposit account goes down, mine goes up. But if we're in separate banks, no reserves needed.
If we're in separate banks, then my transfer of money from you to me, means that there has to be a transfer of reserves from your bank to my bank.
George: Right, right.
Steve Keen: So there's the apex of the triangle.
So you and I, if we're in one bank, the bank is at the top of the apex and you and I are at the bottom.
And then the transfer just goes along the bottom of the triangle, no need to involve reserves.
But if we're in separate banks then we're each in one end separate triangle, above us are the bank accounts of each of our private banks at the Federal Reserve, and then they make the transfer at their accounts.
That's the basic structure.
George: Yeah, okay. So I want to back up a little bit here. I apologize if this is redundant.
When you're talking about the fractional reserve in a sense that bank has $100 to lend out, they lend out the $90 and are left with 10, we all know how that works.
But the other system, or the modern system, is if they have $90, or let's say $100, then that bank is lending $900 on that $100 itself.
They're not actually lending out those reserves, they're creating more deposits and new additional money.
Which are new liabilities, and then offset that on the left side the balance sheet with those new loans.
And the only time that the reserves come into play is if one of those deposits that they created goes to another bank, or the customer takes out cash.
Then they've got come up with the reserve somehow, in which case they'd go into the repo market, they'd go to the Fed, they'd do something to potentially borrow those reserves, they wouldn't necessarily have them on hand at that point in time.
Am I seeing that correct so far?
Steve Keen: Yep, you're right. You're right. And like one of the realities is if you actually… Let's all say all banks happen to be at the reserve ratio when one bank makes a loan.
When one bank creates a loan, it creates an extra million. Therefore has a requirement of another 100,000 in reserves.
If that million though gets taken to another bank, that other bank getting a million deposited, has got more than it needs in reserves, and it lends a fraction back to the bank that made the loan in the first place.
So there's a complicated market where banks are trading reserves with each other all the time.
Only if a bank is not trusted by other banks will it find it has to go to the Federal Reserve window to get the money.
And the last thing the Federal Reserve is going to say is no in that situation, because if they say no what do they do? They cause a bank run. What's one of the main roles of reserve? Preventing bank runs.
George: So just to be clear, when that, let's call it $100,000, goes from bank A to bank B, because that depositor says, “Okay, I'm done with you Wells Fargo, I'm going over to Bank of America.”
Then that deposit or that liability goes from the original bank to the new bank and they have to also transfer over, which happens behind the scenes, in the Federal Reserve.
They have to transfer those reserves from the old bank to the new bank.
What's one of the main roles of a reserve bank? Preventing bank runs. – Professor Steve Keen
But do they have to transfer the $100,000 in full, so the asset side of the new bank matches up with the new $100,000 liability?
Steve Keen: Yeah, yeah, yeah. This is why I've designed a program called Minsky.
For precisely this reason, to model this sort of stuff. Because mainstream economists, like Paul Krugman, believe that money doesn't matter.
They leave money out of their metric models, and have nothing to do with money or banks or debt. And they haven't even tried to model what they argue doesn't matter. Okay?
So they're ignorant about the actual monetary mechanics.
But the basic story is if you have a transfer for any reason, like if I purchased a $100,000 item off you and you're in a different bank, then to transfer money from my account to your account involves a transfer of an identical amount of money from say Wells Fargo to Goldman Sachs, of 100,000 at that level.
So it's two systems interlocking with each other and the fundamental role of the reserves is to be banks for the banks, whereas the banks are banks for us.
George: Right, exactly. Okay, I'm totally getting it. I actually knew more than I thought I did. So this is great.
All right, now let's go back to that 2014 paper, the Bank of England. Where I get caught up here is, and I'm actually going to go to this right now, Steve, so I can reference the paper exactly.
On one of the first pages, it talks about some of the fallacies and it goes into how bank reserves are actually created by the Bank of England. And it says that the amount of bank deposits… Let me actually read it here.
“The amount of bank deposits, in turn, influences how much central bank money banks want to hold in reserves, which is then, in normal times, supplied on demand by the Bank of England.”
So there it would seem to me as though, if a bank A gets low on reserves, then they just call the Bank of England and say, “Hey, I need some more.”
Now, kind of dovetailing on that, if you go down to where they have their diagrams of how a typical mortgage works, with the commercial bank's balance sheet and then with the homeowner balance sheet, it shows the buyer's bank, after they've created that new loan and new deposit.
That goes over to the seller's bank, just like we were talking about, and therefore their reserves, meaning the buyer's bank's reserves, are depleted substantially, at least in this diagram.
And then it says, “But settling all transactions this way would be unsustainable.
The buyer's bank would have fewer reserves to meet its possible outflows, for example from deposits and withdrawals. And if it made money new loans it would eventually run out of reserves.”
So I'm having a hard time reconciling them saying that they just issue them on demand, but then saying that a bank can run low on reserves, it would restrict them from lending more.
Steve Keen: It doesn't restrict them from lending more, it just means they've got to go and borrow the reserves later.
Let's see, though I want to get down to the reason this actually matters because I know that even in my unorthodox group of economists, they still haven't got their heads around it most often.
And that is that, if you have the fractional reserve banking system, then banks can create money but it's under the control of the government.
When they marry with what they call the loanable funds model, what they're saying is actually going on, is savers deposit money in a bank and a bank lends the money out to borrowers.
Then they put the bank as a neutral body, effectively not creating loans at all.
There's a weird inconsistency in the mainstream modeling, but that's typical, the bastards are full of inconsistencies all the damn well time.
But as they talk about fractional reserve banking and that says it's the government responsibility to control the money supply.
Okay, then they say “Well, we're just loanable funds. We are simply financial intermediaries.” Have you heard that phrase?
George: Yeah, of course.
Steve Keen: Nauseatingly often. They're not financial intermediaries. They are financial originators. And that's very different.
Financial intermediaries imply that they're a warehouse. And they transfer your money to me, and my money to you and stuff like that.
And it's important if you've got a warehouse you don't want the stuff to go off.
So you've got to be careful, you've got to make sure your stuff is repaid and so on, that makes a personal obligation to repay the loan.
But also, in the loanable fund’s version, if I lend money to you, you've got more spending power.
If you pay me back, you've got less, but I've got more. So there's a seesaw effect.
The average of the seesaw remains the same, it tips up and down. If it's up on this side then the borrower's spending the money, if it's up on this side then the lender's spending the money, no change overall.
When you look at it and say banks actually create loans, nobody borrows for the pleasure of being in debt.
So when you borrow money, you borrow to spend. And rather than this canceling out, what you've got it assets and liabilities the bank can either expand or contract, and it's not a seesaw, it's an elevator.
So if the bank creates new loans, the amount of money in existence goes up, and that new money creates demand.
So movements up and down in loans and deposits, actually cause movements in aggregate demand.
Credit is not a zero-sum game, but in the mainstream model, they say it's a zero-sum game. And that's why they leave banks and debt and money out of their models.
Now, that's why they didn't see the financial crisis coming because in that model, and I can literally demonstrate this in my Minsky software.
If you have a massive increase in lending, it can actually reduce aggregate demand.
Because the person doing the lending can have a higher propensity to spend than the person receiving, even though there's a borrowing going on.
And then there's a massive fall in debt, that can actually increase demand as well, for the same reason.
It goes back to the person with a higher propensity to spend.
So you can ignore the banking sector completely. When you acknowledge that banks create deposits, and people then use that money to spend, and an increase in lending means an increase in demand.
A fall in lending means a fall in demand. And that's what causes the booms and slumps like the 2008 crisis.
The Bank’s Balance Sheet
George: Right. So, okay, I think I'm getting 99% of it.
The next thing I'm struggling with is the actual bank's balance sheet.
Going back to the fractional reserve system that we talked about where you've got the $100, you're lending out 90 and you just have that money multiplier that goes up to 1000 in deposits.
But yet the same thing happens. And in the modern system, which is I assume correct, and that if that bank has 100 they lend up and they've got now 1,000 in assets, they've got the 100 original in reserves, and then they've got the 900 in new loans.
But isn't that, as far as the balance sheet at the banks, isn't it identical?
Steve Keen: The balance sheets look the same but you're thinking about the wrong thing.
People say the reserves, it's actually the equity. I've learned this myself in designing Minsky, I did not realize this until I did Minsky software.
So you have assets, liabilities, and equity. Now when a bank starts, it needs equity. Which means that assets minus liabilities must be positive.
And before you've created your very first loan, your equity side might be 100 million.
Therefore your reserve side is 100 million. Because assets minus liabilities has to equal equity. If you have no liabilities and 100 million in equity, then you have 100 million in assets.
So what we're doing, by talking about reserves all the time, we're looking at the assets side of the book, we're ignoring the equity.
Well without any equity a bank can't function. So what it actually does is lever up, over time, it's equity base, as much as it wants to. And that's the creation process.
The reserves are there, as a mirror image of the equity when you start lending. It's not that the reserves enable the end lending, it's the equity that enables the lending.
George: Right. But that equity came from lending, prior lending.
Steve Keen: No, not normally. That equity comes from a capital issue. You get money from your wealthy friends, you make an RPO, then bang you've got the equity.
So banks have to have positive equity, this is another essential element of capitalism, which puts an inherent contradiction in capitalism right from the outset.
You imagine a pure capitalist economy, and a lot of people who have been pro-capitalist end up being anti-government as well and saying there should be no government, should be total private sector, get rid of this bloody thing and everything's going to be commercial, it'd be a much better world.
In that world you have money. We're not going to be exchanging cowrie shells with each other or trading in gold, we'll have a monetary system, even private money.
America had this back in the 19th century, so did Australia. If you're going to have banks having positive equity, the rest of society must have negative equity.
So one of the rule of our accounting is assets minus liabilities minus equity equals zero. So banks have to work with positive equity because one person's asset is another person's liability.
For the banking sector to have positive equity, the non-banking sector must have negative equity.
Now, you and I can operate with negative equity as long as we can pay our bills as when they're full due.
So if you imagine a firm borrowing money from a bank, it gets a $1 million loan.
It then turns that $1 million loan over twice a year so that $1 million of cash causes $2 million worth of transactions, and has to pay its workers say 1.6 million, the boss hangs on to 350,000 and pays 50,000 interest to the bank.
It's quite a sustainable system. But the firm, when it looks at its equity base, its cash accounts might have… it takes out the million initially, that was a million, so it's already at zero equity.
It then pays the workers some money, they might end up with say 50,000 in their accounts, or 100,000 in their accounts.
The firm has 900,000 it its accounts, but it's got a debt of a million. So the firm's operating with negative equity. But because it turns the money over, it can do it.
Now the shareholders can be in a similar situation, the workers perhaps as well.
Nobody likes being in negative equity. So what do we do? We think, “Oh, God, maybe if I go and borrow some money from a bank and buy a house as an asset, or a share as an asset, the price will rise.
And we then record on the asset side, where we had the shareholding or the house, we multiply the number of shares we've got by the price the very last share sold for.
And “Oh, great, we've got positive equity.” Garbage. Because if we all tried to realize an equity at once, share prices would crash.
So we get caught in this mess.
George: Yeah, we need to sell the shares.
Steve Keen: Yeah. Yeah.
George: You'd sell the shares. Right.
Steve Keen: Yeah. Now that is one of the traps of capitalism because people are individually uncomfortable with being in negative equity.
It encourages them to go and borrow from the banks and speculate on financial assets to give themselves a notion of positive equity, but that positive equity is self-driven by the level of debt.
And then you get those appalling feedback systems that we see, where you get booms and crashes on stock markets and booms and crashes on the housing sector.
So the only way around that, to stop that happening all the time, is to have some institution in society which can handle being in negative equity.
George: That's the Fed.
Steve Keen: Yeah, the government. The only institution that can handle being negative equity is the governed system as a whole because it has its own bank.
So in a fundamental sense, the government can be in negative equity.
But what it means is the government runs a deficit, it pumps money into the economy, let's say it pumps $1 trillion in, it ends up in $1 trillion in negative equity, but we end up with $1 trillion in positive equity.
And when we take into account, looking at the bank sector, overall we end up in positive equity. So we're not as stressed.
So ironically, if you want to avoid… I've lost the word but, neurotic element of being in negative equity, the government, by being able to take that negative equity, lets the rest of us feel less neurotic.
Steve Keen: So you need a government sector to have everybody in positive equity, except the government, which can handle negative equity.
Equity In The Private Sector
George: Yeah, well I'm definitely one of those free-market, low-government guys.
But I'm also someone who really loves to learn from people and keep an open mind, so I'm just fascinated to have my horizons expanded here.
Now, my question would be, if we go back to the 1800s, and we had deflation, prices at the beginning of 1800 were 50% higher than they were in 1900.
But you had nominal GDP growth, you had a certain amount of wage growth, so…
How did that work when we look at it through the lens of that negative equity, in the private sector?
Steve Keen: Oh, I think that's a large part of the people.
Every time there was some new bubble coming on people would dive in to borrow money off banks and gamble on it and think they're in positive equity until the system crashed about 15 years later.
So if you take a look at the long term private debt data for America, which I've done by combining Federal Reserve data, which starts fundamentally in 1946, with data from the U.S. census, in two different series.
We go right back to 1834, when I put those series together… they overlapped thank God, so I can work out how much do I have to raise one and lower the other one to make the overall data series consistent.
I then look at the rate of change of that and this is where I make a distinction between debt and credit.
Most people use the words interchangeably, and that leads to massive confusion. So I call debt as the actual dollars you owe, and credit as change in debt per year, which is a flow.
Now, I've created this long term series, which people can find if they look on my Patreon site.
As well as the site's being free, they've got a little set of tags, about 230 of them I think.
So just choose one of the tags, like Federal Reserve or U.S. long term debt or something like that, you'll find the data series I'm talking about.
George: I'm going to be there all night, just FYI, Steve.
Steve Keen: Okay. When you look at that, you see every time there's a possibility for a bubble, up goes the level of private debt, but then down at the bottom, I've got the rate of change of that private debt.
From 1834 to 1937 there were regular periods of negative credit. So when you've got a rising level of private debt, you have positive credit, and that adds to aggregate demand.
And that's what gives you a bubble. But when you have a crisis, either people go bankrupt and their money gets written off or they use their income to pay their debt down, you get negative credit.
So between 1834 and about 1938 there are about 15 episodes of serious negative credit. And that made a slump. And two of those, of course, were the greatest depressions America's ever had.
The 1930s we all know about, the Great Depression, but one we've completely forgotten about called the Panic of 1837.
And I discovered the Panic of 1837 by doing this analysis. I didn't know it existed. That was the worst financial crisis in America's history.
It was actually… there were causal elements to it where the government decided to have zero debt.
What the government did was take its equity out of the economy, and bang! You're on your own with only private equity, privately created money.
And people were having these financial panics and there was a collapse in the level of private debt from about I think about 60% GDP to about 30% of GDP.
But that meant for about five years or more negative credit was running at 10% of GDP per annum.
Steve Keen: And that was a huge scar on the American psyche and I think it's still a large part of what determines American behavior, is that period of time. That was what gave you the Wild West.
Robbing a stagecoach was a good idea back then. So that period of negative equity went right through until after the Second World War.
And then after the Second War, the government was so big that we lived in positive equity permanently.
Now that has its own problem, because with permanent positive credit you get rising level of private debt and we finally got to the level of private debt in 2007 when it hit 170% of GDP and then you had your very first negative credit event after the Second World War.
And it went from +15% of GDP to -5, and that's what caused the crisis. So, neither system is perfect.
But the one where the government exists, if it's properly managed, and it is not properly managed because it's run by neoclassical economists which is basically like having wizards and warlocks in charge of the school education, they haven't got a bloody clue.
Except of course in the Bank of England and few others. It's badly managed, they don't, therefore, look at the level of private debt, they should be looking at it and saying we can't get it too high.
Because if they ignore it, that's largely part of what caused the crisis so I'm not saying the reserve's perfect, by any means, but I'm saying a government system makes it possible for the private sector to have overall positive equity and we remove that neurotic element that is a large part of the American psyche.
And we might get a more Scandinavian form of psychology, where people live in positive equity and you're looking around for good ideas to make new products. You're not panicking about being in negative equity and trying to get out in the next stock market bubble, or tulip bubble or whatever else.
George: Yeah I know. I mean you've obviously thought about it in great detail.
From the outside looking in, I see that so many Americans, and I think maybe other people in developed economies, see that the only way that they can get ahead from a purchasing power standpoint, is not necessarily by producing more themselves.
But by actually betting on asset prices going up, whether it's their home or the stock market, their 401k, and I think it's a perverse system.
I wish we could get back to people focusing on themselves producing more and that's how they're increasing their purchasing power, instead of having to rely on asset prices or, to your point, the people at the Federal Reserve making the right decisions, which I think you've got even a lot more confidence in them than I do.
Steve Keen: Not the Federal Reserve, no. They're economists. So this is the danger, they're neoclassical economists.
Now, I don't know if I can swear on your show, but I'd like to.
George: Sure, sure, sure, of course.
Steve Keen: Okay, okay. They haven't got a fucking clue about how capitalism operates.
They have a mythical model they know very, very well. And that mythical model leaves banks and debt and money out of it.
And then they try to describe capitalism. So I don't have any respect for them at all.
I'd rather kick them out and put a bunch of decent engineers in charge. I'd rather have engineers doing economics than economists any day.
So that's my level of respect for the Federal Reserve.
The people inside the Bank of England, there are some sensible people who have grown up and learned through the whole process.
Not all of them, but there are a few, of course I know them personally. So there's this mythical vision which gets in the way.
But if you look back and say when was America like that, the answer's in the 1950s and the 1960s.
And now, during that period, partly because of Roosevelt's New Deal, partly because of the bank holidays that Roosevelt also voted in, which wiped out a large amount of private debt.
But mainly because of the Second World War. America's private sector emerged with one of the lowest levels of debt its ever had.
Not the lowest, but one of the lowest they've even had. So for the 50s and 60s, credit demand had two aspects to it.
One, people had been scarred by the Great Depression and they didn't' want to get in lots of credit…
Credit cards didn't exist obviously, but they do lay-by and stuff like that.
So there was an unwillingness to borrow. But when you did borrow you added additional demand to the economy and the increase in debt wasn't all that bad because the debt was so low.
But they kept on doing it and doing it and doing it, and we got to 1987 and we go into the huge stock market bubble again and we're back in the same old behavior as back in the 19th century.
But with twice the level of private debt. And then when Greenspan went in and did the bloody rescue in '87, rescuing the banks in the market, we just kept on going again.
And we've been caught up in this bubble ever since. And now the Federal Reserve, which could have prevented this psychology of riding the bubble, is now maintaining it.
So I'm not a great fan of the Federal Reserve.
The Private Sector Credit Growth
George: Okay. That makes two of us. But we talk about the private sector credit growth and that's how the economy continues to expand, and that transfer mechanism is through the commercial banks.
But what about the demand sides of that equation?
Correct me if I'm wrong, but the commercial banks really have a hard time lending, if people, regardless of the interest rate, don't want to take out any loans.
So doesn't that have a lot to do with psychology and regulation for small and mid-sized businesses? Can you expand on that?
Steve Keen: Yeah, I mean that's true as well. You want banks to lend to pretty much for three sorts of reasons.
Consumer items that are too big for a consumer to buy or to save up and buy them with cash, first of all.
That's a car, that's a house. Business, which needs working capital, because here's a company you've got to have cash on hand, so if you borrow it from the bank, you've got cash on hand.
You can turn them over. And entrepreneurs, whom I define as people with a good idea but no money.
So you want to give money to those, all three situations. Now, if we control banks so that they can only make money by lending to those three sectors of the economy, they'd be functioning well, we wouldn't get too much credit. We'd get credit where it's needed.
Instead, we let banks decide where to lend and for them the easiest thing is to lend their finances to stock market bubble, through margin loans and to lend to finance real estate bubbles through mortgages.
That's brain dead stuff. And then that ultimately has to collapse because what actually causes the increase in price is the increase in lending.
And I've done the mathematics on this and the empirical work as well.
But if you look at the… because we buy homes with mortgages, and because it's a new mortgage you take out, it's not the level of mortgage debt it's the change in mortgage debt.
So I define the change as mortgage debt as mortgage credit. So mortgage credit sustains the price level of housing.
So you get a relationship between new mortgage debt or change in mortgage debt, or what I call mortgage credit, and the price level.
You, therefore, get a relationship between change in mortgage credit and change in price level.
That relationship is driven… change in credit drives changes in house prices and it's a very strong positive correlation.
And the correlation or causation [inaudible 00:39:31] the direction as well as from, sometimes there's a feedback where rising prices cause you to go and borrow money.
But predominantly, borrowing money causes rising prices.
Now that gives you an unsustainable process because that means that the only way you can have sustained rise in prices is to have sustained acceleration of the level of household debt.
And that's what gives the bubble and crash.
Steve Keen: And the same thing applies to the stock market.
I'll give you a little… this is a piece of news that I haven't yet published on a broad level, margin debt's the same.
So, if you look at margin debt you find that when margin credit is rising, so margin debt is accelerating, you have a stock market bubble.
The Feds sort of wiped that effect out to some extent but it's even happening now.
So, I'm doing a cartoon book with a cartoonist called Miguel Guerra that's going to be coming out in six months to a years time, called something like On The Money.
And it's taking people who've got conventional views about money and letting them run the system and seeing what happens and it doesn't quite work out the way they did.
But as part of that, I went back and I found I had margin debt data from the New York stock exchange going back to 1959, and then it occurred to me that a database I had purchased back when I did my PhD might have margin debt further back in time.
There's this thing called the Global Financial Database, which I think still exists. So I found his margin debt series.
Now I'm sure I'm the first person who's ever looked at this database because people don't analyze it, particularly economists, don't think they have to look at it.
So the people who should be checking the data don't look at the data. I graphed this level of margin debt to GDP.
Now I'll give you a clue, in 2000 and 2007 and now, the ratio of margin debt to GDP was roughly 3%. Have a guess what it was in 1929?
George: 3%. If it's 3% now, or it was 3% in 2007?
Steve Keen: Yeah.
George: Oh, geez. I'd say 5%.
Steve Keen: It went from 2% to 12% over the decade of the 1920s. 12% of GDP.
And then it absolutely plunged in the 1930s crash. And back in those days, margin debt allowed you to buy shares with a 10% deposit.
That's why the 1929 crash was so big. So what we do, we end up gambling and speculating rather than being entrepreneurs. And that's because we let the financial sector lend without regard to the amount of debt.
It's creating and without regard to where that money's being used.
They're not geniuses running banks, they're often charlatans running banks, because you can make a huge amount of money if you create lots of debt.
You charge fees on it, your rewards are driven by the amount of loans you're creating, it's all encouraging you to create debt, pretty much without regard to its quality.
And a great friend of mine, an ex-banker who's well worth reading called Richard Vague.
Great last name, we're going to put a book together called Vague and Keen one day.
But Richard has become a critic of the banking sector because he actually looked at the level of debt and saw what was going on.
He's published a brilliant book I think of it as the Kindleberger and it's the Charles Mackay of our day, but it's better written and better researched.
It's called A Brief History of Doom. So I really recommend people read that book and see what is the financial history of the world.
Which is actually accurate both in its macroeconomics and understanding how the banking center operates and how it causes promises like this, and how you should not have an unregulated banking sector.
But fundamentally what these neoclassical economists in the Fed Reserves have said, “Oh, they're going to be responsible businessmen.” Garbage.
They've let the financial sector riff and that's actually hampered the industrial and entrepreneurial sector of capitalism, which is what we need to make capitalism function properly.
George: Yeah, so when I'm hearing that, and again, I'm a hardcore free-market guy, but I always keep an open mind.
I would think that if the banks actually kept the loans on their books and they just didn't sell it to Fanny and Freddie before the ink is dry, and if we would just let banks go bust, instead of privatizing the profits and making the losses public and subsidizing the losses through bailouts…
If you just let them suffer through that, don't create the moral hazard, would that alleviate the problem at all?
Steve Keen: Yeah, yeah, absolutely. For about 10 or 15 years before the next snake oil notion came along and started a new bank.
There's a level of naivety and faith in humanity here that I find in the totally pro-free market crowd which is touching.
It's a bit like a little kid, “Aw, you believe in Santa Clause, how sweet. I'll put on a red suit at Christmas time.” I'm sorry, people do not learn.
I walked out of a seminar when I first presented my model of Minsky's financial instability hypothesis, at my old university back in Australia, and this lovely bloke, a good guy, he's pretty easy, he's not an intellectual by any stretch, he's an academic but not intellectual.
And he walked out of the room and he said to me, “You know Steve, the difference between you and me is I believe people learn from their mistakes.”
And I said, “Yes Andrew, and the other difference is I believe people forget and die.”
Steve Keen: Now, people forget and people die. And their memory and experiences are gone and we can only repeat the same bloody mistakes all over again.
You need some sort of long term history memory to be able to do that, and you can't do it with a market system.
You have to have some non-market system which records that memory and knows what the hell's going on.
Unfortunately, we have a bunch that records memory and doesn't know what's going on. And that's mainstream economics.
George: Yeah see, that's how my mind is I understand how in a perfect world, if we had benevolent people in charge that were managing this, that could potentially be superior.
But I just think, boy, we're choosing a system, potentially, and requiring people that are at the Fed to manage that well.
And if they don't manage it well then we get a worse outcome than potentially just leaving it up to the free market.
Steve Keen: It comes down to… The thing about astronomy, and my favorite analogy for neoclassical economists is Ptolemaic astronomers.
If you had a bunch of Ptolemaic astronomers trying to do moon shots, you can imagine the outcome.
Lots of crashed rockets. And rockets that would miss their destination because the epicycles are not correct, to begin with.
Once we get the corrected astronomical understanding, you and I can talk about sunrise and sunset, and know that we're really talking about is earth rotate.
If you have a decent intellectual background, which is accepted as the proper understanding of a system then the people who manage a system, even if they're a bunch of twerps and so on, they're going to be managing it roughly correctly.
So it's partly the lack of understanding that's our main problem rather than whether we're free market or a mixed system.
But to me, part of the proof of the pudding is that before debt became a problem, before private debt became a real problem, we had a golden age of capitalism.
We had that period from the late 40s to the late 60s when we did everything, massive innovation, good standard worker's wages, loan, private debt, high level of sense of security, etcetera, etcetera.
That was with a mixed economy when the government was about 30% of GDP.
Steve Keen: When you go back to the previous period, right from 1830s through to the beginning of the Second World War, the Great Depression as well, the government was no more than 10% often about 5% of GDP.
To me that's like having a house with no air conditioning. The temperature's going to be hot if it's hot outside, cold if it's cold outside, and you've got to live with the swings and the roundabouts.
The air conditioning system is there to attenuate, need a bit of feedback.
So I've got a yin and a yang type of approach and I'm very skeptical of government overall. I'm very skeptical of government-driven by mainstream economists.
But I realize the need for a dual system to make it work well. And it's a question of tuning that dual system to make it work reasonably well. It'll never be perfect.
So what we have is an extreme where you have people arguing for free market one extreme and saying that's great. And total socialism on the other, and I don't mean Bernie Sanders.
Bernie Sanders is not a socialist in that Russian sense of Stalin. You need a mix of the two. And it's tuning it properly.
The trouble is we get people pushing for either extreme, and it's a combined system that works better if you understand how it works.
And we have a combined system driven by people who don't understand how it works. The main problem is getting rid of neoclassical economics.
The Fed, The Black Swan, And How It All Plays Out
George: Okay. All right. That makes a lot of sense, and like I said, it's a lot different than the way I think or my belief systems, but that's okay.
I'm always open to new ideas and obviously you know a heck of a lot more than I do and have studied a lot more.
But I want to be cognizant of your time, Steve, and I'd really be angry with myself if I didn't ask you a few questions pertaining to today and the future.
I mean we're talking right now as the feds just came out and cut by 50 basis points, and that not only did not make the market go up, the last time I checked, the market was down by 400 or 500 points.
So the way I see that is you've got… Especially with what's going on with this coronavirus, it's a potential kind of black swan if you want to call it that, jeopardizing an already fragile economy that's built by asset bubbles, to your point.
And when you've got that powder keg, if you will, it's kind of the government and the Fed versus the reality of the news flow on who's going to control the confidence of the American public or XYZ economy.
So generally, going back 12 years when the Fed would come in and especially do quantitative easing to extend their balance sheet, that would have the psychological effect or monetary flow effect to increase the stock market.
But if we get into the stage of the game, where even if they lower interest rates or expand their balance sheet, the stock market actually does the opposite, how does that play out?
Steve Keen: Yeah, I mean, this is a point where we're facing a process which in one sense is an exogenous shock.
It's not exogenous because we've caused this process by becoming far too dominant a creature on the planet and that means we're the best sort for pathogens.
So we've asked for this bloody one. But looking at it simply when it comes out of the blue, yes its an exogenous shock.
Now, in that situation if you have an only private sector system and you enforced all the rules of the private sector system, we'd be in a collapse, no time at all.
Because workers would lose their jobs, they don't have enough money to pay even a couple of weeks living expenses before they're flat broke.
They can't pay the rent, they get evicted, they're evicted onto the street, what'll they do?
They'll catch coronavirus and pass it on to the rest of us even more so. The financial sector would collapse because suddenly revenues are down.
The production line is broken because we have this complicated global production system right now where the Apple iPhone, most of the components are made in 30 other countries apart from America.
Suddenly that's not coming across, you can't even produce iPhones, let alone sell them.
You'll be talking a serious collapse.
Now, on the other hand, you can't solve it by dropping bloody interest rates.
And if you do QE, what QE was doing was buying a trillion dollars worth of bonds of the financial sector, meaning they've got a trillion dollars worth of cash, which doesn't give them return, covered by cash reserves.
So they want to spend those reserves because if they spend reserves they can't reduce the reserves because when they spend them they go to somebody else, the reserves remain constant.
The reserve leakage is with overseas, which again, Carney's done some very good work on.
Not Mark Carney, but John Carney. So the reserves have gone down slowly. Oh, a guy called Zoltan as well is brilliant on this stuff as well.
He's very, very good. He knows his stuff very well on the technical side of things.
Steve Keen: What QE did was prop up share prices because bonds are gone, you didn't have bonds any more you had cash.
As a financial institution you bought shares and that drove up share prices. Now, in this sort of crisis are you going to buy shares?
Steve Keen: Okay. So that indirect mechanism, which we're relying upon.
Federal Reserve, financial sector buy shares is not going to work. We have to do several things.
First of all, we have to get the money to the private sector, not the financial sector.
Because we have people renting homes, who are going lose when the economy drops and be out on the streets in a week or two weeks.
And that will accentuate the virus process. People paying mortgages will be in the same situation, they'll fold, because they'll lose their jobs as well.
Companies, restaurants are going to be screwed by this. Education, sporting venues, a huge number of industries are going to go down for no fault of their own.
It's a systemic hit they weren't expecting and they shouldn't be expected to expect it.
The health system will fail and what do we need the health system for now?
This is a system where you can't rely upon the private sector. It's got to be the government. It's got to be a collective effort.
So I would want the government to do what I called a modern debt jubilee, some time ago, but I now call a modern virus jubilee.
And this has been done by Hong Kong already. Hong Kong government's given everybody 10,000 Hong Kong dollars, which is roughly $2,000 U.S.
The only way would be to create the money and you can pay the rent, you can pay the mortgage, you can buy some food, the system won't break down.
So I want to have a modern jubilee, now, to enable us to get over the financial shock of this thing and buy us time. Because we need time to fight the virus.
We need to get through the next two years to be able to fight it effectively.
George: How would that work if we're increasing the money supply of basically the average Joe, giving them more purchasing power, but we potentially get a supply shock, reducing the amount of goods and services.
So we're increasing the money supply while reducing the amount of goods and services, would we not get some serious inflation with that?
Steve Keen: No, the trouble is… and this is where people think in terms of what the amount of money and its circulation.
This is one thing I'm largely originating because of looking at my Minsky modeling has taught me this.
We used to call it the velocity of money and this was bastardized by Milton Friedman.
Who stuffed it all up in a way he thought about it, because he thought the government dropped the money out of helicopters and created it, it's really the private banking sector that does that.
But the velocity of money has slowed down radically over time. If you look at the velocity of money, how often did money turn over per year between 1950, roughly, and 1970?
It was about 1.8 times per year, roughly twice a year.
Until the inflation took off in the 60s and 70s and it rose to about three and a half.
Steve Keen: That was the peak of the [inaudible 00:55:40]. Now it's down to 1.3, and falling.
Now, with the coronavirus hitting, it's going to go even lower, might fall below one.
That's going to be a huge drop in aggregate demand, and that itself is going to compound on itself.
So, partly I think, there's a rising level of private debt, people have responded to that by saying, “I want to save money to pay my debt down.”
Individuals can save, but at the aggregate level what you do is slow down how fast money turns over, making the problem worse.
So we need to counteract what's going to be a drop in the velocity of the circulation of money and we can counter it by creating additional money now, which you spend instantly.
So if I go to the velocity equation that Milton Friedman hammered into peoples heads, money times velocity equals price level times transactions. That's wrong.
It's money times velocity plus change in money equals price times transactions.
Now, we're going to get a plunge in velocity, we can compensate by an increase in the money supply.
And then that might give us problems further down the track but if we don't get those problems further down the track, maybe 3% of us are going to die.
So it's one of these things where, yes, there might be inflationary consequences for it, but if we don't do it now, we won't have an economy to worry about anymore.
We'll come through it. I don't see this as wiping off the… it's not going to kill every human.
But it's going to kill 1 to 3% if we don't control it properly. And it will devastate the financial sector and we'll be in ruins afterward.
So realize the seriousness of this thing. Do something which is temporary, a band-aid, if you like.
But it's either a band-aid or a gushing wound and I'd rather the band-aid.
And what would the long term consequences be that you referred to? Would that just be that we're running trillion-dollar deficits and they just go to the roof?
Steve Keen: Oh, this is the thing, the government should run a deficit.
Again, the belief the government should save money is again, one of these fallacies by not making any monetary sense.
Because if the government's going to run a surplus, which is what a lot of people think it should do all the time.
To run a surplus, necessarily, the rest of the economy is running an identical deficit. Because when looking at balance sheet terms make a huge amount of sense.
If the government taxes me more than it spends and runs a surplus, the amount of money in your bank account's going down by precisely as much as that surplus is.
So this drop in money means that you have less money in your bank account. And on top of that, if you have less money then all of a sudden it turns over in your bank account.
the belief the government should save money is again, one of these fallacies by not making any monetary sense. – Professor Steve keen
So attempting to reduce the government debt ratio by running a surplus can actually increase the government debt ratio.
Because first of all, the change in the debt, which say you drop your government debt by the amount of the surplus, that's your numerator.
You also drop the denominator by precisely as much, because government spending minus taxation is part of GDP.
So you have identical fall in numerator and denominator. And then, the turn over of money, there's less money to turn over, which is also on the denominator.
If the money turns over in terms of the business sector, which actually generates wages and profits, it turns over two to two and a half times a year, in that part of the economy when you look just at that level of spending.
If you drop the debt by $1, you can reduce the GDP by three. So trying to directly reduce government debt ratio by reducing government debt, can increase the ratio because it reduces GDP more than it reduces debt.
And the analogy that I'm using, I've used this in the cartoon book I've just written on this, it's like what happens when you get into a skid.
You American's aren't particularly used to roundabouts are you?
George: Not too much. But I've…
Steve Keen: Okay, okay.
George: I used to live in Australia so I know them well.
Steve Keen: Oh, right, okay, okay. If you're in a roundabout, you're going too fast, you get into a skid, because in Australia you're going right around the roundabout.
You turn the wheel right, you get into a skid, what does the amateur do? He tuns the wheel further and even further right, and the car spins.
The professional turns the wheel left. So this is in that sort of effect. The direct idea of attacking something is the wrong way to go about it, it's the amateur way.
So if you want to reduce the government debt ratio, run a deficit.
Because it will increase the money supply and increase spending, more than it increases government debt and the ratio will fall.
And if you look back at the American dollar from '45 through to about '80, before Reagan got in control, you'll find that the government debt ratio was falling all the way through, while the government was running a deficit.
The reason being, the money created and the money that turned over again, the turn over of that money in the private sector, increased GDP by more than it increased government debt so the ratio fell.
All this is at this point running a surplus, having an increasing ratio.
George: Right but that creates the inflation that reduces the…
I know in the 70s the U.S. debt dropped substantially due to the fact that they were paying it back with cheaper dollars, but really what that means is nominal GDP is going up a lot faster so the tax receipts are increasing.
Steve Keen: That didn't start happening until '67 or '68.
So from '45 through to '68, we had a deficit… Oh, pardon, I've got a call coming, I've just got to say no.
Okay, okay. The golden age of capitalism was about '48 to '68. And in that period the inflation rate was low. And the government deficit was a positive deficit and the debt ratio fell.
So the inflation didn't happen to that [inaudible 01:01:33] period, when we had strong bargaining and powerful workers because unemployment was really low and we had the first oil crisis.
The first oil shock, when prices increased by a factor of four, you when from $2.50 a barrel in '73 to $10 a barrel in '74. And then you had it happening again in '79, from $10 a barrel to $40 a barrel.
So in that sense, which we've set it up by having the economy operating at a gang buster's level, but it was the price increases for wages and the price increases for oil that gave us that inflation.
Again, that was a case of not looking at your overall system and saying, “We're in trouble here, we've got too much tightness of demand.
We should be trying to take this demand out of the economy.”
So again, it's not that inflation reduced the level of government debt.
It's that the economy was allowed to get into a gang buster's period and a real bubble and in '73 was the first private debt bubble.
When you look back at the data, there's a big private debt bubble in '73, '74, '75. And that's what brought the economy down.
Government Deficit In Keen’s Model
So what would the ideal level of the deficit be according to your models? How would that play out?
Steve Keen: It's pretty much the government deficit can be compared to the rate of turn over of the economy.
So if you want a 5% increase in GDP in nominal terms, a deficit of 2.5% of GDP when the velocity of money is 2, is about right.
Steve Keen: So something in the order of 2 or 3% of GDP, maybe 5 on some occasions.
That's at a level as a sustainable level of the deficit.
George: Okay, so the problem is if the deficit goes above that, then it's unsustainable, you get Japan or…
Steve Keen: If you're in a tight economy. At the moment the American's are running a deficit at 4% of GDP, under Trump.
You haven't got rampant inflation. It's something I won't answer just in a podcast, I want to go into a lot more detail.
But the basic story is a deficit of about 2 to 3% of GDP is a sensible, sustainable level. And that's been the level, on average, for the American economy for the last 120 years.
So the government surplus, for all the history for the last 120 years has been a deficit of 2.5 to 3% of GDP.
Just get relaxed about it, that's what you should be doing. And trying to push it down if it actually causes the problems.
George: As long the banks are behaving. The commercial banks.
Steve Keen: Yeah, you got to get the banks under control is what. Don't let the bastards get out of control.
George: All right, well I really appreciate your time. It's been eye-opening.
I really look forward to doing this again and I look forward to going on your Patreon page this evening and just diving into all this research and trying to learn and absorb as much as I can.
But can you remind the viewers how we can find more out about you and all the good things you have on your page?
Steve Keen: Yeah so it's www.patreon.com/profstevekeen. I'll say it again, I'd like people to sign up and help me out.
The minimum is a dollar a month. I've got one guy giving me 1,000 a month, which is much appreciated, but that 450 subscribers.
But you can read 99% of what's there without paying me anything.
Because I actually asked my patrons when I started this thing, I said, “Do you want to make me have created just for you, or make it public?” And they said, “Please, make it public, we want to get rid of all the myths that dominate.
How we think about the economy, and so we want you to put this stuff out there for free.”
So people can check it out and not pay me a cent.
George: Yeah. Awesome, awesome. Steve, I appreciate it, I can't wait to do it again.
Steve Keen: Thank you, man. It was good fun talking to you.