The neoclassical vision of saving and lending -- the standard model being taught in universities -- causes economists to be blindsided by the dynamics of debt in the economy, according to Steve Keen. In part 3 of this INET interview, Keen talks about the role of private debt in the economy.
It is true that one person's debt is another person's asset, but it is equally true that banks create money when they lend. This kind of endogenous expansion of debt, Keen says, drives economic activity, and most economists are completely oblivious to it.
In part 4 of this INET interview, Steve Keen tells us why he prefers to speak of the credit accelerator, rather than the credit impulse. "An impulse implies it comes and it goes; acceleration is always with you."
Keen also talks about how tough it was to contend that Australia was doomed. He had, early on, and in a minority of one, publicly warned of the coming crash in the housing market -- the mortgage industry was not amused. "It's personally difficult to continue doing that, but I simply couldn't see how I was wrong on all this."
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