Home > Miscellaneous Musings > Why is Keen’s analysis so good and his policies so bad?

Why is Keen’s analysis so good and his policies so bad?

People specialize.  Some people are good at analysis and terrible at predictions.  Some are good at maths and terrible at written English. 

Steve Keen is a great example of a ground-breaking analyst of the current monetary system who is genuinely terrible providing concrete policy prescriptions to correct the weaknesses in the monetary system which he describes so brilliantly.

His latest contribution is here on his blog.

There are so many holes in his prescriptive “solutions” to the problem of debt and credit, it’s embarrassing to even have to respond to them.

First, his criticisms of the American Monetary Act are incredibly weak.  From hearing him talk at the recent conference, it’s as though he objects to any anti-bank reform he hasn’t proposed himself.  He’s very critical of everyone else’s ideas but his own.

He says the regulators are captured and Glass-Steagall was abandoned.  Yeah.  After 70 years.  That’s not too bad of a record.  Constraining unregulated banking for a few decades is better than throwing up your hands entirely and just giving up. 

We all agree leverage and the issuance of what Mises called ‘fiduciary media of exchange’ is what causes crisis after crisis.  Why not support the AMI’s general push to regulate banking?  It’s not going to get up anyway, so why not add your name to the cause just to add weight to their cause?  I would support their proposal over the current monetary system.  And I’m a Libertarian free-trader!

Second, his two policy prescriptions (a time limit on shares and limits on leverage of property) are equally vulnerable to being termited and watered down.  How could you possibly limit leverage on property to 10 times rental?  Why not 12?  Or 20?  It’s so arbitrary there’s no way his proposal has any chance of getting up.

I’d prefer the AMI’s clear, simple and elegant solution – nationalize the banks.   As a Libertarian I’d then recommend break up and privatization of the banking system along with the monetary system, but anything is better than self-immolation – which is what the current system guarantees

Obviously the ideal solution would be to allow a free market in money production.  Libertarians and Austrians both believe gold and silver would quickly return as money because of their inherent physical qualities as money.  Gold is real money.  It’s malleable, inherently limited, easily divisible into coins and impervious to decay.  It is a ‘natural” store of value.

Contrast this solution to Steve Keen’s tinkering at the edges with ridiculous and politically impossible proposals.

He says he doesn’t care how money is produced. 

He is morally blind to the process of counterfeiting so doesn’t have a problem with it.

Therein lies both his moral weakness and his analytical blindness.

Sad, for such a brilliant modeller to be so ignorant of the principles of sound money.

But then, you can’t have everything…

Categories: Miscellaneous Musings
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