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TOPIC: DISCUSSION THREAD: Episode 14 - Steve Keen

DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #1

  • NathanEgger
    Nathan Egger
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As if trying to sort out the sharply contrasting views of Richard Duncan and Satyajit Das weren't already enough, Professor Steve Keen shows up and starts throwing all kinds of new monkey wrenches into the mix.

For better or worse, we've received a ton of feedback on the last couple of episodes, and what's most important to me is that we can continue to bring on guests who generate thoughtful discussion here in the forums, and beyond. I hope that this week's show with Dr. Keen fits that bill for you guys, but please let me know your thoughts. I'm also really looking to hear from forum users who aren't already familiar with Samir Madani's work from Twitter, and more generally, what you guys think of this change in format to allow for short interviews towards the end of the show with lesser-known people doing interesting work in the world of finance and macroeconomics. We're doing all we can to grow this community of intelligent investors so that we may all have greater success in our attempts to make sense of financial markets.

Happy listening!


--Nathan
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #2

  • thesheet
    peter connor
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Let me first state that I am thrilled with what Erik is trying to do on macro voices.

The idea of a collaborative effort has prompted me to make a posting here about Steve Keen's interview.

I am not a sophisticated investor, but I can say that I think I run my own affairs in a rather sophisticated way. I use my own,"back of napkin" basic ratios of debt to income and some extremely basic cashflow models to keep tabs on my personal finances.

Like him, I am intensely focused on debt levels, only with me it is my personal debt levels.
8 years ago, my wife and I made the decision to increase our debt to help her get her midwifery ticket. Granted this is good debt,
but I've realized that my debt levels are cold hard numbers that must be brought down if not eliminated altogether! A strategic choice
to go into debt is wise, but one must not rest on their laurels.

I've a question to other readers. What is a good way to calculate one's own debt to income levels?
i.e. do you take you gross income and divide that by your total debt without regards to what assets(liquid and illiquid) that you may have?

What debt to income level is considered risky?

Are there any other financial ratios that lend (pardon the pun) themselves to personal finances?

thanks
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #11

  • marting
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thesheet wrote:
I've a question to other readers. What is a good way to calculate one's own debt to income levels?
i.e. do you take you gross income and divide that by your total debt without regards to what assets(liquid and illiquid) that you may have?

What debt to income level is considered risky?

This cannot be answered that simply because the risk is not just a factor of how much debt you have but whether debt is expanding or contracting around you. Anyone who gives you a number (ie a bank) simply doesn't understand the question and risk. Your income is a bad indicator too because you can lose your job any time. What do you mean by risky anyway? 1%, 10%, 50% chance of going bankrupt? If you engage in an activity with a 1% chance of dying I would still consider it risky. Even though the number is quite small. In the workplace one death out of 10,000 is considered acceptable.
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #13

  • thesheet
    peter connor
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Thoughtful response.

What is risky? I have thought about this but not in the way I'm presenting here.

I feel like I'm at some level of risk when I am unable to financially deal with any scenarios that could POSSIBLY happen.

If I can't deal with very likely problems that can crop up then I'm at great risk. If I've got problems covering very unlikely scenarios, then my risk is less. I see a continuum between the two ends. There's also opportunity cost by focussing too much on debt reduction. My personal example is my wife is going for her Phd and we aren't paying our debt off as quickly, but her Phd will provide excellent benefits for us in the years ahead.

My goal to be bulletproof in my finances. I've taken Martin Armstrong's 2032.x collapse as a general focal point. My conclusion isn't that it will necessarily happen. It doesn't matter if it will or not since I believe basic sound finances from a level of debt point of view are the same whether economic times are good or bad.

The subject is much greater than just your levels of debt. I would like a good formula or two so that I can keep track of trends of my debt if anyone knows of any.
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #14

  • marting
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thesheet wrote:

My goal to be bulletproof in my finances. I've taken Martin Armstrong's 2032.x collapse as a general focal point. My conclusion isn't that it will necessarily happen. It doesn't matter if it will or not since I believe basic sound finances from a level of debt point of view are the same whether economic times are good or bad.

There is no such thing with debt. By definition it is taking on risk so you can't be bulletproof. It's equivalent to looking for the perpetuum mobile. The last one claiming to achieve this was LTCM. Wouldn't give too much to what Martin Armstrong has to say. He was in jail for running a ponzi scheme. The way successful investors deal with debt is making asymmetrical bets where the reward is greater than the risk. So you may lose 60% of the time but when you win the pay is 3 to 1. This is a lot of work that only institutional investors can do and they usually have a whole team helping them (Kyle Bass, George Soros). A phd is usually a good investment only if you stay in academia to do research. There are hardly any jobs that require it. Even for the most mathematically intensive jobs a masters with talent and interest is enough.
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #15

  • thesheet
    peter connor
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That's why I'm very focused on paying all my debt down. Ie to zero.

Now I'm defensive, so here you go.
Phd will be of tremendous help!
Tell your theory to my wife, when she's older in her 60's after she's been up 24 hrs at a birth
with her simple mid-wife career? The Phd is an eloquent way of side-stepping that nightmare
And on top of that she's planning on writing books on child birth etc and she has the go to author "in midwifery circles" at least
as her mentor. She has a skill in writing and a Phd would add credibility to the book.

We did make an asymmetrical bet with the debt 130,000$ vs 2.2 million income over 20 years.
We racked up 130000 of line of credit debt 75% our gross income at the time due to her education. We almost went bankrupt when the government funding didn't come through for her new job 6 years ago.
I stress tested our finances recently and a job loss for her would've caused strain but not horrific results.
Eventually I'll be able to extend the middle finger and laugh (nervously) at a similar situation in the future...
I am simply looking for some ratios I thought someone here would have some curated ones.
Maybe I'll just google it....
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #3

  • bigqueue
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I have just listened to about half of your latest Podcast and I think the topic of debt and the economic schools of thought it wonderful. I have come to learn much and appreciate the lessons of the Austrian School....but I am surely not knowledgeable enough to know ALL the various schools and what they espouse.

As for people who "saw the great recession" coming.....my first exposure to a person who saw it coming was a fellow named Warren Brussee who was a Quality Assurance Engineer who wrote a book on the coming Great Depression of 2007-2020....and he wrote in in 2005 I believe. I believe I read the book in 2006.....so when the situation came to be in about 2008, I was shocked to see how closely he had predicted the situation. His prediction of the government's response was not totally accurate, and so his suggestions give to "regular people" were then also not as good since he felt the printing of money would result in high inflation.....that is hardly a negative on the book in my opinion.....I read it a full two years before the shit hit the fan. (you can say the same for some of the things that people like Peter Schiff had said in those days too)

Check out the book here:
www.amazon.com/Second-Great-Depression-W...russee/dp/1591136881

Warren is an interesting guy......I guess being an Engineer myself, I might like him because I find myself "thinking" like him....but that might just be me flattering myself more than I should because I certainly didn't see the issue coming as he did.

He still writes a BLOG, though I don't think he covers the world economy.....I think he might focus on his opinions on Technolofies and such....his BLOG can be seen here:

wbrussee.wordpress.com/

Anyways....I think things like the economy are quite complex systems that could probably be simulated as electronic circuits and benefit from some of the simulation software packages that have been developed over the years......I am sure a mechanical Engineer would say the same of mechanical simulation....either way, it is a very complex system with dependencies and movements like those we simulate for electrons. (voltage, current, resistance, inductance, capacitance....etc...)
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #4

  • levineam
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Great show guys. Love what you're doing by having lots of contrasting views. IMO this is the only way to acquire high quality information. What people always seem to ignore is that just because people disagree that doesn't mean they don't agree on SOME things. For me that's when things get really interesting. Seeing where people who disagree, agree, and seeing how the insights from one person or school of thought illuminate another. Keep up the great work.
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #5

  • ErikTownsend
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Greetings all,

I'm particularly interested in feedback on the two changes we announced - the research roundup e-mail and adding short 10-minute personal interest interviews to introduce you to others in our regular listener community who are doing cool stuff they're willing to share.

We've realized a flaw in our system - when you go and register at MacroVoices.com, you'lre signed up to get the next research roundup e-mail. What we failed to consider is that many people registering are doing so because they wanted the prior research roundup links. We're going to fix this by creating a "Research Library" area on the site where you can find everything we've even mailed out in the past. We only figured out that we needed it today, so it may be a while to set up.

How did you guys like the #OOTT interview with Samir Madani? Would you vote for us including more such interviews in future?

Also, what did you guys think of Prof. Keen's proposal to print money, give it to everyone, but require debtors to use it to pay down debt? I'm not a fan of this sort of government intervention in general, but of all the people I've heard proposing "helicopter money" scenarios, this one seems most reasonable. It's still a rip-off for savers and investors, but we're probably going to get some kind of helicopter money at some point, and if it must happen I for one would definitely prefer a solution that pays down debt.

Thanks,
Erik
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #6

  • mhellaker
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Hi Erik and Nathan,
Your podcast is by far the best source of information about macro that I've come across. Heard about it from retired hedge fund manager Karl Mikael Syding who said (on his podcast) that MacroVoices is something you can't miss. Couldn't agree more and I can't thank you enough for the work that you put into this. Greatly appreciated!

Followed Keen a few years back and appreciate his work. Sad to hear that he has given up on getting attention from CB. We need more people like him. Great surprise to also get Samir on the show. More of this would be nice.

Thanks again
/M
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #7

  • ccc203
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Great show as always. I have stumbled into Macrovoices by mistake. This is by far the best mistake ever. Keep up the good work, guys! I do like the round-up email and "Research library". I have download few of them for bedtime read.

I have googled Samir Madani straight after listening to this week podcast. I really like what he does. And he is full of passion. I like it so much that I I have registered twitter and stared to follow #OOTT. It is a very interesting movement that Samir has started. Personally I think it is a good idea to include such interview in the future. It raise general awareness of good stuff to all the folks. I am not a twitter user myself. So I would not know this if wasn't for you.

Professor Keen is a very interesting person which intriguing thinkings. I don't agree fully with his views(I am more pro-capitalism and free market)but increasingly it looks more probable than before. If I remember correctly, he is one of the key economic advisors to UK opposition party(labour). If opposition party is ever elected, we might see this idea getting implemented in UK.
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #8

  • NathanEgger
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@ccc203 - Really appreciate the feedback here. I spend so much time on Twitter that sometimes I forget that most of the world isn't doing the same. Exposing people like Samir to a broader audience than Twitter may allow for is exactly our motivation in getting people like him on the show, and I'm glad his work resonates with you.

@all - Thank you for listening and interacting with us. We'd be as good as lost without all the excellent feedback.
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #9

  • ErikTownsend
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Thanks so much fort your kind words, @ccc203! We agree that Sam rocks!

We got a fantastic compliment on twitter tonight when someone said Sam is our best guest yet. I couldn't agree more!

Some people aren't getting it yet... Sam is a real normal person and definitely not a 'famous guy' like Jim Rogers or Marc Faber, who we're super proud to have brought you guys in our first two episodes. But guess what? Mr. Rogers and Dr. Faber take my calls because I have a podcast and can help them. Samir is ready and wanting to meet you personally, and engage you in the exciting work he's doing. If you want to be involved and don't know anything about it, he'll teach you. I challenge any average Joe podcast listener to reach out and make a personal connection with Mr. Rogers or Dr. Faber. Respectfully, these are guys who don't have time for you. Sam is ready to be friends. He wants to share and compare with other private investors.

I'm equally proud to bring you guys Rogers, Faber, or Samir on the show. Obviously, Rogers and Faber are far more accomplished in their careers than Sam is at this time. But Sam will answer your e-mail personally, and with passion.

Your call on which guests we're doing the best job of bringing you. Nathan and I will adjust course based on the feedback we receive from you, our listeners.

All the best,
Erik
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #12

  • marting
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Good interview but there was no discussion of the inflationary effects of prof Keen's proposal. I think savers would still lose and debtors win in this scenario. So it's a tremendous moral hazard. Someone with a big mortgage would have a house left but someone who saved would have a bit more money that's worth a lot less. There is no easy solution and the only just solution is bankruptcy for those who took on too much debt. Prof Keen is willing to compromise on justice for social harmony which I guess is a question of ideology not logical reasoning. He was so far the only person I know who had a valid argument for why bitcoin could not become money. So it's quite surprising that for someone this smart it took so long to give up on central banks.
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DISCUSSION THREAD: Episode 14 - Steve Keen 6 months 3 weeks ago #10

  • Michael Gebhart
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Love your podcast. I am very small time trader who looks at macro.

Steve Keen is right about private debt being too high but does not understand how that happens and claims it is a natural phenomenon of capitalism.
People have not had a right to their money as they would a warehoused good. I'm guessing what happens is people forget after a crises about collateral and loan money is valued for it's ability to collateralize future income streams. This is aided by central bank monetary policy. Keen's definition of money obfuscates the role of the monetary authorities as he states that only commercial banks create money. This isn't the case for some traits of money is that it is a store of value and the final payment for settling a transaction. Bank money is a derivative of it. There would never be a bank run it were a store of value. He also confuses the velocity of money with productivity in standard Keynesian fashion which throws economic calculation out the window.

One other warning about Keen is that he has been pushing the idea that technology kills jobs; another justification for helicopter money to fund a universal basic income. The Austrian school's capital theory shows why this does not happen. Capital goods values are simply imputed into land, labor and interest further up in to the capital structure and to the extent it is cheaper it frees up purchasing power elsewhere.

Keen does reflect the Soros backed INET (Institute for Economic Thinking) agenda of helicopter money which has been gaining influence and will likely happen to some extent by desperate policy makers.


Mike,
Menasha, WI
Last Edit: 6 months 3 weeks ago by Michael Gebhart.
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