Bernard Hickey talks to Professor Steve Keen about asset prices, debt, and a 'modern debt jubilee'

Earlier last month, Bernard Hickey spoke to Professor Steve Keen, an economics professor at the University of Western Sydney about his unconventional economic ideas.

Professor Keen runs the 'Debtwatch' blog, and the website He is a follower of Hyman Minsky, has built is own substantial following, and claims to have predicted the 2008 GFC. Like Minsky, he argues against the accumulation of debt. He is a speaker in high demand.

Bernard started by asking Professor Keen about why debt matters, and what moves asset prices.

Professor Keen has the view that banks make profits by creating debt, and while there are some good outcomes from this when the borrowing results in expanding the productive base, most of the recent debt expansion has been for 'unproductive' housing and has resulted in rising prices and rising housing debt levels.

He is calling for a "modern debt jubilee" - QE for the public - where both savers and borrowers share in the debt forgiveness, and the banking business is radically restructured.

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I assume that once the mortgage debt was reduced that the LVR would be reduced to a permissible level otherwise it would all go off again.  Sounds like a good idea to me.  Something has to be done.

Keen has mentioned that the ability of the private banks to create credit would be curtailed by an equal or greater amount than that created by the govt/RB. This reduces the inflation threat. eg once someone's mortgage was paid off to a bank, that bank could not make a new loan for the same amount to someone else. Over time the amount of bank created credit in the economy would reduce significantly and the interest payments along with it.
He has also talked about reregulating the banks including reducing allowable mortgages to a proportion of a properties income, say 10x rather than to the borrowers income. Cash buyers could still pay what they like but not your average punter no matter how much they earned.
Keen and Hudson amongst others, going back to Adam Smith, are also big on taxing property with a land tax and reducing income tax. Keen and Hudson both believe in capitalism but not a system ruled by the financial sector
The whole premise is to prevent another explosion of private debt after a total reset of the economy on a low debt footing.

'he claims he predicted the gfc in 2008
'well he either did or he didn't.
you can't go over niagra falls slightly.

Luckily for us all , Steve Keen became an economics professor ( garnering a tidy salary from the university system , sucking off the government teat ) .....
...... if he was a practising medical surgeon , with his penchant for unconventional thinking , he'd redesign the patients' bodies ...... re-fit the organs and the bones where he thought they'd achieve maximmum utilization ...
"Cos the human body ain't so different from our economic system .... it isn't perfect , very far from it , but any attempt to radically restructure it  ( based on some mad professors egotistical feeling that he knows best ) will most likely make it worse , much much worse than just leaving well enough alone ...

But GBH, it seems to me the NZ economy has at least three very significant structural problems that leaving well alone has done nothing to address; in fact they seem to be getting worse.
They are:
1) Very high private debt, which has gone pretty much into anything other than something productive, including property and farm bubbles.
2) A persistent current account deficit, meaning as a whole NZ has not grown its wealth in any material way for forty years.
3) Now very high fiscal deficits, with no obvious path back to balance given an ageing population, assets gone or going, and growth in the economy weak at best.
Having said that I do think Keen's solutions are a little more left field ( as in unconventional; not political leaning) than necessary.
A very similar method to help fix the private debt, would be tax cuts at the lowest tax rate area (so they primarily benefit lower income workers; although all income earners benefit). That though would make 2 and 3 worse, without other actions.
So printing money to both bring the dollar down (to fix the current account); and fund the government deficit would help solve those. Counter any inflation effects by limiting foreign money that is coming in for non productive uses. The money printing will chase such money away, or make it unnecessary, in any case.
Many conservatives on here choke at the mention of money printing; but I haven't seen any of them propose a realistic solution to 1,2,or 3; and certainly no solutions to all three. The solution I've noted is effectively that currently managed by the US, the UK, and Japan among others; although they for now are pretending they will one day pay themselves back their money printing. I would undertake the fixes for 2 and 3 now; the fix for 1 is only necessary when the economy hits recession.

Those are small changes , minor surgery ....... Prof Keen wants to biff out your guts and re-arrange your spine , sew it all up , and presume that things will be from better now on ...
...... you're correct .... there's alot we need to address ..... but the good Prof wants to biff the baby out with the bathwater , and attempt something radically new , something that works 100 % only in his imagination..  ..
Do you accept that his imagination is better than yours , or Bernard's , Wolly's , Gareth Morgan's , the Count's , Uncle Ollie's  .. .. ?

I personally suspect the differences would be in scale; and more importantly in packaging and presentation. The solutions I've talked about (including just enough printing channelled in an optimum way to have the exchange rate at fair value) now apparenly seem almost conventional to you, and that's great. For Keen, who just may be right, as no question he's a very bright guy, his biggest issue will be that his solution does sound somewhat Frankenstinian in terms of all our conventional paradigms.
Seems to me the current debate (on here at least, and now in a wider forum with all oppo parties on board), is a healthy one. The compelling arguments to me are the ones that connect as many dots as practical from a logical perspective, with obvious and not so obvious consequences of any actions or policies at least thought of in some way. Some comments don't do that, but at least remind us of a few key emotional hurdles to get over in making any changes.
By the by, I've confused myself even with a numbering system above, so ignore all that. 
Impressed that you were up at midnight offering thoughts. Are you in our fair land at present?

Hey Gumster, I don't recon your analogy is quite accurate.

Keens premise is that the fractional reserve banking system that we all opperate within, is a ponzi scheme, and a messy ending is baked into the system that cant be avoided.  No matter how any participant conducts themselves within the system it will fail no matter what, this will occur when debt will eventially overwealm the system.

His idea is to preempt the day of reconing by giving every individuel a one off payment of new non debt created money (potentially up to the value of the average of percapita amount of debt held perhaps $100k?) with the requirement that any debts held must be paid off.  

Doing it his way eliminates the moral hazard of of rewarding debtors over savers that would come from just wiping debt all together.  Savers would be as richer after the exercise than they were before.
Banking debt that is paid off is extinguished from the system.  The net result in all this is that banking debt gets wiped from the system and we can all start again.

..... and if his initial premis is wrong .... that the fractional reserve banking system is " a ponzi scheme " ..... ?
Who says he's correct on that ! ...... who says " a messy ending is baked into the system that can't be avoided "  .... what if he is completely & utterly wrong !
( but I promised not to have any more pot-shots at the good Professor ..... must behave meself ! )

Don't worry Gummie, Bernie couldn't get rid of you, his site would lose half its webtraffic if you wern't here

... it's me own fault really , for blogging late at night after having a heavy day on the turps :
Message to Gummy :
Don't Drink & Blog : If you do , you're a bloody idiot ..... ( or more of an idiot than usual , in my case , ahem ! )

Well follow along with me for a sec,
Pretty much all money is bought into existence and is done so in the form of an interest bearing loan one way or an other, (a government issued bond or credit created out of thin air from a commercial bank (remember banks aren't just intermediaries between borrowers and lenders they create new money in the form of extending credit)).

And given it is only the princible that is created, How can we pay the interest portion of the loan if it doesn't exist?

The answer is, more money is required to be borrowed into existence as well.  This keeps expanding at an exponential rate, akin to paying off your mortgage by getting new creditcard.  It can keep going on for a long time but at some point it cant continue.
At some point the debt levels overwelm the system.  This is what I mean by unsustainible.

"He is calling for a "modern debt jubilee" - QE for the public - where both savers and borrowers share in the debt forgiveness, and the banking business is radically restructured."
Nah................screw the borrowers! Steve is dead right in many respects EXCEPT he fails to see the conflict of interest when just about EVERY political and banking figure has an 'asset' portfolio fill of property investments!
He's asking them to shoot themselves in the foot! Won't happen.
The whole thing will collapse under massive social decline and rioting before they agree to that. 

True the highly leveraged and the banking sector would loathe this idea but your average Kiwi with a reasonable mortgage could pay it down as well as perhaps their student debt. The young without a home and who currently have little hope of getting on a property ladder where the first rung is out of reach could get a start in a declining property market (less credit and a land tax) or alternatively people could use their unencumbered jubilee payment to start a business. I think there would be an exodus of people from jobs they hate and a big increase in new enterprises. Could be hugely popular especially with the under 40's.

The US and Europe have hundreds of millions with more purchasing power than Chinese or Indians but hasn't saved us yet despite our best efforts to sell stuff to them for the last 100 years

Grant Shirley - the physical planet (which is where your 'stuff' comes from) is at it's limits supporting the 2 billion currently at our level of 'stuff consumption'.
You talking of a 'doubling'?
Can't happen. Where did you get the nonsnsical idea that it can? Did you study economics? My sympathies, you should'a done tarot (less student debt).
No good saying we are small, or that we have largely renewable electricity, or that we produce food. The problem is the payment for same; which requires the payers to be able to consume resources/energy to generate real wealth.
We are way beyond the ability of the planet to address the fiscal (proxy) expectation-to-buy now - which I suspect Keen realises. It took very few generations for the degrees of removal to produce the widespread belief that the clutching of a dollar in the mitt, is a guarantee of being able to buy. It so happened that the two entirely unrelated things could happen for a period, but ultimate scarcity (no use blithering about substitution when dealing with finite resources, that merely delays the inevitable) is just that.

" Peak Atoms " again ? ..... pity that we can't import some from China to make up for our short-fall ... 

PDK, Must be windy up there on your 50 foot horse. You belittle yourself and detract from your point of view with your constant condescending tone. Let others have a say without the antagonism. You get yours, and I quite enjoy your commentary and slant. Chill man.

It's only a pony, and it has no legs.
Doesn't take much to appear tall, what with posters like the one above you  
One of the reasons, seriously, for the shortness of tolerance, is that I started out with the prerequisite supply, back in '75. To be still hearing the blind bulldusting blameshifting blather now, is a tad frustrating.

Keep bangin away. Real change takes a generation. 

this change will take a generation out.

Keen is keen on savers slash investors taking a bail out splurging gamblers and save the banking systemic fraud....if I posted what I really thought of his idea I would be banned from the site for life!

Gummy rides the ragged edge of Hickey's wrath , and I've always consoled myself that guys 'like Ivan , Count  and Wolly are on the same track ......
..... Prof Keen is so full of %^&$ , that only a jumped up egotistical little Aussie *&(%head would throw out these foolish cockamamie theories , and only a daft silly gloomsteriser such as Bernard would waste everyone's time by giving the w#$k*r air-time ..

Settle down GBH, Keens analysis on the relationships of change in debt and GDP is spot on.
His jubilee idea combined with shares having a 'lifetime' are also worthy of consideration, the idea being to reduce speculation and improve real investment. His idea obviously aims to reset the system without causing massive bank insolvency which is in nobodies interest.
It's somewhat bizarre that we take the idea of a jubilee as being crazy, and yet there are many such times in history where jubilees have occurred.

Gareth Morgan has come up with some radically different economic plans , but at least he's a self-made man , proved his worth in the hurly-burly of business .......and come out of it with resounding financial success .... so I pin me lug-holes back & have a good hard listen to his ideas .....
....but  has Professor Steve Keen ever so much as run a corner dairy , or a school fundraising cake stall , even..... ? ..... I get the impression that he's just  another ivory tower academic , permanently sucking off the tax-payer .... never contributing anything more to society than some unproven wild theories ...
Bernard loves the guy , 'cos he's a kindred perma-bear ..... but I totally agree with Wolly's comment above : Only a complete nutter is gonna suggest that us prudent investors should bail out the greedy & the stupid ones yet again , and on a grander scale than previously  . Enough is enough !
.... gimmee someone who knows what they're talking about , a Bob Jones or Ollie Newland , and I'm all attention ...

Gummy, Keen has the problems SPOT ON!..........but as you say he does not quite have the answer without hurting many people who did everything 'right' (relative)  over the past decade. Many of the so-called 'economic experts' out there that 'think' they have answers are the VERY same fools that never saw the GFC coming in the first place. 
Should we leave the answers to the likes of Bernanke? or Geithner? or our own clowns like Bollard? 
Even Bob Jones and Olly have utter failure on record within their business history.
I totally agree with your points on Gareth but unless he runs for parliament his ideas are just fantasy. As is Keens I  believe.
He doesn't deserve the abuse you are throwing at him though

You are correct , Justice ...... I should be nice to Prof. Keen , even though his ideas are daft beyond comprehension ..... I'll leave the fine fellow alone , henceforth ....
...... not another word from moi , on the subject ....
Sorry Prof , for calling you a jumped up , egotistical  little Aussie w%^k#r !

What am I missing GBH? When seeing and hearing of the imbalance in Europe, and difficulty that the NZ youth face to service a loan to buy a house; Prof Keen makes a reasonable sounding explanation on the role of debt backed up by a feasable solution. He did mention the Jubilee is something that could be trialed and implemented in increments.

Didn't Gareth make his millions as a passive investor in a company that sold for silly money?

No , he'd made his fortune with Gareth Morgan Investments , a financial advisory firm , which he founded ..... and that probably explains the name of the company .... or just a remarkebly lucky coincidence ? ....
.... the TradeMe millions were made long after he was already comfortably wealthy ...

Sounds as though you are guessing - I worked at O'Connor Grieve & Co, Stockbrokers from 1978 -1982, thereafter I moved to the UK -  nevertheless, I have a different understanding, please explain - Fay, Richwhite come to mind, but I am willing to be corrected by some one more knowledgeable,  Lunches at the Firestation on K Road are symtomatic of how events unfolded - not that I remember Morgan attending.

 Gareth Morgan donated all $ 50 million he collected from the TradeMe sale into his charitable fund .....
..... he'd already achieved financial success through Gareth Morgan Investments ( established in 2000 ) , his investor advisory service ....
He'd previously established economics forecasting company Infometrics , and prior to that , a horse race tipping guide ....

... a classic case of "but where are the customer yachts?" if ever there was one ...

Plenty of academics have contributed ideas and things to society without running a corner dairy or running a cake stall. What is particularly special about these activities?
Sure he is taxpayer funded but he is one heterodox economists in a sea of neoclassical economists. Surely if economics is actually committed to research you should fund a balance of views rather than just the ones who provide 'advice' to banks and act as enablers for things like hugely leverage derivative trading. For example would astronomy have progressed very far if only Ptolemy was funded?
Only a complete nutter is gonna suggest that us prudent investors should bail out the greedy & the stupid ones yet again , and on a grander scale than previously  . Enough is enough !
You do realise as a saver, your money isn't actually in a bank vault somewhere, it has been loaned out many times over, hence the problem. In the old days of banking (pre deposit insurance, which is really not much more than govt bailout) if you put your money in a bank making reckless loans you would take a haircut on your savings.
Keens jubilee idea is not a bailout per-se. The idea is to writeoff debt so someone indebted might get 100k which has to go pay down debt, the saver would get 100k to do with as they please. Hence each side of the borrower/saver equation would balance.

He definitely doesn't want to protect the banks. One of the proposals is to separate savers current accounts and the payments system from the banks balance sheets so that they can fail and everyday deposits and transactions will be protected. He also wants to spike the property bubble and stop future asset bubbles from being funded with bank credit. By making a jubilee payment of equal amount to debtors, who have to use it to pay off debt, and the debt free alike, it neatly avoids moral hazard. Those with moderate debt will benefit but the really big slurgers will still get crushed and give you your moral satisfaction.

see whats happening for what it is.. it is what it is
not force into a framework you're inclined toward given your preferences..
or would preferred by others for you to apply...

Quite right Wolly.  There is no way savers should have to contribute to the hordes unable to make a sacrifice and thus borrow like there is no tomorrow.
It's all, hey, look at my new house,bike, car ,tv etc.  I don't actually own them, because it's all on tick, but i am keeping up the image.
Sod them.  They made thier bed, they can lie in it.

Sure you can take the moral high road (personally I have no debt at all and could be excused some schadenfreude) but if Hudson for instance is correct and many people have been "tricked" into taking on debt by a self interested banking industry, the problem may be so big your moral satisfaction will only last as long as the debts don't drag the whole house down on top of everyone, yourself included. In which case saying "I told you so" will have a hollow ring. The most indebted and reckless will have no escape even with a jubilee.

I can take the moral high ground for as long as I like.
Because the moral high ground is a nice dry place above the swill of private debt down below.
I take no satisfaction from the position indebted people find themselves in, but i don't feel as a saver, I should have to pay for others misguided decisions either.

I don't get it, how is Keen suggesting savers should pay for debtors?  He is not, savers will be as better off as debtors after the jubilee as before??!!

Obviously I don't understanding his concept fully. If what Keen is saying, isthat the Govt/RBNZ do QE directly into the hands of the public, I can't see anyway that isn't hyperinflationary fairly quickly, at the very least highly inflationary - a public that got itself so deeply into debt over the past few decades, who suddenly doesnt have a mortgage at all, or a big deposit in their account, is going to party like there's no tomorrow for a long time.
And if you knee cap one side of the banking system's balance sheet, effectively kill their source of income through lending, I'm struggling to see how you've have any sort of banking industry left, let alone a smaller one which Keen wants 

A jubilee would have to be accompanied by tax and welfare reforms to encourage productive investment and not wanton consumption. It could also be paid in tranches to stop a massive one off orgy.
As to the banks, who cares. As long as there is a govt guaranteed payments system and current accounts, the banks can tout for commercial business as they should - as intermediateries between savers and borrowers but with no ability to create credit beyond this. If they want to lend they have to offer attractive deposit rates commensurate with the risk of the people they are lending too.

IF they had the skills to manage a jubilee properly, they would not need one.

That's it. I knew I was missing something obvious. Thanks for that.

The Fractional Reserve System will get to a point where it cant go on, Keen is offering a solution to avoid an otherwise gauranteed collapse irrespective of how well an economy is managed, the better managed economies will last longer thats all.  

There is no incentive to go into debt with his suggestion, everyone would get the same handout, the proviso is that if you have debt, you must pay it off.
As you know bank credit is extended, it is simultaniously created with a corisponding debt attached, when bank credit is paid back, the debt it is extinguished from existence.
The net result is there will be collectivly less debt in the system, and banks will have fewer loans on their books to collect revenue from.

No I do not think a Government Guarantee" makes things safer in any way.  The impliciete guarantee banks had was one of the primary factors in the subprime collapse in the states.  The FDIC is just a trick, it is not capable to cover squat in an event of a major downturn.
Keen understands that where money is created from interest bearing bank credit, the debt increases exponentially eventually over coming the whole system, leading to a collapse.  The endgame is not far away.

I am not sure you understand Keen, he is suggesting the jubilee funds be created out of thin air, independent of the banks, so  there is no "debt to go toxic".  When debt is paid back as a requirement of the acceptance it is extinguished.
The net result is the banks get stiffed, a whole pile of debt is wiped from the system and those prudent individuals that had no debt get a stimulas payment to play with.

There is no painless way out of a fiat currency system.  Got any better ideas?

It is more than possible Steve Keen correct. What he and David Chaston and Bernard Hickey don't discuss is the following
Since the beginning of the GFC, the US Federal Reserve has undertaken 6 monetary "solutions". The very first two efforts were a "cash splash" payment to every taxpayer and beneficiary (from memory) of USD $700 followed by TARP for the merchant banks. The "cash splash" into the hands of the peasantry WAS equivalent to Keen's jubilee concept. The other 4 programs (3 QE plus Operation Twist) have been exclusively for the benefit of the banks.
At the same time the Australian Federal Government did 4 things. Guaranteed bank deposits under $1 million (banks and credit unions and building societies only) (no finance companies), an immediate "cash splash" of $900 to every taxpayer and welfare beneficiary, a $10 billion disastrous "pink batts" scheme which was never completed and subsequently collapsed, and a $15 billion BER (building education revolution) which took a long time to get off the ground and only benefitted the building unions and building companies. There were no direct bailouts.
It is now history that the Australian economy survived. The recipients of the $900 went out and either spent it or reduced debt. That "cash splash" direct to the peasantry, plus the bank guarantee saved the Australian economy (and probably the new zealand economy). Again, it was a Steve Keen type jubilee.
Bernanke and the US Federal Reserve is discovering that QE and Operation Twist haven't worked and ignores what did work.
The question you have to ask yourself is: did any of the programs work? If yes: which ones? The evidence so far, is, Steve Keen is right. The message is: you have to get the cash into the hands of the peasants, not the banksters.


 iconoclast - the big difference between Australia and the US is that the Aussie had, and still have, very low public debt levels (23% debt/GDP against the US 100%) and accordingly had plenty of comparatively risk free options to stimulate without threatening their economy. The US did not. It has pushed its debt ratios to hideous levels, and had the Fed needing to fund over two thirds of it last year with printed money.


And only two thirds because of the 2nd half of 2011 when the european scare pushed "safe haven" money into the US - at some point that money will leave, and in the meantime, they will have added at least another $1.3tln to that debt burden, and it will be 110% of GDP by 2014 heading towards Greece's 160%


Money printing has been, and will continue to increasingly be, the only way they can fund their deficits and keep interest rates down, for a period. That period ends when inflation finally starts to bite and eventually the markets kills them with higher long terms, then they finish the job of themselves by having to raise the Feds funds rate to kill it. And kill it/them they will - at that point, the money printing advocates here will realise how stupid they were to propose it when NZ is no where near the US point of no return...some just can't look that far ahead because none of us know the exact timing of these inevitable events

If you stub your toe, whacking your hand with a hammer will reduce the appearance of pain in the toe.  
That is manically great.

Yeah I know, but it was the context in which you used it :-) and that you seem to have had a day where you were on top of your game because it isn't your only good post.
SAS soldiers or other elite athletes probably use similar mental processes to overide signals the body gives that would otherwise inform a person to stop. My personal thoughts on this are that it is detrimental to the body and these guys do die young.
Another angle on what you say is colonades. Most people can only perceive 5 objects, some six and rarely 7, but no one can perceive 8. It is no accident that the Parthenon has 8 columns across the front. Just another one of the optical tricks incorporated into the design.

"Me invade your country.  It cheaper."  -Chinese PM to Aussie PM

I've altered me Gummy odds of a " Grexit " down  to 57.5 % ....... but of a " Germexit "  retirement from the Euro up to 26.8 % ....
....... but within an 11 to 16.5 month timeframe , as opposed to your 12-18 month schedule ..

There will be no 'Keen solution' because lining the sides of the debt hole is a mix of greed and envy.
The extent of private debt and therefore the insecurity of the banking system, are an integral part of sick economic management by govts and slack control by RBs.
To change the system will require the wealth taken by pollies being tied to the private and public levels of debt....the higher the debt....the less pollies get.
Here is one step on a pathway to improved banking regs:

"The main financial regulator will decide what activities the country's retail banks are able to carry out under a new reform aimed at shielding taxpayers from having to bail out the industry again.
The draft Banking Reform Bill issued on Friday includes the requirement for banks to separate their domestic retail business form other bank operations, but it said it will leave much of the detail on the scope of this so-called ring-fencing to secondary legislation.
That effectively allows the successor to the current Financial Services Authority to decide what banking activities can be undertaken within the UK retail banking operations. There remains uncertainty on what the ring-fenced business can and cannot offer, such as providing derivatives services to customers."
Peasants need to be reminded of the recent decision by a secret committee of fools to allow the sale of 'covered bonds' by banks, so the same banks could borrow created credit overseas on the back of mortgaged NZ property, leaving Kiwi depositors to take any the same thieving gambling banks could multiply up the borrowed credit and lend out heaps of cheaper credit to pump life into the property farce that is the NZ economy.

They dont borrow it Wolly if they cant lend it. They borrow it because we want the cheap credit to "pump life into the property farce that is the NZ economy". Isnt it time we stopped blaming others for our own failings ?  More PC not to I guess ?

Oh, so NOW debt matters!  I thought you guys were all cheerleaders for neverending property rises!  Get this Keen guy outta here! 
Strange days when Bernard is interviewing this guy.  David Rosenberg has a great new presentation at Business insider.  Very sobering.  Especially slides 41 and 56. 
Why buy property today when you can buy it for the same price 10 years from now?  That's what you have in the US.  Are we really that special?  OZ too. 
Keen lost the bet, for now.  However, give it time. 
World economy is deleveraging.    Banks are printing.  Sure, this will end well. 

Why is no-one talking about a referendum on this issue? Maybe because NZ is just small  enough, and with a modern banking system, to try Keen's theory out in practice without a possible (even more) disastrous effect on the global economy. IE It's plausible that we could do it and we would be supported as the guinea pig with the biggest balls by the IMF.
Yep.  That's it.  It just might work but as usual we want someone else to take the risk. Bugger that.  Our country's losing its vitality year by year.  Everyone looking to someone else to pull them out of the mire.  Referendum:  NOW. That's what they were put in place for ,after all.
And before you say this stuff is way too important and complicated for the average Joe, consider the legacy of the geniuses.

No referendum because we dont have the detail yet to impliment would take a year I reckon to plan....and no one feels desperate...
See houses donw 30% and alling and then maybe.

Hypothetical. You're trapped in an old clunker  doing 0.001 km/hr in a straight line towards a cliff.  Car won't go over for a couple of years.  Question:  are you desperate yet?

How long did it take the yanks to come up with 700bil.  Did they have the detail? How many mil per month do we continue to borrow?  Have we got a detailed plan to justify this spending?

Yep went there. I see you want citizens referenda to be binding on a government if over 2/3 vote on a proposal.  I totally disagree.  I think better minds than mine can consider momentus decisions that will affect the country.  What I was suggesting is that a yes vote in a referendum would provide this government the weasel (public support) factor it seems to need in order to act on something so contentious. I also believe we do have a binding referendum:  ELECTION DAY.  Too bad less than your stated minimum bothered to turn up last time.
How about you support this:  Unless you can prove you voted in the last election your flat tax rate will be 50%.

not common sense, kooks....

"Ironically, Keynesian clowns are begging for stimulus, as if we don't have it already. But no! $1 trillion in deficit spending is not enough for them. They want to spend still more as if they can overcome demographics, debt deflation, interest on the national debt, and the simple fact that the government can never spend money wisely."
Then consider the damage that would result from having Shearer, Norman and Peters running the circus.

The deficit spending isnt Keynes this is right wing voodoo "economics" and corporate welfare but then never let truth get in your way eh wolly.
Peters has no redeeming features I can see.....the other two, maybe.

I am interested on what you think of Steve Keens jubilee idea Steven, given he is at odds with your friend Krugman on this.

My view on all this is that the system we operate in (independant of all the other factors on the horizon (peak oil/ energy, demographics, climate ets)), is inherently non sustainible and will collapse at some point shortly when all confidence is lost in it.  
A view Steve Keen shares and Krugman doesn't,  Keen offers a jubilee and reset as a solution.

In terms of "friends" actually I would say Steve Keen is closer to me than PK.   I like to read and study both because of their models, data mining and explanations of economics and events seem so through and accurate....they also avoid generally political claptrap unlike say the von mises brigade.
Jubilee's have in practice worked in the past, but the financial environment was way smaller and way, way less complex.  So its not that I dont think Steve Keen's idea lacks merit I just dont know the ramifications if we do it....but, I think it maybe the only practical way out of this mess thats to come....
ie I see a Greater Depression coming and we really dont want to go there IMHO.  So the maybe side effects of SK's idea v obvious real hardship and huge risk of severe social un-rest world wide if we dont.  I have to vote for Steve Keen.
NB If SK's idea was put to PK as a solution would PK say yes? I dont know, PK is I think American centric so such a "socialist" idea might not get a fair read by him, or we might find he grabs it with both hands.
Guess we dont know.

I like this from Charles Hugh Smith on new ideas that challenge the status quo. Or you can continue to believe like most that even if the "system" isn't fair, what the hell I'm just going to put my doubts to one side, there's nothing I can do anyway, and concentrate on making the most for myself and my family.
"The key social control myth is that the system serves your self-interest. If you believe this, then you will defend an oppressive, exploitive, parasitical Status Quo in the misplaced belief it serves your personal interests.
The chief purpose of propaganda is to establish and renew various social control myths. Central States have long deployed powerful myths to solidify their control: “we are being threatened by outside forces, so rally round” remains popular due to its enduring success.
Another key social control myth is that individuals are powerless in the vast systems that dominate our society and economy. This is a very useful myth to the Status Quo, as it leads individuals to surrender their autonomy and liberty without coercion.
In the myth of top-down revolution, nothing can possibly change until the leadership has been replaced and vast, impersonal systems far beyond our individual influence have been reworked at the top of the pyramid.
In terms of directly influencing the centralized political and financial structures that dominate our lives, we are debt-serfs gazing upon the aristocracy’s distant, inaccessible castle. But our remoteness from concentrations of wealth and power does not render us powerless.
The truth is that revolution and liberation are within our reach; when we liberate our minds from pathological illusions of self-interest, we have already achieved the first key step of liberation. We can do so without the permission of the aristocracy or the centralized State they control.
Rather than being powerless, we hold the fundamental building blocks of power. We need neither permission nor top-down political change to liberate ourselves. A powerless individual becomes powerful when he renounces the lies and complicity that enable the doomed Status Quo’s dominance."

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Under the National Mortgage Settlement, a $25 billion agreement between 49 states and five major U.S. banks, mortgage principal will be slashed, loans will be refinanced at better terms, debt will be forgiven and cash will be offered to some foreclosed borrowers.
The five lenders — Ally, Bank of America, Citi, Chase and Wells Fargo — provided $1.7 billion in relief to 23,110 borrowers in Florida as of June 30, according to a recent progress report from settlement monitor Joseph A. Smith Jr.
Another $1 billion in relief, for 9,175 borrowers, was reported as “in process.”

Great vid anyway Berno.