Zombies-To-Be and the Walking Dead of Debt

Using credit--which most other economists ignore--to explain why Japan, the USA and UK are among the "Walking Dead of Debt" and why China, Canada, Australia and South Korea are on their way to joining the Debt Zombies. This presentation is based on work I'm doing for a new 25000 word book for Polity Press entitled "Can we avoid another financial crisis?"

[syndicat]

Thank you for yet another great lecture. I don't understand all the big funny words, but I get the message. Private debt and expenditure drives economic growth. Private debt in the form of corporate and household debt, creates economic growth, but over time burdens the economy and causes reductions in demand, resulting in economic stagnation. The fact that I was able to comprehend that much is a testament to your teaching ability. Unless I misunderstood the lecture, then in that case I lay the blame entirely at your feet.

[alvinlovasz]

Great work Steve! unlike the "economics" we learn at uni! :)

[javierwagner]

I built a Stock and flow model where I can get something very similar, but dependent on the spread between debt's net return to Interest rates (i.e as long as the net return of the use of debt is greater than the loss to interest, if debt is reduced by a reason other than debts failing to be paid, a fall will not occur). However, most of the time when debt is being serviced properly on average across the economy it probably will not ever decrease. Also something relevant is at low levels of debt the relationship seems to decouple in its strength, I'm not sure if you get something similar.

[jdlc]

Could someone spell out in writing what it is that keen asserts about new debt contributing to demand and change in the rate of growth of debt affecting the economy that is disputed by his colleague heterodox; postkeynesian economists;wray, Marc lavoie etc.

[Achrononmaster]

Except that of course if the government deficit suddenly dramatically increased (due to say wiping out all private debt) then the crisis would be completely averted, although throughout recorded history that has never been seen afaik, since governments have never understood the dynamics, so they have never tried this sort of crisis averting policy.

[derekfoulk]

So what ultimately happens? Where does a single guy without anything do/go?

[HannesRadke]

that's a lot of zombies... Prof. Keen do you have a complete list of debt "zombie" countries atm?

[vitoraugustoandreghettobor]

Read : Debt and Investment in the Keen Model: a Reappraisal
of Modeling Minsky. His model is wrong, profits go negative this is never heard of and it is necessary to his crisis.

[random]

This doesn't make much real-world sense to me. I have an unbiased view of the property market.
From what I can see in Australia, people are spending like never before (which is exactly what the gov. wants), whether it's housing or retail. They are collecting tax regardless.

On that, the current hike in prices in the housing market (which is seeing significant moves week by week) is supported by a strong demand and weak supply.
Also the incentives for negative gearing are too great. I don't see this as a threat unless we have some extra ordinary policy changes.