There are some interesting talks and lectures around at the moment. Here is another one: Steve Keen at the “Just Banking Conference” on 20th April 2012. Keen talks about banks and macroeconomic theory, and re-visits his debate with Krugman too.
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Income = aggregate demand+change in debt?
ReplyDeleteaggregate demand=income-change in debt?
if the change in debt is positive, private sector is going into debt(this is not net debt as I understand Steve, this is borrowing from commercial banks, corresponding asset is created with every liability)then this reduces aggregate demand? In reality the opposite is true. Credit buums create aggregate demand.
Change in debt is flow, so is income. We are talking about some period here. Change in debt is already in incomes. Let's say there is only three agents in economy. Me, you and a commercial bank. I I am building houses, you are baking cakes. You go to a bank and borrow $100 000. You hire me to build a house for you. At the end of this period you have tranfered $100 000 to me, and I have transfered $5000 to you for the cakes I bought from you. Our incomes are 100 000+5000=105 000. Change in debt is $100 000.
Aggregate demand=105 000+100 000=205 000
What am I missing here?