Saturday, December 28, 2013

Steve Keen Interview from “Economics in Debate”

A very short interview here with Steve Keen posted on the “Economics in Debate” website.


  1. Quite interesting interview. I wonder how Steve Keen includes compound interest (interest on interest) into his models. After all compound interest makes debts grow exponentially without the lending of additional money, and hence this increased debt is not matched by savings (even if the principal had been).

    1. One of the interesting things about SK's modelling tool is that it can be used to demonstrate that under some conditions compound interest makes debts grow exponentially and under others it doesn't. Providing that the bankers' costs are high enough the bankers will be forced to pay so much money to their employees and to the debtors for goods and services rendered that the debtors will be able to pay back more than they were loaned.

      So in an economy with high interest charges and low living expenses, debt may grow exponentially whereas in one with low interest charges and high living expenses it may not.