Weekend Roundup

I didn’t realize that the Occupy movement and the 1%/99% concept was so firmly rooted in history. Thanks to the “Big Picture.”

One more time, Steve Keen on the uselessness of neo-classical economics ( and economists):

Bizarre as it may sound, these arguments by leading economists ignore decades of empirical research into and practical knowledge on banking, which have established that their fundamental premise is false: a new debt is not a transfer from one bank customer’s account to another’s—which is effectively what Krugman models and Bernanke assumes above—but a simultaneous creation of both a deposit and a debt by the bank. A bank loan thus gives a borrower additional spending power without forcing savers to reduce their spending power to compensate. As Joseph Schumpeter put it during the Great Depression:

‘It is always a question, not of transforming purchasing power which already exists in someone’s possession, but of the creation of new purchasing power out of nothing…’ (Schumpeter 1934, p. 73; see Keen 2011 , pp. 154-157, for more detail on this issue)

From this empirically confirmed perspective (Holmes 1969; Moore 1979; Kydland and Prescott 1990; Carpenter and Demiralp 2010), the change in debt therefore does have serious macroeconomic consequences, since an increase in debt adds to aggregate demand—and it is the primary means by which both investment (Fama and French 2002) and speculation (Minsky 1982, pp. 28-30) are funded.

If you want a real laugh, Obama is decrying the high cost of tuition. Why is tuition so high? Because the government provided guaranteed credit to students, which schools immediately took as the license to raise their prices to astronomical levels, knowing that the government would give students the money to pay. Want to reduce the cost of college? Eliminate student loans.

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