Back in April 2010, I joined with and supported Professor Steve Keen on his week-long Keenwalk to Kosciuszko. For readers who don’t know, Steve is one of just 13 economists worldwide who foresaw and forewarned of the GFC. Indeed, Steve won the 2010 Revere Award as voted by his peers, for being the economist who first warned of the impending crisis and (more importantly) the one who most cogently explained the reasons why.
For some time now, Steve has been working to develop a new computer program for modelling economics. It is called “Minsky”, in honour of the economist Hyman Minsky. Yes, that’s him, in the cartoon above. He developed the Financial Instability Hypothesis, which essentially recognised that lengthy periods of economic stability are actually a cause of subsequent instability and crisis. It was Minsky who famously coined the phrase “Stability is destabilising”.
Steve’s “Minsky” computer program is revolutionary.
How so?
Well – believe it or not – it is the first economic modelling program that actually includes the role of banks, money, and debt.
Seriously.
Mainstream economists – including all those overpaid “experts” in the world’s treasury departments and central banks – failed to see the crisis coming.
But you already know that. What you may not know is the reason why. And that reason is simply this.
The mainstream economic theories (thus, models) they all believe in … ignore the role of banks, money, and debt.
You really can’t make this $h!t up.
Steve wants to change all that. He wants to give the world the tools needed to properly model the real world economy. Not an imaginary one. Because in the real world, banks money and debt all matter. A lot.
To make this happen – to revolutionise economics – well, sad to say, it requires money. Money to hire not just one or two part-timers, but a team of full-time computer programmers.
So, to raise money for this project, Steve has launched a campaign on the well known fundraising website called Kickstarter.
Please visit the campaign page here –
http://www.kickstarter.com/projects/2123355930/minsky-reforming-economics-with-visual-monetary-mo
I want to encourage you to take 2 minutes to watch Steve’s introductory video. If nothing else, it will entertain and educate you. And if you really want to be educated – in (mostly) no nonsense, layman’s language – take the time to read what Steve has to say on his Kickstarter campaign page.
Then, if you feel that this is a worthy project … I certainly do! … then please, make a pledge.
As little as $2. Because every dollar helps.
And please share the links to Steve’s Kickstarter campaign on your own blog, Facebook page, Twitter, and other social networks.
Your simply spreading the word will be a great help, and a wonderful support.
Thank you.
Lots.
P.S.
The Economist recently had a feature on “Economics after the Crisis” called “New Model Army” which featured Minsky as an example of what the future of economics could be:
In Australia Steve Keen, an economist, and Russell Standish, a computational scientist, are developing a software package that would allow anyone to create and play with models of the economy that incorporate some of these new ideas. Called “Minsky”—after Hyman Minsky, an American economist celebrated for his work on boom-and-bust financial cycles—it places the banking system at the centre of the economy. (The Economist, January 19th 2013, p. 68)
Barnaby Is Right 
You are quite wrong, Steve Keen, who I admire, was far from thefirst to predict the GFC.
Those watching oil production knew what was coming some years earlier, perhaps as early as 2000. One oil field engineer predicted 2005 followed by economic trouble a couple of years earlier.
It was all old hat by 2008.
A bit of misunderstanding there Bob. It was the Revere Award that deemed Steve to be the economist who “first and most cogently warned the world…”. I wouldn’t have a clue who was “first”.
Whoops I meant followed a couple of years LATER !
The oil market became tighter during 2006 and 2007 and finally forced the real estate crash. Don’t believe it ? Well if you don’t learn from history you will repeat it.
Is it your view that the GFC was caused by the flow-on effects of oil production / prices, and NOT by private debt levels?
Yes, basically that is what happened. The price of oil rose during 2007 which because food is so energy dependant also rose with it.
This pushed many people to have to choose between buying food, buying petrol to get to work or paying the mortgage.
This situation triggered the time bomb of the CDOs that were all sitting there waiting for this to happen.
Note every recession, except the dot com recession, has been preceded by a spike in oil prices.
It is just the way it is, everything one way or another depends on energy.
So, oil price spike not the fundamental cause then. Merely the trigger, setting off the underlying time bomb of private debt growth.
Yes the oil price triggered the GFC, but it was inevitable that a recession was arriving. It just would have been a slower descent into it.
It was actually predicted as far back as 1956 to happen about 2000, so not a bad estimate over 50 years.
The current recession is believed to be permanent as growth is dependant on increased energy and there is very little extra in sight.
The Chinese realise this which is why they have been running around the world buying up coal and oil fields.
It is called cornering the market, or self preservation depending on your point of view.
I suggest you have a look at a couple of web sites;
http://crudeoilpeak.info/
http://www.resilience.org/
Our biggest worry is that the politicians seem blind to this problem, yet Barnaby Joyce and Martin Ferguson are aware and have spoken about the problem. Have both parties put the gag on them ?
“This situation triggered the time bomb of the CDOs that were all sitting there waiting for this to happen.”
I don’t think so Barry. The CDO’s & so on were triggered because they were junk to begin with. ‘Somehow’ (note quotation marks) they were trading money good, literally as money – the most precious.
Junk trading as money – lead as gold – is alchemy.
The magic pudding.
Funny isn’t it (literally, funny ‘money’) … if anyone in ‘modern’ times claimed to be an alchemist most would look at them askance. But the Merchants of Debt actually do do this (‘magically’ transform something worthless into ‘gold’) every single day, in vast amounts.
Yes, the apt explanation is the verse below, which by the way was written around 1720.
The stock of the South Sea Company was dubious to say the least, yet it traded near 1000 English Pounds. That’s not to say the English Pound was not also dubious then, as now, which likely explains the extraordinary rise & fall of the South Sea Company – & the economic volatility of modern times.
When “Sunk in Lucre’s sordid charms” it is impossible to predict what may happen. Lucre is the most precious, people will do ANYTHING for Lucre.
Good luck to Mr Keen, but I suspect he’ll wind up like Einstein & his grand unified theory.
Yes, the CDOs probably would have failed, but it was the sudden increase in mortgage failures on such a large scale that made it all so worse.
It seems that whatever the trigger is for each recession, it is the spike in oil prices that is the detonator. It always is. (except dot com).
JMD: I don’t think think you can model a magic pudding.
I’ll bet the IPCC would try !
Here’s a ‘working’ model of the world economy.
How goes the Stock, becomes the gen’ral Cry.
Rather than fail we’ll at Nine Hundred Buy.
Instead of Scandal, how goes Stock’s the Tone,
Ev’n Wit and Beauty are quite useless grown:
No Ships unload, no Looms at Work we see,
But all are swallow’d by the damn’d South Sea.
Or
‘Tis a long pudding that has not an end.
In all seriousness, I don’t think think you can model a magic pudding.
JMD, I think this will explain why recessions are always preceded by oil price spikes.
http://www.resilience.org/stories/2013-02-13/how-high-oil-prices-lead-to-recession
On the same site there are a number of similar articles over the last few years.