Well, what Keen points out is that consumption drops because people aren't spending as much. He also points out that the sources of spending are income and credit.
Basically he picks up on Minsky's idea of credit cycles and uses this to explain both the current economic problems and the Great Depression. He also points out that private debt is much greater than public debt.
I don't know if he sees the reduction in credit as a bad thing or just an inevitable thing.
As he points out, the way banks work is that they lend money, create deposits in the process, and look for reserves later.
As for private debt being reduced to zero, wouldn't that require a drop in housing prices by something like 90% so one could just buy a house without a bank loan?
As for private debt being reduced to zero, wouldn't that require a drop in housing prices by something like 90% so one could just buy a house without a bank loan?
Which would, in my mind, be a Good Thing. At the very worst, we should be decreasing housing prices down to 2x or 2x annual income, which would put mortgages back in the 5-year or 10-year range rather than 30-year.
A normal family taking out a mortgage to buy a house should be able to look forward to paying off their mortgage.
Basically he picks up on Minsky's idea of credit cycles and uses this to explain both the current economic problems and the Great Depression. He also points out that private debt is much greater than public debt.
I don't know if he sees the reduction in credit as a bad thing or just an inevitable thing.
As he points out, the way banks work is that they lend money, create deposits in the process, and look for reserves later.
As for private debt being reduced to zero, wouldn't that require a drop in housing prices by something like 90% so one could just buy a house without a bank loan?