Hearted Youtube comments on ProfSteveKeen (@ProfSteveKeen) channel.
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Prof. Keen, I see the value of a depreciating currency that you point out (eg. the stamp scrib notes), but I don't see how that reconciles with the rational incentive for people to purchase non-depreciating assets. If money depreciates (slowly but deliberately as a policy decision), then it seems that there's an unbalanced incentive to immediately flip your paycheque into assets gold / silver / bitcoin / real estate / etc. Anything that you don't want to buy in the very short term, like food, would be put towards assets.
Now, gold doesn't have that many important non-monetary purposes, so maybe it doesn't matter if people are hoarding gold as a means of storing value. But it does seem like there's a very delicate balance to be maintained here, because any alternative asset can make a play to become an appreciating shadow currency that people hoard to store value instead of exchanging with each other. Once it starts to appreciate, you'll get a runaway feedback where people prefer to flip their currency for that asset even more strongly, and may even borrow one to buy the other. (And if that asset is something that is actually useful, like real estate, then you have even bigger problems).
I don't see a way to defuse that loop other than for your currency to always maintain some non-negligible threat of appreciating against those assets, so that it's always risky to bet too strongly against currency. If the government always promises to intervene against deflation, then betting against the currency becomes too safe a bet. That's the conclusion I come to from thinking about this problem -- but maybe you know of a better solution?
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@ProfSteveKeen I agree; financial assets get too much focus, and productive assets like real estate are the bigger concern. (I remember George Monbiot laid out a planetary-boundary currency scheme in his excellent, albeit somewhat dated, 2006 book "Heat: how to stop the planet from burning".)
But I think things like gold or crypto speculation have real-world consequences, and as far as I can see, only the veiled threat of deflation really keeps them in check. In the short term a gold or crypto explosion is a net zero redistribution of wealth, but in the medium-long term it may be net negative. Not only due to obvious things like power consumption or gold-mine waste, but also because it reallocates capital and purchasing power from productive investments and industrious workers to unproductive assets and their owners, creating incentives that point in the wrong direction. I think people felt this strongly during the COVID asset boom; why work 12 hour shifts on the frontline at the hospital when your highschool dropout friend is making more than that in asset appreciation while sitting on their sofa?
Deflation is full of huge downsides, but I think one real upside is that it flushes out overleveraged asset speculators first. And so even if that deflation never materializes, at least the risk of it might discourage that kind of leverage. Any hard-coded policy that removes the risk of deflation ever happening would change that calculus immensely, and I do think there are real consequences to that.
(By the way I immensely appreciate and respect your willingness to engage with the lay public, like me, in these conversations!)
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The only real activity Economics have practiced, since the 1700s steam engine in Britain, is extracting and burning finite fossil fuels reserves. The rest, including manufacturing and playing the game of credits/politics/etc, are human-choreographed.
Although some of us are doctors, economists, barbers, plumbers and others, humanity has been mainly living on one profession: finite fossil fuels extraction and burning - as if there's no tomorrow.
The sad fact we discover today, on the wake of the miserable failure of nuclear, fusion, solar, wind and others failing to create energy abundance, being spectacularly demonstrated all the last 100 years - is that humans can not manufacture energy.
Energy always and only comes from the past into the future.
At last, The Tragedy of the Commons has now been quantified and given its own Law of Thermodynamics (The Fifth Law).
The predicament before us is no longer an issue of Economics, but an issue of re-writing the social contract, this time between Man and Energy!
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Thanks Prof. Keen - outstanding lecture, indeed.
"Slag and Emissions" are not the only waste forms out of refining iron ore into steel, for example. Ware and tear internal to matter, degrading the furnace that makes the steel, progressively, necessitating the ceased-furnace's repair, and later on, its total decommissioning and replacement - is another form of waste, which is much substantial than the first two, the "Slag and Emissions" (The Fifth Law).
Why is that? Because the furnace's 'repairs' and 'total replacement' require another bigger furnace to construct spare parts and the required 'total replacement' of the child furnace. That parent-furnace itself is subject to wear and tear and will need to be removed as waste and replacement, overtime - and so on (see junkyards all over the world of abandoned metal and eWaste Energy devices of all sort -, an example)!
Some publicly announced government plans to decommission nuclear plants in the UK are scheduled to run for almost 100 years - strong. The [solar in fossil fuels] Energy consumed in the process, added to the total Energy put earlier into constructing and managing the plant, will be far greater than the total sum useful Energy a nuclear plant of those has ever produced - humans can not manufacture Energy, even when splitting and fuse atoms!
Although Earth is considered thermodynamically an 'open system', no creature on its face can acquire the solar energy stored in this season's grains unless it has made it alive to this point in time, living on the Energy coming from the grains of last season.
The Sun rises every day, yet humans wouldn't have defaulted to making PV solar panels, powered by the Sun, before making steam engines made of coal-mixed steel and powered by coal, that stored solar energy from the past.
When the fossil fuels age is behind us, humans would default back to wood-made and powered steam engines before they manage to build and run solar panels and fusion reactors, if ever, despite the Sun will rise every day - Energy always and only comes flowing from the past into the future!
The weakness of Club of Rome's message since "The Limit of Growth" is its focus on over-population and finite resources. This far, it gave - and giving - the impression that our world is ideal, only if 'the damn' humans don't reproduce!
This has overlooked the essence of the predicament, like Smith, Malthus, Keynes, Orwell, Huxley and many others have managed to do, not recognising and answering: where the energy to make humanity progress and prosper in the style of civilisation - which has produced the luxury and posh mindset behind "The Limit of Growth" - will be coming from? Slavery, again?
Having humans have consumed almost all fossil fuels reserves without being able to answer this question is a manifestation that any style of Economics and social science, such as "The Limit of Growth", is actually a product of the Social Contract.
The Club of Rome overlooks the fact that humans' population is the only 'device' that will remain intact, storing some of all the immense fossil fuels energy since 1700 - when most of the industrial base would be gone to wear and tear, including solar panels, wind turbines, nuclear and fusion reactors post the fossil fuels age. Humans need to take care of their existence being themselves the most efficient form of fossil fuels energy storage and legacy!
The miners in 1700 - 1980 Britain needed not to riot for increased near-slavery wages but to stop digging coal as long as production is exercised on the 'lease period' basis, demanding coal must only be traded on the basis it is finite - being their own collective property, too!
Soon coal peaked in 1913, Britain has gone invading Iraq in 1914 and the Middle East, trying since 1917 a bargain 'lease period' terms for the resources of that region, too. The rest is History.
Kissinger has traveled to China, when US Oil peaked in 1970's, to convince the Chinese that, it is now their turn to deplete their own coal reserves, the soonest possible. China today produces nearly 3 billion tonne of coal a year. Big chunk of all the Energy burned goes to fake projects, fake Energy solutions, junk products, fake cities, weapons-making and unfathomable amount of waste!
The Club of Rome doesn't object this intensive and unjustified finite, once-only, Energy reserve extraction, but it objects overpopulation.
I wished Prof. Keen has mentioned Nicholas Georgescu-Roegen's distinguished work, "The Entropy Law and the Economic Process", 1971, for academic thoroughness.
Thanks Prof. Keen, you, and soon your bright students, are really paving the way for all of us into better Economics in the future.
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