My expectation is that, some time during 2010, the disconnect between the financial markets’ euphoric expectations and the hard reality of a deleveraging private sector will bring the optimism of both “born again Keynesian” neoclassical economists and the markets to an end. Growth will not resume once the stimulus packages are removed, since deleveraging will then assert itself in the absence of government stimulus. Falling debt will subtract from growth, as it once added to it, and unemployment will start to rise again.Unique visitors to Keen's blog have increased from 15,000 to 50,000 per month during 2009. I'm one of the new ones.
I expect that governments will react to this as they did in 2009–by turning on the stimulus packages once more, while continuing to ignore the private debt levels that caused the crisis in the first place. They will “turn Japanese”, to coin a phrase–since this is the same thing the Japanese government has been doing for two decades since its Bubble Economy burst at the end of 1989.
This process may repeat itself two or three times before serious attention is finally turned to the Ponzi-dominated financial sector’s parasitic impact on the real economy. But for now, the parasites are clearly still in control of the host
Steve Keen is a prolific Australian economics writer and publishes most of his material, including his university course, on line, see Debunking Economics. He supports a Post Keynesian or Minsky analysis of the economy, that capitalism is a fragile system in its internal dynamic (Financial Instability). One aspect of Keen's work is that he connects Post Keynesian analysis to Marxist dialectical philosophy, arguing continuity between the ideas of Marx and the ideas of Minsky (The Minsky Thesis: Keynesian or Marxian?).
I have bought and am reading the mobipocket eBook version of Keen's book and have recently ordered a couple of books by Hyman Minsky (1919-1996), that have been recently republished in the light of the crisis: