Cross-posted from Naked Capitalism
Steve Keen, one of the short list of economists to warn of the coming of the financial crisis, gives a very fast paced and informative talk. He explains the workings of his economic model, which contrary to prevailing macroeconomic models, includes the role of banking and credit. He then identifies the conditions that lead to zombification: a rapid expansion of credit in an economy that already has a high debt load. He shows how merely stabilizing the level of debt to GDP leads to a serious economic contraction.
Using new BIS data, he then identifies a surprisingly long list of countries that are destined to become zombies. It’s not pretty.