Economist Steve Keen argues that public debate is overly focused on government debt while underestimating the economic power of private bank credit. He says banks create money when they issue loans and claims swings in credit growth drive booms, busts and unemployment, citing US data he says shows a -0.93 correlation between credit and unemployment from 1990 to 2015. Keen also criticises mainstream economics as structurally resistant to banking-focused analysis, alleging prominent economists have confused debt levels with annual credit flows when explaining the 2008 crisis.
On current risks, Keen says AI investment resembles a classic innovation bubble and predicts a recession-level downturn within one to two years, arguing many firms’ revenues are far below their buildout costs. He contends financialisation has skewed Western economies towards asset-price speculation rather than productive investment, pointing to margin debt and valuation metrics to illustrate what he describes as repeated bubbles.
In fiscal policy, Keen rejects “debt-to-GDP threshold” arguments associated with figures such as Ray Dalio, saying government debt often rises as a response to private-sector deleveraging. He cites research by former banker Richard Vague to claim the private sector has created the vast majority of US money since 2000. The conversation also ranges across China’s industrial strategy, the role of public provision in infrastructure, health and education, and Keen’s call for publicly funded elections with private donations banned.
Economist Steve Keen argues US election campaigns should be funded entirely by the state, with private donations prohibited. He says private money lets politicians be bought by financial backers, shaping decisions in office.
Read this moment →Keen claims mainstream economists misunderstand basic banking concepts, arguing that a 2010 paper he cites treated debt-to-GDP levels as though they were annual credit flows. He says the error helped economists dismiss credit dynamics during analysis of the 2008 crisis.
Read this moment →Keen cites research by former banker Richard Vague to argue that US money creation has been overwhelmingly driven by private bank lending rather than government deficits. He claims the government’s net contribution was small from 2000–2024 and negative across 1980–2000, due to bond-sale mechanics that drain deposits.
Read this moment →Keen says changes in bank credit are a primary driver of economic cycles and labour-market outcomes, arguing the relationship is visible in US data. He presents the figure as evidence that “credit goes up, unemployment goes down” and vice versa—contrary, he says, to standard textbook models.
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