What Central Banks Get Wrong About Economic Equilibrium

The video discusses the limitations of general equilibrium in economics, as highlighted by Professor Keen. It critiques the traditional economic mindset that assumes equilibrium and explores the impact of private debt on economic models. The role of central banks, particularly in the context of quantitative easing and forward guidance, is examined, emphasizing the challenges they face in maintaining economic stability.

What is the main argument against the concept of general equilibrium in economics?

• It is no longer necessary and hinders progress.

• It accurately predicts economic outcomes.

• It is a new and innovative approach.

• It simplifies complex economic systems.

What economic issue is highlighted as being ignored by traditional models?

• Trade deficits

• Government spending

• Private debt accumulation

• Public debt accumulation

What lesson can be learned from Japan's economic experience?

• The benefits of maintaining equilibrium

• The long-term impact of ignoring debt issues

• The success of rapid economic growth

• The effectiveness of high inflation rates

What is one of the challenges central banks face when unwinding quantitative easing?

• Increasing inflation rates

• Causing chaos in financial markets

• Reducing interest rates

• Boosting economic growth

What is a potential consequence of central banks' actions in the bond market?

• Decreased share prices

• Stable interest rates

• Reduced economic volatility

• Increased share prices