🚨Prof. Steve Keen: ‘Financial markets are COMPLETELY IGNORANT to devastating consequences of Strait of Hormuz closure.’
‘I think we should revise our opinions of people in the finance markets because economic theory tells you that markets are efficient, that markets price in all potential opportunities. And this has become part of the aura we give finance markets, that they’ve got some prescience, they can see what’s coming.
That is complete nonsense.
The people working in the finance markets are basically trying to guess what other speculators are likely to do. The extent to which they pay attention to the real world is quite minimal.
I was involved in a Twitter Space not too long ago where about five other people who claim to be experts on finance were talking about the impact of the war. Not one of them had any awareness of the physical damage to the production system of the planet being done by the closure of the Strait.
They thought petrol would get more expensive, oil would get more expensive. They didn’t realise that we’re not going to get sulfuric acid for so many industrial processes, that helium comes out of there. All these physical elements of production are issues that people working in the finance sector have no knowledge of.
Conventional economic theory argues that if you combine what they call technology, or total factor productivity, with labour and capital, you get output out the other side. They have no inputs from the natural world in terms of their production theory.
I’ve pointed out the flaw in that about eight years ago with a little quip: labour without energy is a corpse, while capital without energy is a sculpture. So if you don’t have energy as an input, you can’t produce anything.
You’d think that would be something which is common knowledge to economists, but in fact their mental model of how the economy operates leaves out the need for physical inputs from the natural world altogether, especially energy.
So they’re completely ignorant about how the system functions and therefore they’re not pre-warned about the dangers of cutting off the supply of physical goods through the Strait of Hormuz.’
—
@ProfSteveKeen joins us for Monday’s episode of Going Underground to discuss the devastating economic consequences of the US-Israeli war on Iran
Don’t miss it, follow us on X and follow our Rumble channel, link below in the replies👇