George negus is interviewing me and Peter Schiff on Dateline tonight. The topic is the attempted rescue of Fannie Mae and Freddie Mac, and what that may mean for the global economy and Australia in particular.
Dateline goes to air tonight (Wednesday) at 8.30pm. It is also accessible on the web, the day after the program goes to air.
In other news, the podcasts are currently not functional, but I hope to fix them up tomorrow.
September 10th, 2008 at 10:28 pm
Hi, thank god for P. Schiff and the UWS Professer spelling it out. US is stuffed and so is Australia. The sooner we wake up to this fact and move forward in a diplomatic, non-violent, humble fashion the better for all. Future progress lies in a new path altogether. There is no going back. This is the watershed the Western world needs to move on.
And also, Anwar will come to power, though undoubtedly he is with the USA, even the Malays are not for UMNO anymore.
Great reporting George.
Shri Ma Kristina Baird
Shri Kali Publications.
September 10th, 2008 at 11:07 pm
Great – looking forward to seeing you on Dateline and I can’t wait to listen to the podcasts when they are up.
You must be busy with all of these media engagements – it is good to see more people becoming aware of the critical issues we are facing and the challenges ahead.
September 11th, 2008 at 3:27 pm
I’ve seen Peter interviewed on Fox “News” before. Makes a pleasant change to hear his point of view without being yelled over by the “interviewer”
You put up a good fight Steve, but I think he out gloomed you by a nose.
Seriously though, thanks for trying to bring some sanity to the main stream media. Keep up the good work.
September 11th, 2008 at 4:15 pm
Thanks Steve for trying! nHowever negus must have reckoned he could grab you anytime but he might not get another chance to have Schiff on. My problem with the media here is that everyone is saying “Look at those stupid Yanks with all their mess and debt” when, as you were trying to point out, Australia is in at least as bad, if not worse position.
It seems here everyone is in cahoots trying to keep this show on the road long enough to milk a bit more out of it. Media, bankers, Lawyers, Real Estate agents, politicians etc all try to put the spin “there is nothing wrong here. It’s all the Americans”
I’d hoped there might be a bit more depth in the SBS approach as it is supposed to be ‘non-commercial”.
Negus proved to be little different. Every time it Steve got his teeth into the matter at hand, Negus returned to Schiff.
September 11th, 2008 at 5:51 pm
Debt is being used for consumption, but the world bank figures give the following of Australia vis-a-vis Singapore.
However what should our target be? I concede GNP per head is a flawed measure, but better than nothing. As Barry Jones points out in 1900 we had the highest GNP per head in the world, let’s look at recent figures of GNP per head as between Singapore and Australia:
GNP per / Year US dollars 1969 1989 2007
Singapore 840 10450 48520
Australia 2760 14440 33240
Ratio 3.3 1.39 .70
Sorry the chart miss fired, but email if you would like a copy of the letter I sent to a politician
September 12th, 2008 at 5:06 pm
He (Peter Schiff) sounds a lot like an Austrian. “The solution to market irrationalism is freer markets” doesn’t really work for me.
September 13th, 2008 at 11:45 am
Hi James!
Peter Schiff sounds Austrian School because he is from the Austrian School. That explains why there is a fundamental philosophical difference between his opinion and Steve Keen’s opinion- Steve Keen believes in better government intervention whereas Peter Schiff believes in the libertarian free market. Yet, they share the same views regarding debt.
To quote Nassim Nicholas Taleb in his book, “The Black Swan: The Impact of the Highly Improbable”,
September 13th, 2008 at 11:46 am
Sorry, a typo correction: In the last sentence of my quote on Nassim Nicholas Taleb, the word “thought” should be “though”
September 13th, 2008 at 12:04 pm
That’s true Contrarian,
But there are analytic ways in which Austrians and (some) Post Keynesians differ too, in addition to differing on policy recommendations.
On that front by the way, I’d now describe myself as a somewhat Austrian Post Keynesian! I am much more sceptical about the benefits of regulation and government intervention than I was before analysing this crisis. But I certainly don’t believe in “handing it over to the free market”, as Peter does, because that begs the question of what the “free market” is. All markets are determined by legal structures and laws to some extent–they can’t be otherwise–and therefore we can design the laws surrounding those markets more intelligently than we have in the past.
The key redefinitions I’d like to see relate to ownership of capital assets–changing the nature of shares and the valuation of houses. But that’s a topic for a future blog.
Here I’ll just emphasise the ways in which Peter and I differed analytically on the night. The key point is the attitude to how money is created. Notice the time that Peter began to argue that for every debt there had to be a saver somewhere? That’s where I differ: that is a “fractional banking, deposits create loans” analysis. As I have intimated, I have a “credit market, loans create deposits” analysis that argues that this innate balance Peter (and other Austrians) perceive doesn’t exist.
There were other analytic differences as well–it doesn’t all come down to differing degrees of scepticism about the benefits of government. And as I concede, there’s much less difference between me and the Austrian position on that than there once was.
September 14th, 2008 at 1:57 pm
Hello Steve
I enjoyed the session but I notice that you made one comment which went totally unnoticed by, and over the heads of George Negus and Peter Schiff, you said that Australia has been “de_industrialised”. This statement was way too deep for them. Even though this has occurred to a lesser extent in the US where military imperatives have reduced the severity.
The overlooking of this event is of particular significant to me as an engineer. It is part of the big picture which is overlooked by the Austrians, Keynseyans, and Neo-Classicals . It has resulted in a shift in real wealth creating capabilities to Japan, China and India.
Also this illustrates how little the significance of technology is understood by these “small picture” economists. Particularly in the way it affects even their small picture perspective.
They have for a long time thought that technology is of no particular value and can be “transferred” not built on or valued, and does not need to be nurtured and maintained. But throughout history the wealthiest countries have always been those which owned the current leading edge technology. This point was even made by Adam Smith in his seminal work.
Yes Australia’s technological capabilities have been ruined completely. This goes right through industry and education and now threatens our ability to manage our own infrastructure. After this coming depression we will need to become a “developing country” before we can recover the position that we occupied in the sixties. Otherwise we will need to learn to live as we did in the nineteenth century. Small picture economists will never be able to see this.
September 14th, 2008 at 2:08 pm
I’ve watched a lot of Peter Schiff and he’s definitely one of the most entertaining speakers in the financial world.
Steve Keen: “The key point is the attitude to how money is created.”
I agree with this, Peter seems to think that the US will monetarize debt (ie. print) in a substantial way. This is a low probability I feel as it would mean the destruction of the USD and an instant collapse in the US bond market.
On the role of governments. First thing to realize is that out system comprises a number of key components:
- Interest bearing debt based monetary system (no printing)
- With fractional banking determining the leverage; approximately 10 to 1 on average
- With democracy as the political system driving fiscal policy
Next thing to realize is that democracy has flaws which include:
- The masses will vote for the public purse, the Greeks and people like Thomas Jefferson knew about this
- Monopolies/cartels form as in Coles/Woolworths in Australia
I feel that the system works well when adequate limited regulation is enforced. Your equations Steve simulates nicely the behaviour of the system as a function of base variables. With time however almost all the rules are bent and eventually broken. In Australia the majority wants house prices to increase and politicians carry out their wishes. They unknowingly, it would seem, corner the market and turn the younger generation into their debt slaves. Related to this, is the study done at UWS that showed governments are voted out when they try to reduce debt – I think Steve you had this article on your debt watch once with some nice plots. Leverage is also greater than 30 to 1 thanks to the unregulated shadow banking system; the idea that loans can be made against loans is obscene.
Steve Keen said
>The key redefinitions I’d like to see relate >to ownership of capital assets–changing the >nature of shares and the valuation of houses
In the end I don’t think that any system can be devised that is full proof but I have little doubt your efforts would be superiour to any politican’s. I feel the best means to guard against corruption is education in the principles of our system and at school. Indeed I have been ignorant most of my life.
September 14th, 2008 at 5:59 pm
Hi Steve
There always seems to be a lot of analysis on what is likely to happen, but not a lot on what actions one should take to navigate the storm. In terms of investment and apart from keeping your job, what does one do to maximise their position through the coming financial turmoil?
Thanks for your contribution.
bb
September 14th, 2008 at 8:45 pm
Good segment, most enjoyable for those of us who understand what we are hearing. A pity that relatively minor differences between Peter Schiff’s view and yours tended to obscure the areas of agreement around the severity of the problem and what it holds for Australia’s future.
George Negus is a fine journalist, but he was clearly out of his depth. It would be good if he could be educated and persuaded that this topic deserved more attention.
I’m far from sure what a “somewhat Austrian post-Keynesian” is, but I’d sure like to hear more on the subject. I’m a firm believer that markets are the best way to set prices but they may get other things badly wrong, making politics and regulation necessary evils. A blog on that topic would have my interest.
Keep up the good work!
dy
September 15th, 2008 at 7:27 pm
Steve Keen your research into debt levels is excellent infact it has influence my thinking not to upgrade to more expensive house thus higher debt levels.
Living in a small Villa at the moment with low debt and low interest payments.
Why loss $200,000 in five years on higher interest costs and capital depreciation?
Question why did you invest your money when you knew the market was going to fall and cost you large losses personally?
Why push for lower interest rates?
You have seen the results the Aussie is down 20% against US dollar and petrol is up and this will cause inflation in food etc.
Inflation will effect everyone unfortunately the most poor the pensioners.
Remember six figure incomes do not feel the pain of inflation as much as the poor.
It’s the cost of living that’s painful not lower interest rates.
Do not lower interest rates send the gamblers broke.
Clean the economy out.
September 15th, 2008 at 10:18 pm
The answer to the question was a personal one Stephen–purchasing a flat for a then new marriage. That personal reason has since become irrelevant, and I am now selling my property.
On the other issues, you’d better read some old blog posts. High interest rates also compound the outstanding debt–adding fuel to the eventual fire. And living costs are only painful now across the board because of high debt levels. It isn’t just the gamblers who will go broke as a result of this.
September 17th, 2008 at 11:20 am
Steven I have always loved your stuff…but hated your solution!!
Inflation got us to where we are. Inflation = negative interst rates = no savings (people are not quite as stupid as we sometimes think)= more debt. How would inflation now be the cure rather than the cause?
Anyway i’ll go back and read your old blogs but I have to say, everytime in the past I hear you on this I think “Steven, you can’t be serious?”
I know inflation will postpone the evil day, but as per your own prognostications, postponing the evil day just makes it worse in the end.
September 17th, 2008 at 12:30 pm
Thank you Steve Keen for your reply I live in Campbelltown area and are at the coal face.
Sad stories of good people who made mistakes brought at the top of the market and now facing negative equity.
Those good people are the minority.
Many others have live beyond their means the new car,trip overseas etc.
You are right it won’t just be the gamblers it will be credit card debt,car loans and all those financial undiscipline people who can go broke as well.
Why should poor pensioners with very little debt go through the financial pain of high cost of living and low interest rates to bail out some of worst people in our society.
Again it’s the cost of living that is the real pain not interest rates.
Government has underestimate the amount of anger out there regarding the cost of living for the poorest people in our society.
We always hear about mortgage stress what about inflation stress cost of living.
Federal Reserve is starting to wake up no interest rate cut and let Lehmann Brothers fail no bail out.
February 10th, 2009 at 9:55 am
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