Play the ball and not the man

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The import of Gerard Henderson’s diatribe in today’s SMH is that the media has done a “soft” job on  my views, which have only gained notoriety because of the extreme prediction I have made—about the forthcoming economic downturn qualifying as not merely a recession, but a Depression. It seems I’ve only got attention because of my extreme views, while the media has let the side down by doing a “tabloid” job only and not subjecting my views to scrutiny.

In fact, as many in the media know, I have gained attention because of my Debtwatch Report, which will be two years old as of the next issue (No. 28, to be published in November the day before the RBA meeting). The journalists who have reported my views—including of course Kerry O’Brien, who gets special attention from Gerard in his mockumentary—have read my analysis for two years now. I saw no sign of any attention to the analysis behind my predictions in Henderson’s piece—apart from possibly a “just in case” concession towards the end where he noted that “His predictions of a debt-induced decade-long depression … may be correct.”

In that case, the commentator who deserves the approbrium for “tabloid” journalism is Henderson himself, and not the ABC nor the Daily Telegraph, nor Sixty Minutes. They, after all, read my research, have quizzed me extensively about it, and made the decision based on investigative journalism that my views deserved coverage.

For this, I applaud them—for standing up for the principles of the Fourth Estate. Standard economic commentary has been dominated by the cheerleaders for the policies which have led to this crisis, while the authorities themselves and the academic profession of economics itself have turned a blind eye to any arguments that questioned the mantra in favour of deregulated finance.

I know this from extensive experience. I have made five applications for ARC funding to investigate the dynamics of debt-deflations and Depressions in the last ten years; all have been unsuccessful (including one time when I topped UWS researchers on the ARC’s then published referees’ point scores, after which seven UWS researchers received funding—but I was not one of them).

I made a submission to the Wallis Committee in July 1996, in which I warned that securitisation of loans could lead to a crisis exactly like the Subprime crisis that has now unfolded—and of course my comments were ignored.

I wrote to the RBA in June 1998 offering to hold a seminar on the “Financial Instability Hypothesis”, which is the foundation of my argument that we are likely to experience a Great Depression. The offer was declined.

As has often been said, official channels are often clogged to make sure information and criticism doesn’t get listened to. When I saw the debt that Australia’s speculative bubble in real estate (and belatedly shares) had got us into, I decided to turn to the journalistic profession to raise the alarm. To their credit, since I made a good case and the empirical evidence was compelling, journalists listened to me.

So Gerard, maybe you should do some investigative journalism now too. Go to my blog, where you will find Debtwatch Reports going back to November 2006, and academic papers on debt deflation published as long ago as 1995 (maybe even read Debunking Economics). And if you’d like to take a real risk and play the ball rather than the man, I’m more than willing to give a seminar on debt deflation at your Sydney Institute.

Over to you.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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94 Responses to Play the ball and not the man

  1. sage of collins st says:

    Steve, you are a public figure now – you have to expect this. This is the price of entering the debate in such a public way. Please keep the analysis coming.

  2. SAVEME2 says:

    Steve, Mr Pascoe is also on the job of trying to pull your ideas down. Quoted below is Mr Micheal Pascoe’s critique of you. Your colleagues seem to be getting very gealous of your media exposure. Yoy must be doing something right!

    Mr Pascoe quoted verbatim:

    Economists can occasionally be dangerous things when radical or simply wrong ideas fall on fertile ground. Karl Marx, for example, never personally hurt anyone that I know of, but some of his ideas eventually helped cause incredible suffering and death.

    Domestically, an associate professor at the University of Western Sydney, Steve Keen, is currently scaring the easily-frightened with especially dire forecasts about the Australian economy. Keen’s predictions aren’t taken very seriously by most economists, but he’s still enjoyed plenty of media attention, much of it unquestioning. Some of my media colleagues are happy to search out the most extreme and alarmist views – they make bigger headlines.

    Keen is predicting the economic equivalent of the earth splitting open, spewing forth fire, toads and serpents, the seas turning to blood, the Four Riders of the Apocalypse loping off random heads and limbs and so on. He represents a tiny minority of economic opinion.

    (Part of Keen’s appeal to populist media is that he has put his unit on the market, claiming housing prices are going to crash. As Rory Robertson, Macquarie Bank’s respected interest rate strategist, observed, Keen would have more credibility as a housing forecaster if he had sold his unit last year.)

    Journalists can be as dangerous as economists too when they needlessly scare their audiences and perhaps provoke them into doing the wrong thing. I’m writing this on a flight to Perth and have just watched the Channel 9 Inflight News with a couple of prime examples.

    There was doom and gloom story that treated the rash of redemption freezes by mortgage funds as if it news – it’s been going on for months. And the report used the sorry house of Citi Pacific as its main case study. Citi Pacific blamed Kevin Rudd – I think the over-geared Gold Coast outfit should look much, much closer to home for the root of its problems. Quite frankly, Citi Pacific was on the nose with the stock market before the sub-prime crisis hit.

    More importantly, a serious young English reporter (well, young compared with me) filed a cliché-riddled yarn from Shanghai that gave the impression China might be grinding to a halt and that it would take the rest of the world down with it.

    What rubbish.

    China is slowing, but slowing from an unsustainably high growth rate to what remains strong growth in anyone’s language. The 9 per cent growth it recorded in the September quarter would of course be the envy of any other country – down from more than double-digit growth last year.

    If you want to know what China is doing, turn to the experts, the two companies that are intimately entwined with the China story: BHP and Rio.

    Last week Rio released its quarterly production numbers and included the comment that the expected re-bound in Chinese demand from the Olympics close-down looks like being delayed from the December quarter and was more likely early next year. That caused a sharp sell down of Rio and other resources shares.

    It’s perhaps not accidental then that Rio’s chief economist, Vivek Tulpule, turns up in an interview in today’s Sydney Morning Herald putting a bit more perspective on those China remarks. As the SMH reports:

    “He said the downturn in metals demand in China during the second half of this year had taken the market by surprise.

  3. Thanks SAVEME2, I wonder what robust analysis Mr Pascoe conducted to arrive at his conclusion – “Keen’s predictions aren’t taken very seriously by most economists”.

    And thanks also to James Haughton for pointing us to John Quiggins blog topic for today where he says “I’m generally in sympathy with the arguments presented here [Steve’s CPD paper]. However, having made similar arguments for a long time and having been continually surprised by the durability of the asset price boom/bubble let me offer a couple of counterarguments/cautions…….[go to blog to read specific points]….Obviously, the opposing arguments I wanted Keen to respond to look a lot weaker now. Whatever qualifications I might still want to make, Keen got the basic points right, and those who are criticising him now should concede this.”

    And I notice on the news the politicians were now gunning for Glenn Stevens today, after having a good go at Ken Henry on the previous two days.

    Looks like it’s open season on economists – except, of course, for those employed by the banks and other vested interests because they ARE “respected” (though Mr Pascoe didn’t tell us by whom).

  4. Emil says:


    I agree with your assessment of the RBA – in my mind, they totally let this get out of control and should have stopped the party much sooner. I guess no one wants to be the party pooper – look at Rudd, going out of his way to prematurely drop his wad of surplus dollars on us by giving first time debt slaves a bonus just big enough to make them feel wealthy for a week while they buy a house. Foolishness knows no bounds when it comes to politicians. People think the cause of the GD was incompetent leadership. This scares me given the current worldwide line up of clowns at the helm.

  5. BrightSpark says:


    Looks like you have another turkey tackling you and not your considered opinion. His simple arguments reveal that he has only just discovered your work and is obviously not aware that you have been warning of this problem for a long time. He only chooses to criticise when criticism is least justified that is when you are being proven correct.

    Now he does not realise that by making those claims he is admitting that the economy is extremely fragile as you have been claiming for some time. Again no arguments except some gobbldygoop about BHP RIO and China, what is journalism comming to? Newspapers sure are a waste of space time and paper!

  6. Muzz says:

    Henderson’s essential beef seems to be your achievement of publicity. This, of course, is the turf of Institute mouthpieces and his attack suggests that perhaps he confuses you with one.

    Institute mouthpieces can make shocking predictions to achieve publicity but take no risk in doing so. Economists making shocking predictions are placing their credibility and long term careers on the line.

    So this jealousy over publicity only makes sense if Henderson thinks you are right, or that you are not an economist.

  7. Mal says:


    Henderson’s article was all about HIS personal ego usurping yours!

    He has no credibility and due to the fact that either his own house is worth less than what he paid for it (like mine is), or his margin lending account has been thumped, then he is probably another one trying to talk the market up,

    No credibility from me!


  8. Bullturnedbear says:

    Hi All,

    I have been thinking through some of the possible political outcomes of the debt deflation and I don’t like them. Tell me what you guys think?

    Government always seem to be the last ones to the party. The World is groaning under too much debt and not enough income to cover it. So what do the governments decide to do. Borrow more money to bail out the failures. This will only delay the certain outcome of debt deflation and wealth destruction. It just won’t work to borrow more money when too much debt is the problem. Ask any “old” banker.

    Now the possible outcomes:

    I believe the calls to “reform the system” will continue to rise to the point where the governments of the World will come up with a new system purely because as politicians they have to give the people what the people think they want or need.

    Now the big problem. When the governments borrow heaps more money to prop up a system that’s failing (and will fail eventually anyway, because it has to) the debt burden will be magnified and remain with the tax payers after the crisis is over.

    To then change the system to one that regulates against too much debt (or some variation under another name), “so it can’t happen again” ha ha! will leave the World with the debt and a reduced means to grow incomes to pay back the debt. Double Whammy.

    The private debt pendulum will swing back hard and then be artificially held there by new government policies. This will magnify the pain for longer than needs be.

  9. toksira says:

    Pascoe and his cohorts on yahoo finance have been writing rubbish for years, but this article smacks of desperation.

  10. furball says:

    Roubini’s latest speech is available here:


    Truly impressive description by Roubini. I highly recommend his website,

    I’m still waiting to understand exactly what trigger the Minsky Moment for Australia. However, I do take the adjustment process suggested by Merrill’s that a structural de-leveraging may be occurring.

    They point out the relationship b/w credit & GDP prior to deregulation. They point out Three distinct phases of credit growth since 1984. Deregulation – Supply Side; Low Inflation & Low Rates – Demand Side; China & Terms of Trade.

    Can anyone think of what may drive Phase IV ?

    If not, then how will the adjustment occur ? Slowly, with 20% real washed off over three – five years ?

    Or like Steve Keen suggests ?

    Steve, Roubini even makes mention of a “Minsky Moment”.

    There’s no dispute from me about the possibility of financial systems spiraling out of control… however, in Australia, while you have clearly demonstrated the potential, what I’m looking to hear is the catalyst event that will trigger the decline that locks in *expected* capital losses that push housing into a decline *all over the country*.

    I greatly appreciate your commentary and think your promotion of Debunking Economics and Unstable Financial Systems deserves a lot more credit than it receives. That is, I personally believe that you should be taken seriously by academia, as opposed to only by the media, who may be looking for a headline.

    However, please protect your future position by moderating your claims.

    That is, make it clear that you are talking about a real decline in the residential property asset class. Make it clear that an adjustment process may be orderly and all policy initiatives possible to permit slow erosion of real wealth – slowly easing the pressure rather than hastening a collapse – should be undertaken.

    Then you’ll be undeniably right, your intellectual frameworks will be looked upon more faviourably & shrill commentators with vested interests & narrow perspectives will not be able to

    The Merrill Report can be found if you take a free trial on the roubini website. I don’t mention because I like Merrill, the fact they sold their company in a rush is testimony to their financial management and is something that ought never be forgotten. I just mention it because it presents the case (return to long run averages over time) that cannot be ignored.

    If you can show what is our Minsky Moment, then please do go ahead.

    I have control of two properties, and the one that is not the family home is being prepared for sale.

    So, with those disclosures, please take my comments as encouragement. I’ve also read your book, and enjoyed it’s illuminating pathway. But then again, I’m a fan of all things dis-equilibria, including book by chemistry noble prize winner, ilya prigonone, by title of The End of Certainty, which argues for a quantum mechanical formulation that does not permit for the reversibility of time, as implied by classical formulations…

    Good Luck Steve. Don’t over-reach and you’ll be vindicated. They have moved onto trying to take out your credibility with sweeping blows, perhaps because they do not wish your underlying messages to be examined in detail.

    All the best,

  11. The attack dogs continue (apologies for being the bearer). Terry McCrann writing in The Weekend Australian – “At least it [Kearting entering the debate by mentioning Kondratieff cycle] made a more elegant change from economics alarmist Steve Keen”.

    It is a real shame when genuine academic rigor and concern for fellow Australians is so threatening to the establishment that they must attempt to trample it down.

    It really is time that the entire economics profession – including those employed by the vested interests – stands united and says enough is enough! Freedom of thought and debate is what is needed at this juncture, rather than character assassinations on those that display courage and humility by standing up and voicing their honest and considered opinion!!

  12. BrightSpark says:

    Now Keating is elegant ……?

    Where did Keating earn a PhD?

    Has Terry McCrann read any of Steve’s work? He seems to require “elegance” encapsualted in one line of cliches.

    Are there any credable journalists out there who can confine themselves to accuratly reporting on news items. If there were perhaps their editorial quips would not be so stupid.

  13. GSM says:

    On some comments here;
    The Australian Minsky moment will arrive when many mortgage holders realise (together) that unemployment is headed several points north of where expectations are now, and MANY will decide to unload that heavy mortgage- all at the same time.There is a tsunami of supply headed for the market in the New Year. House prices here are in decline and will remain so until the next employment cycle points up.

    I’ve been reading Roubini for a year now. Keen’s position is pretty much in line with his albeit with a lag. I’m rather certain that avoiding a house price debacle like that afflicting the US and UK is uppermost in KRudds mind. Roubini was pillaried as late as June this year for his extremist views by the US MSM that despised any economist who was forthright enough to tell it really like it is. If Steve has done his homework (which no doubt he has), he has nothing to worry about.Future event’s here will bear him out. I would offer however that responding to these types of media jibes demeans Steve’s position.

    Just like Dragnet;
    “Just the facts, ma’am”

  14. Nic says:

    I came to this site by it being referenced by Nouriel Roubini’s site, a compliment.

    Henderson’s attempt at mild ridicule of you, and his usual swatting of the ABC & 60 Minutes in passing, is another.

    To be taken in stride. I doubt a debate of your reasons for selling your property will be as edifying as your previous pronouncements on the bubble economy, which simply will not get air-time.

    I do not think Henderson’s conclusions were so harsh, he acknowledges you may well be right.

    Given you clearly have been so far, keep up the good work.

  15. Ken says:

    Hopefully Keating’s position as the messiah of Australian economics will be re-evaluated soon, when deregularisation becomes a dirty word. It must be obvious that any government that deregulates will make the economy look good for a while unless they restrain debt and Keating couldn’t restrain either public or private debt. About two years in thirteen with the budget in surplus and only with Victoria borrowing as though it never had to repay the money.

  16. Bullturnedbear says:

    The SMH reported today that almost all super funds reported losses for the year to September. Not news of course.

    What has occurred to me though, is that the Government was receiving 15% of all Superfund revenue. Now that almost all funds are down. The Aust. Government has a huge hole in its budget. Wait until the papers and opposition wake up to that one. I don’t know how big that number was, but it must be in the billions.

    As unemployment rises and mining revenue falls off the cliff, the budget will start to resemble a sieve.

    The Govt is still talking up budget surpluses. Dream on! How stupid was that anyway to convince the public that responsible governments always ran a budget surplus. That was one of Costello’s nonsense mantras.

  17. Foundation says:

    BtB: “What has occurred to me though, is that the Government was receiving 15% of all Superfund revenue.”

    Good point. I’ve noticed that my super fund reports gross earnings in one column and net earnings in another. When gross earnings are positive, net earnings are lower. When gross earnings are negative, net earnings are higher! Does this mean that the super fund actually claims against losses?

    If so, they might be sucking money out of the Treasury, not just failing to contribute?

    I’m no superannuation guru, can somebody set me straight?

  18. Ken says:

    Foundation, they wont be taking money out of Treasury but they probably have capital gains losses which will be carried forward. They also have franked dividends which aren’t taxable, so it gets confusing.

    The change in revenue is a very important point. Reduced tax revenue and increased social security payments, so the surplus is going to disappear rather quickly. That is what you expect in a recession but that is no reason to spend it on vote-buying. I’m betting on Rudd winning the next election and then discovering that there isn’t enough money. How large can they make the deficit ?

  19. Chris White says:

    in my new blog I post Immanuel Wallerstein’s argument that the world depression has started.

    He analyses long term Kondratieff cycles and long political hegomonic cycles where the US power declines.

    ‘We can assert with confidence that the present system cannot survive. …This will not be a capitalist system but it may be far worse (even more polarising and hiercharical) or much better (relatively democratic and relatively egalitarian) than such a system. The choice of a new system is the major worldwide political struggle of our times.’

    Also, I post a series of critical analysis from left historian Humphrey McQueen.

    there are links to the
    Monthly Review Press economic analysis.

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