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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