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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  • Bull­turned­bear

    Hi Steve,

    Don’t take any of that crap per­son­ally. Just about every other econ­o­mist and ana­lyst that gets reported makes up some descrip­tion of what has hap­pened or what “is hap­pen­ing” after the event. 

    There is no ques­tion you have made your pre­dic­tions and put them on the pub­lic record. To date your pre­dic­tions are com­ing to pass. Time will tell if we go into depres­sion or not (I also believe we will). 

    Either way the rest of the ana­lysts will stay on safe ground and keep mak­ing up a poorly informed descrip­tion of what has already hap­pened.

  • pete

    It prob­a­bly doesn’t help that you have accused the median eco­nom­ics aca­d­e­mic of being math­e­mat­i­cally illit­er­ate, and unable to mas­ter dynamic sys­tems. It may or may not be a valid point, but it is bad pol­i­tics.

    On the other hand, the pub­lic is well aware that house prices are too high, and that new buy­ers are los­ing the abil­ity to pay higher (ver­sus share hous­ing, rent­ing, and other sub­sti­tutes).

  • Mr_­Clean

    Steve, You have summed up the sit­u­a­tion per­fectly. Aus­tralia appears to have been “dumbed down” to such an extent that crit­i­cism of the party line in this coun­try is almost non exis­tent. I am a recent immi­grant to Oz and I have to say that I have been shocked at the almost bliss­ful igno­rance of the pop­u­la­tion. It seems that Oz is far from the ‘lucky coun­try” (what­ever that means) and more a stu­pid coun­try filled with (on the whole) stu­pid peo­ple. Strangely the Bris­bane Times (another Fair­fax rag) ran a story about Hans Redeker — head of for­eign exchange strat­egy at BNP Paribas, Europe’s biggest invest­ment bank, pre­dicted: “The Aussie is going down, big time.” His views pretty much echo yours.

  • Ken

    It seems that eco­nom­ics is dif­fer­ent, any other area peo­ple make pre­dic­tions and then they are tested and if they don’t work, some­body had bet­ter find a bet­ter idea. I think any­one who has seen this unfold, from the era of debt is OK (I can remem­ber Git­tins writ­ing about how it was OK because there were a lot of oppor­tu­ni­ties out there) to the gov­ern­ment effec­tively prop­ping up banks in most of the west­ern world has not been overly impressed by econ­o­mists in gen­eral pre­dic­tions. Appar­ently now it is going to be a reces­sion but not a big one, except that the Chi­nese econ­omy that was going to drag us through this is now hav­ing their own prob­lems. Not unex­pected when their inter­est rates have been kept sim­i­lar to the infla­tion rate. Spec­u­la­tive con­struc­tion of fac­to­ries based on assump­tions of an expand­ing econ­omy.

    What I can see is that the finan­cial insta­bil­ity hypoth­e­sis does have a the­o­ret­i­cal foun­da­tion whereas stan­dard eco­nom­ics has some very dodgy assump­tions or “Equi­lib­rium, What Equi­lib­rium ?” to mis­quote the Super­tramp album. I wouldn’t want to believe if I had a huge mort­gage either. This is really the biggest case of denial ever. Not sur­pris­ing when may peo­ple are look­ing at their equity being totally wiped out.

  • BrightSpark

    Hello Steve

    What evi­dence has Hen­der­son pre­sented? what are his cre­den­tials? What does he know any­way.
    I am giv­ing up read­ing news­pa­pers, they used to be full of news with a small and well con­sid­ered edi­to­r­ial con­tent. Now they are full of edi­to­r­ial con­tent writ­ten by peo­ple who are bet­ter at writ­ing than research­ing a topic and have no par­tic­u­lar exper­tise on the top­ics on which they wax elo­quent. There is very lit­tle news and this is some­times buried in any case in igno­rant opin­ion.

    One bias that these peo­ple have is to ignore bad news or pre­dic­tions. Hen­der­son may have seen and promptly for­got­ten your com­ments of 10 years ago because he did not like them and they would not have been attrac­tive to his read­ers.

    Your attempts to gain fund­ing have been dealt with in the same igno­rant way. But is this not the cause of the bub­ble? and the cur­rent loom­ing dis­as­ter? Intel­li­gent con­sid­er­a­tion of a full range of opin­ions and reli­able data may have given a bet­ter result. Changes may have pre­vented the cur­rent dis­as­ter but instead “Reforms” have ensured its occurence and sever­ity.

    What is this “Syd­ney Insti­tute” any­way, I do not think that you should grace it with your pres­ence.

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  • Stu­dent

    Arrgggh­h­h­h­hhh (bangs head on table repeat­edly). I have just been reminded as to why i am never more frus­trated in life then when i read the news­pa­per. The guy’s got no idea. Case in point — he men­tions how a reporter said we are in the worst ever finan­cial cri­sis and then dis­agrees with his rea­son­ing being that the 1930’s saw 30% unem­ploy­ment. Unem­ploy­ment is NOT direct evi­dence of a greater FINANCIAL cri­sis!
    I’m at the point that i cant even be both­ered get­ting worked up by the media any­more (well this was the last time anyway)Thanks good­ness for blogs hey

  • c


    Would you mind explain­ing how the US can expe­ri­ence defla­tion when the Fed’s bal­ance sheet has grown from US$800 bil­lion to $US1.3 tril­lion in a few months and expected to go to US$2.5 tril­lion by the mid­dle of next year.

    You may also wan to explain how we could pos­si­bly expe­ri­ence defla­tion while the world’s major cen­tral banks are embark­ing on a huge mon­e­tary expan­sion.

  • Aac

    Steve — Mikchael West of the Syd­ney Morn­ing Her­ald echo’s a lot of your views. He’s one of the very few jour­nal­ist in main stream media worth lis­ten­ing to; the rest as you rightly point out are cheer lead­ers.

    Mr_­Clean — you’re spot IMO regard­ing the dumb­ing down of Aus­tralian and the west­erm world in gen­eral — par­tic­u­larly in basic math­e­mat­ics; the Bub­ble Media has played a sig­nif­i­cant role towards that affect.

  • Grant

    I agree with Mr_­Cleans com­ments above. We’re turn­ing into a coun­try that just has Pavlov­ian responses to slo­gans.

    I’ve really noticed over the last 2–3 years peo­ple can’t put together an argu­ment to back up their views. They think if they rat­tle off enough slo­gans at you that some­how jus­ti­fies their world view.

    There is a big dif­fer­ent between putting for­ward a self con­sis­tent argu­ment and just argu­ing.

    Sim­ply ask­ing peo­ple, “Why do you think that?” seems to bring them unstuck.

  • Wow, how’s the pho­to­shop to make the Prof look like Mr EEEEvil him­self?

    That’s play­ing the man alright! Chuckle. Smells like some­body is wear­ing brown pants today, and I don’t think it’s Steve!

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  • kym­bos


    As an prac­tic­ing micro-econ­o­mist with sev­eral years expe­ri­ence, I hap­pened across your work about three months ago. Upon read­ing your research, I con­cluded that you had some very impor­tant points. While hop­ing that you over-stated your case slightly, I could not point to the fun­da­men­tal flaw in your argu­ment and sub­se­quently with­drew my invest­ments in the stock exchange. I’m very glad you did, and I thank you for your advice.

    Hen­der­son is sim­ply play­ing the pol­i­tics of your eco­nom­ics. It’s not new, nor valid, and your rig­or­ous ana­lyt­i­cal work is of more value than Henderson’s bizarre claims of ABC bias.

    Thanks again, and keep up the good work.

  • Terry

    I have read many if not most of Mr Hen­der­sons columns for a num­ber of year’s and had up until now found his style of writ­ing, which usu­ally played the ball far more then the man to be fair and more often then not in my opin­ion to be bal­anced. Hen­der­son nearly always backs up his argue­ment with rel­a­tive quotes, facts and well sourced details that give his point of view nine times out of ten sub­stance and clar­ity.

    In his dif­f­ence I would have to say he must have had a very bad day when he wrote this rub­bish, this per­sonal attack on you would be some­thing that Alan Jones and his ilk could only be proud of.

    I take my hat of to you on your reply, it is every­thing that Hen­der­sons poorly writ­ten arti­cle is not.
    Mr Keen you have reacted as a scholar and a gen­tle­man would in this sit­u­a­tion and have made Hen­der­son look like a hys­ter­i­cal dill, which I never thought I’d see the day that would hap­pen.

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  • Luck­yGuy

    Steve, I wouldn’t worry too much about your detrac­tors at this point in time. Nobody likes a Cas­san­dra, espe­cially when they’re cor­rect. The major dif­fer­ence between you and many other com­men­ta­tors is the strength of your data. I had the sheer luck to come across one of your arti­cles exactly one year ago, and while it was writ­ten objec­tively with­out all the dire pre­dic­tions and impas­sioned rhetoric one hears so much these days, it prompted me to do some more research and then scaed the bejeesus out of me. I imme­di­ately with­drew my fam­ilys sav­ings out of the share­mar­ket and have never regreeted that deci­sion. So, mat­ter what your detrac­tors say next, it may be com­fort­ing to know that you may have saved at least one Aus­tralian fam­ilys future (or at least Christ­mas).

  • Dave

    I am not an econ­o­mist, nor do I pro­fess to be one, but where I am look­ing from Mr Keen seems to be on the ball. I am see­ing job lay off every­where and this is just the start. 30/40 per­cent drop in house prices — easy.

  • Big Game Hunter


    Great reply.

    As a for­mer stu­dent of yours in your Ecomonic Thought & Method­ol­ogy classes at UWS I want to con­grat­u­late you for stick­ing to your guns.

    Just know your work is appre­ci­ated by a lot of peo­ple out there who are well aware of the ‘dumb­ing down’ approach that fish & chips rags try too stuff down our faces.

    Keep it up & good luck with your mes­sage!

  • NME

    Amus­ing to see the hind­sight brigade out in full force, with their post-hoc ratio­nal­i­sa­tions of what went wrong. Where were they a year ago? Frater­nising with exec­u­tives of now defunct finan­cial insti­tu­tions and endors­ing the ben­e­fits of glob­al­i­sa­tion, dereg­u­la­tion and “finan­cial inno­va­tion”. They were wrong — Steve was right. A mid­dle age, slightly dorky (sorry Steve) aca­d­e­mic from the burbs. I bet that stings… 

    Of course Steve was not alone in his call. Steven Roach pro­duced an excel­lent weekly com­men­tary until he was ring­ing the alarm bell so loudly that Mor­gan Stan­ley had to ship him out to China to shut him up. Nouriel Roubini is another unglam­orous aca­d­e­mic who got it absolutely right. I can list another dozen peo­ple who not only fore­casted a cri­sis, but laid out the unfold­ing sequence of events in some detail and sup­ported by solid data. There is a huge dif­fer­ence between the two that clearly escapes Hen­der­son and his “stopped clock” argu­ment.

    The future is a blank slate and it is entirely pos­si­ble that Steve is wrong. But if track record counts for any­thing then he deserves to be heard out. Bet­ter late than never.

  • I think it is impor­tant when analysing what is going on to attempt to under­stand the vested inter­ests at play at the polit­i­cal, busi­ness and media lev­els.

    The het­ero­gene­ity of report­ing of the cur­rent cri­sis by the media has picked up over the last week. News Ltd was very help­ful to the Gov­ern­ment soon after the stim­u­lus pack­age was announced — attempt­ing to cre­ate fear in FHBs with front page head­lines of pre­dic­tions of house price and rental increases (the stick to the FHOG car­rot).

    Then on the week­end two very frank arti­cles that house prices are falling and crit­i­cal of the FHOG increases. 

    Then the 60 min­utes story by another media com­pany.

    But over at yet another media com­pany, Kochie was chat­ting with his mate Kev (though I have to admit they were sur­pris­ingly frank the pre­vi­ous week — well, at least they allowed Louis Christopher’s frank assess­ment to come through.)

    I sus­pect that media play­ers are strug­gling to come to terms with the new envi­ron­ment they con­front as the finan­cial world is restruc­tured. And all would like to be cosy with the PM — though some are not as cosy as oth­ers.

    I like Ger­ard Henderson’s com­ment “Not unex­pect­edly, the Prime Min­is­ter made it known that he was not in the busi­ness of pro­vid­ing pre­dic­tions “about where house prices are going”.”

    Ger­ard neglected to add that Mr Rudd’s reluc­tance to com­ment on the likely move­ment in house prices DID NOT STOP HIM FROM RECOMMENDING TO A YOUNG COUPLE THAT THEY SHOULD BUY A HOUSE AS SOON AS POSSIBLE!

    Hen­der­son has actu­ally paid Steve the high­est of com­pli­ments. Clearly he hasn’t both­ered him­self with con­duct­ing any research to make sub­stan­tive argu­ments — he’s just attacked his char­ac­ter. (It’s akin to a big­ger but less intel­li­gent child get­ting phys­i­cal when his intel­lec­tual short­com­ings have been “shown up”.)

    Obvi­ously Steve is hav­ing a sig­nif­i­cant impact which some elites find threat­en­ing. And worse still — he’s the most dif­fi­cult threat to com­bat — he has no vested inter­est that they can attack. He’s sim­ply warn­ing peo­ple because his robust aca­d­e­mic research has led him to these con­clu­sions, and because he cares about the well­be­ing of his coun­try­men (unlike oth­ers who are con­cerned about power and wealth!)

    Next week Ger­ard might like to per­son­ally attack Paul Barry for hav­ing the audac­ity to inform Aus­tralians about the Amer­i­can hous­ing cri­sis, and sug­gest par­al­lels to Aus­tralia. There’s even a Yale Pro­fes­sor — Robert Shiller — to “have a go at”. The ABC even showed an updated ver­sion recently!

  • Peter N

    Bravo Steve Keen. Keep report­ing as you see it. Your views are not to the lik­ing of the vested inter­ests who want to keep ordi­nary folk dumbed down so that they can keep rip­ping them off.
    An exam­ple of the media’s mis­re­port­ing was last Sunday’s (19/10/08) Chan­nel 7 News @ 6.00pm where Jen­nifer Keyte’s first item was that Mr Rudd’s recent pol­icy announce­ments were hav­ing a pos­i­tive impact on Saturday’s auc­tion results. What a joke!

  • Well done! Since all pub­lic­ity is good pub­lic­ity, this nasty piece by an ex-teacher, journo and polit­i­cal hack is an acknowl­edg­ment that you and your views are ready for prime time.

    Make the most of it! Nouriel Roubini has built a global rep­u­ta­tion on just two things: pre­dict­ing the worst, and being right! 

    We can really use some­one in that role here and I think you’re nom­i­nated. Keep up the writ­ing, com­ment on every­thing, be seen every­where and we’ll keep cheer­ing.

    The Keen Mon­i­tor has a ring to it!

  • Think of the pos­i­tives Steve –Gerard’s done you a big favour by bring­ing you to the atten­tion of a whole lot more peo­ple-like me-who have been search­ing for some san­ity from an econ­o­mist. When­ever I see Ger­ard on the attack about some­one, I know it’s bound to be some­one I should know about..and so it comes to pass. Great to find your site and will be mak­ing it required read­ing over the dark times to come.

  • James Haughton

    Attack by the right-wing com­men­tariat is the sin­cer­est form of flat­tery.

  • James Haughton

    Shorter Hen­der­son: I’m jeal­ous this man gets more media cov­er­age and has a nicer t-shirt than I do.