Big Ideas: In place of a pod­cast

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I’m still hav­ing dif­fi­cul­ties get­ting my pod­casts up and run­ning at the moment, so in lieu here is a link to the ABC Radio National Big Ideas record­ing of an Evatt Foun­da­tion forum on the Global Finan­cial Cri­sis.

Speak­ers were Bernie Fraser, ex-Gov­er­nor of the Reserve Bank of Aus­tralia, myself, and Garry Weiss, a cor­po­rate lawyer (this is also the speak­ing order).

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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  • nanks

    excel­lent talk — I heard this on the radio and thought you were extremely clear and con­vinc­ing

  • Bull­turned­bear

    I’m becom­ing dis­en­gaged. I didn’t fol­low Bernie’s lec­ture as closely. I’m wor­ried that I am ignor­ing the main­stream view too much.

    I think Bernie gave a bit of his­tory and then said. The cur­rent pol­icy actions are spot on and we should see some signs of improve­ment by the end of the year. Did Bernie add any value to the dis­cus­sion at all?

  • Mark Byrne

    Steve,

    We need to address to global crises. Peak debt (from expoen­tal debt growth) and the cli­mate cri­sis. A new money base can do both.

    Firstly, what ever we use as the basis of our money stan­dard will be hoarded and will increas­ingly be taken out of use for any­thing other than money. Yet gold has great appli­ca­tion in elec­tron­ics and other tech­nol­ogy. We will be poorer with­out its use in these appli­ca­tions. What ever we use as a mon­e­tary base should be stor­able, sta­ble, and some­thing we want to stop using for other appli­ca­tions. Coal might be able to fill this need.

    I hear that crit­ics of the gold stan­dard point to the way that the mar­ket has been cor­nered numer­ous times in his­tory. They also point to the bat­tle between those fight­ing for a gold stan­dard (super rich) and those fight­ing for a sil­ver stan­dard (work­ing peo­ple) at the turn of the last cen­tury. The rel­a­tively small amount of gold com­pared to other bases means that the super rich are more able to monop­o­lies it.

    The biggest bar­rier to mak­ing this as a new stan­dard is that it would greatly favour nations like Aus­tralia with huge coal reserves, We could counter this in a pos­i­tive way by includ­ing car­bon in old growth ecosys­tems, sys­tems that we want to value with­out destroy­ing for con­sump­tion. There by our money sup­ply would be lim­ited by how much of our ecos­phere we pre­serve.

  • Daniel Dare

    Steve,

    does it make any dif­fer­ence to your analy­sis, that the Fed is not merely pump­ing up Base Money and allow­ing the banks to mul­ti­ply the liq­uid­ity, (which they don’t, merely pil­ing up excess reserves); but it is also lend­ing directly to the var­i­ous mar­kets, and so becom­ing “Lender of First Resort”?

    In other words the Fed is bypass­ing the inter­me­di­aries and pump­ing credit into the econ­omy directly.

  • Barry

    Steve,

    Given your the­o­ries on the impend­ing hous­ing mar­ket col­lapse, I was sur­prised to see that the level of over build­ing here is far less than it has been in the other Anglo Saxon coun­tries. Britain, Ire­land and The U.S. are quite lit­er­ally at the stage where they are moth­balling whole hous­ing devel­op­ments and demol­ish­ing oth­ers.

    It seems to me that while all the other causal fac­tors of a bust stack up, the big dif­fer­ence is that lack of emp­ties. Rel­a­tively speak­ing, there is not enough over sup­ply in Aus­tralia to pre­cip­i­tate a major hous­ing bust. I know the cen­sus says 860,000 empty units but how many of these are hol­i­day homes? 

    Am I wrong?

    B

    P.S. Sorry Id didn’t post this in a more appro­pri­ate forum.

  • thras

    Steve Keen’s com­ments start at 19:14 or there­abouts.

  • Hi Barry,

    I don’t think that more than 10% of the hous­ing stock could be hol­i­day homes; home­s4aussies knows more about this than I do, but it is prob­a­ble that a fair frac­tion are unoc­cu­pied invest­ment homes because neg­a­tive gear­ing was more of a moti­va­tion for build­ing them than rental, with its lousy returns in Aus­tralia.

    We did have less over­build­ing, but the obverse of that is that we had more pure spec­u­la­tion. At the end of our boom, 92% of mort­gage finance was going to the pur­chase of exist­ing build­ings.

  • Some but not a lot. The sheer scale they would need to lend still remains beyond con­tem­pla­tion, and by not abol­ish­ing the debt they are still main­tain­ing the root prob­lem.

  • It was rather, well, embar­rass­ing to lis­ten to, from my point of view. Bernie has retired and decades ago, but the absence of analy­sis and degree of sim­ple faith that the trea­sury and RBA offi­cials would work out what to do and all would be well was not exactly reas­sur­ing.

  • The credit default swap oblig­a­tions are var­i­ously esti­mated to be at $600 tril­lion to $1.5 quadrillion. It would seem that you would need a new vari­able in your endoge­nous model for them.

    Can you give any hint about the money flows involv­ing them to the rest of the econ­omy?

  • Chris

    This ABC record­ing is very good.

    How­ever Steve is ignor­ing the basics.

    While buy­ing and sell­ing assets in a ris­ing mar­ket is con­tra­dicted by the fact that debt can rise faster (Steve’s point), the real prob­lem is that debt is ris­ing faster than the real con­sump­tion power of soci­ety and that this is a nec­es­sary trend for a econ­omy based on Cap­i­tal.

    This is Marx’s point. Debt is a symp­ton of a deeper cause.

    Unfor­tu­nately Steve’s rude anti-Marx­ism (eg loos­ing their minds) is under­min­ing his own analy­sis.

  • aussiebass­guy

    I can’t stand lis­ten­ing to Bernie ‘The Sandman(JJJ)’ Fraser. yuk.

  • aussiebass­guy

    great lec­ture steve. keep it up.

  • Effit

    I’ve only just been able to lis­ten to the Big Ideas lec­ture.

    I just won­der if Bernie stayed for it all, and if he LISTENED to it, under­stood it and took it on board. I’m one of those stu­dents who only did one year of Eco­nom­ics, a long time ago, and Steve, what YOU say makes so much sense.

    I have a con­nec­tion to what Bernie was talk­ing about back in the 1960s as my father ‘lost’ his busi­ness at that time because of ‘the credit squeeze’, and as a child I didn’t under­stand what it was all about.

    So I hope Bernie learned some­thing. Oth­er­wise, I fear he’ll be ‘trot­ted out’ again and again to give his ‘expert’ view, as ‘he must know as he’s a for­mer Gov­er­nor of the Reserve Bank!’.

  • selise

    excel­lent and very help­ful lec­ture.

    is there by any chance a tran­script avail­able? or should i try my hand at it?

  • There’s no tran­script selise, and I’ve had sev­eral such requests to pro­vide one. I’d be delighted if you could afford the time to com­pile one.

  • selise

    i might be able to try a draft tran­script tomor­row. will let you know how it goes. thanks for the reply.

    (even promise to use the shift key for cap­i­tal­iza­tion)

  • selise

    steve — i wasn’t able to fin­ish a draft tran­script until today, but now that i’ve done it, i don’t how to send it to you. is there a con­tact page or link that i am miss­ing? alter­na­tively, i can be reached at gmail.