Video of Whitlam Institute Talk

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Last month I spoke at a sem­i­nar on the finan­cial cri­sis organ­ised by The Whit­lam Insti­tute, in reply to a speech by Pro­fes­sor John Quig­gin. Guy Debelle, the Assis­tant Gov­er­nor (for Finan­cial Mar­kets) of the Reserve Bank of Aus­tralia, was the oth­er dis­cus­sant.

The Insti­tute has put togeth­er a very pro­fes­sion­al video of the dis­cus­sion, which has been picked up by SlowTV, a free inter­net TV chan­nel run by The Month­ly, an Aus­tralian mag­a­zine of com­ment and analy­sis which, amongst many oth­er things, pub­lished Aus­tralian Prime Min­is­ter Kevin Rud­d’s lengthy essay on the Glob­al Finan­cial Cri­sis in which he explic­it­ly cri­tiqued neolib­er­al­ism.

The video comes in 4 parts, which are respec­tive­ly

The Ques­tion and Answer ses­sion with the audi­ence isn’t avail­able at SlowTV, but it is on YouTube in three parts:

The Pow­er­point pre­sen­ta­tion that I gave is avail­able here.

My pre­sen­ta­tion includes sim­u­la­tions of two dynam­ic mod­els that are the core of my analy­sis of the finan­cial cri­sis:

  • The Min­sky Mod­el sim­u­lates a cycli­cal econ­o­my with debt in the form of both pro­duc­tive borrowing–where the mon­ey bor­rowed finances increas­es in pro­duc­tive capacity–and “Ponzi” borrowing–which gam­bles on asset prices (which are not explic­it­ly mod­elled here as yet) and there­fore adds to debt with­out increas­ing pro­duc­tive capac­i­ty;
  • The Cir­cuit Mod­el mod­els the endoge­nous cre­ation of cred­it in a pure cred­it econ­o­my, and also sim­u­lates a cri­sis caused by a sud­den shift in the will­ing­ness to lend and to take on debt–a “cred­it crunch”. I also mod­el an “exoge­nous” gov­ern­ment res­cue one year into the cri­sis in one of two ways:
    • By inject­ing a $100 bil­lion sum into banks unlent reserves over a one year peri­od; and
    • By inject­ing the same sum into the bank accounts of the debtors (firms in this mod­el) over the same peri­od

The sim­u­la­tions are run in the visu­al sim­u­la­tion pro­gram Vis­sim; I have embed­ded a link to down­load the free Vis­sim View­er into the pre­sen­ta­tion; that embed­ded link may no longer work, but the one giv­en here should do so after a reg­is­tra­tion process (I use Vis­sim main­ly to show­case the mod­els; I devel­op them in the math­e­mat­i­cal pro­gram Math­cad).

My main research objec­tive for the next year is to com­bine these two mod­els to devel­op an explic­it­ly mon­e­tary mod­el of finan­cial insta­bil­i­ty. This will be the bedrock of the book Finance and Eco­nom­ic Break­down that will be pub­lished by Edward Elgar Pub­lish­ers.

Final­ly, my speech is embed­ded below (Reuters will soon start pub­lish­ing a reg­u­lar vid­cast by me, and I’ll repro­duce it on this site.)

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