The Departments of Political Science and of Economics at the University of Helsinki recently held a seminar entitled “Economics: Challenges for Political, Philosophical and Historical Research”. The motivation was a reorganisation of the University that will combine these two Departments. The flyer for the seminar advertised it in the following manner:
This seminar, organized jointly by the Department of Political Science, Department of Economics and Centre of Excellence on Global Governance Research, will start with reflections on the role of economics and economic studies.
- Can we combine economics and politics through political economy?
- Have political and economic studies neglected history?
- How can different methodological tools be combined?
One of the contexts for the seminar is the creation of the new Department of Economic and Political Studies at the University of Helsinki. More generally, we hope to contribute to theoretical and political debates on how to explain recent and future changes in global capitalism.
I was invited to put the perspective of economists who are critical of neoclassical economics, while the perspective of those favourably disposed to this school of thought was put by Professor Vesa Kanniainen from the Department of Economics at the University of Helsinki. The other speakers were:
- Isabella Bakker, Professor of Political Science, York University;
- Susanna Fellman, Professor of Economic History, University of Helsinki;
- Uskali Mäki, Academy Professor of Philosophy, University of Helsinki; and
- Heikki Patomäki, Innovation Professor of Human Security, Globalizations and Global Institutions, RMIT University.
The seminar was chaired by Teivo Teivainen, Professor of World Politics, University of Helsinki.
I videotaped the talks, and also made an audio recording–the latter includes about an hour’s discussion that was not recorded on video (since my camera’s battery ran out). The presentations and the discussions should be of interest to anyone who is curious about the capacity of economics to reform itself in the light of the global financial crisis, and the failure of neoclassical economics to anticipate this event.
The recording is in three segments: from the introductions and opening address by Vesa to most of the way through my talk:
Steve Keen's Debtwatch Podcast with Stuart Cameron
From the end of my talk to that by Uskali Mäki:
Steve Keen's Debtwatch Podcast with Stuart Cameron
And from Uskali Mäki till the end of the speeches
Steve Keen's Debtwatch Podcast with Stuart Cameron
Discussion then followed for roughly an hour; all the preceding speeches and this last hour of discussion is recorded in the following audio file:
Steve Keen's Debtwatch Podcast with Stuart Cameron
The Powerpoint file for my presentation is available here.
November 24th, 2009 at 5:25 am
Just a note to thank you for being. What a relief to find your site and your analysis AND your book.
Canibalized one of your recent talks for my podcast. Hope that’s okay. (demandside economics) Very little out there that is so right on the mark. Look forward to listening to these recordings. Thank you very much.
November 24th, 2009 at 5:31 am
Thanks demand side,
and cannibalizing my site and comments is fine, so long as the standard attributions and links are provided, as I see you’ve done.
Welcome to our little community.
November 24th, 2009 at 5:49 am
Very good. Nice to be here.
Question: The Home Owners Loan Corporation was a New Deal agency, as you no doubt know, that wrote down the principle on mortgages. The same model should have been tried here, but wasn’t. Instead the debt was extended, for the most part. I’m trying to gauge what the impact of switching to that HOLC scheme would be.
You made mention in your talk (most of the rest of which will be relayed on Saturday, by the way) that capital to the banks did not do anything because they held it, the reservoir went up, while relief to the debtors would have done a lot of good, flowed out into the economy.
How would you go about assessing just how much good? Or perhaps just a guess.
November 24th, 2009 at 7:05 am
I outline a model of this issue in this fairly technical paper:
http://www.debtdeflation.com/blogs/wp-content/uploads/papers/KeenModelEndogenousCreditandCreditCrunch.pdf
Read past the math and the relative impact of rescuing the debtors (very good) versus the bankers (useful but not brilliant) is obvious.
November 24th, 2009 at 7:07 am
Steve,
Here’s a note for your information:
The podcasted excerpts of your talk are not out yet. I have recorded them and scheduled them and they pop up. One short segment is in tomorrow’s and on Saturday I relay most of the rest. Transcripts come out on the day of the podcast, but do not include the cannibalized audio. You are well cited and attributed (and I hope people end up appreciating more of what you have to say).
I’ve also used some digested segments of your book for a treatment of debt deflation on Friday’s podcast.
Won’t hurt my feelings if you reject this note in the moderation process and keep it just for your information. Not really trying to promote my stuff on your site.
Alan
November 24th, 2009 at 9:16 am
thank you steve, i’m downloading the mp3 now and very much looking forward to giving it a listen.
which reminds me…. i was going to ask if anyone had made a transcript of your per capita talk on debt and/or michael hudson’s talk and your group discussion? if not and if there is an interest, i was thinking of giving one of them a try. didn’t want to start though if someone else was already on it.
November 24th, 2009 at 9:26 am
Hi Steve,
I have been a long time fan and follower. I have recently put together some of my thoughts in relation to the Australian Property Bubble. My original target audience was to my friends and family but given that I am getting some random hits I believe it is a good read for any potential first home buyer (as a warning).
I have inserted two graphs sourced from your blogs for dramatic effect (seems people take notice of graphs as most people have commented about them). If there is an issue with this, please let me know.
If you have any feedback, I would also be very interested, as it would be like my ‘pin up hero’ sending me his autograph. Your readers can also take a look at it, I have attached the link below:
http://www.scribd.com/doc/22566921/Australian-Property-Bubble
Regards
Sid
November 24th, 2009 at 10:37 am
I’m curious if anyone else had trouble accessing Steve’s webpages in the past week or so. I’m in the U.S. and use Verizon FIOS as my ISP. I tried multiple times from various links and always got the ” IE could not make a connection ” screen , then today it started working again.
I guess it could be a glitch in my firewall , but my first thought was : Government Conspiracy. Ha!
Seriously though , I was half-worried that Steve had been “disappeared”. It’s been known to happen , from time to time.
November 24th, 2009 at 10:55 am
Steve,
In your talk you made the point that economic studies should strive to acquire insights from other fields.
Here’s a link to a great visual that illustrates the inward-looking approach of current academic economists. It’s a graphic showing citation linkages between various fields:
http://well-formed.eigenfactor.org/radial.html
(It takes a few seconds to load the graphic. ‘Economics’ is at about 1 PM on the dial.)
November 24th, 2009 at 12:04 pm
Goldilocksisableachblond,
The graph is great!
I always suspected that the so-called “computer science” is a degenerated form of not very sophisticated mathematics. That’s why I’m doing so well as a software engineer as I’m too dumb to be a mathematician.
I will watch the presentations at night if I don’t have to work (I may have to).
Steve, would it be possible to publish the constants and initial conditions of your models in a table together with the actual differential equations? They are mentioned in the text and it is a good exercise to find them all but it would save time to have them in one spot.
I have worked out how to run the models in scilab and I will be very happy to post the scripts once I verify that they are consistent with the original MatCAD simulations.
November 24th, 2009 at 1:01 pm
Steve,
I read your book some months ago. I enjoyed it and found a lot of your ideas interesting. However, I cannot agree about one particular point you make in the book (and again here in this Powerpoint presentation).
You have claimed to “debunk” the idea of the market demand curve, by picking apart it’s construction from indifference curves of individuals, saying that it is theoretically inconsistent and based on assumptions that are unrealistic.
This criticism, I believe, misses the point. No-one, anywhere would claim that the assumptions of the theory are a complete reflection of reality in all situations. Of course no individual has an indifference curve which they stand ready to buy an amount of every commodity at any point in time.
Likewise, for the implications of the theory. No-one would suggest that the market demand curve for a commodity is some kind of exact instrument which can forecast the exact amount of commodity the market will buy at a given price.
Both the assumptions and implications of the theory represent general relationships. The claim that they are not perfect reflections of reality in all situations is a trivial one.
The fact is that a downward sloping individual and market demand curve, broadly describes reality in many situations.
In my experience, it is sometimes quite amazing how closely the behaviour of the real economy can be to the theory.
To illustrate I will give one experience which I will never forget. When I was at uni I worked at a pub in Brisbane. One Saturday, the bottleshop put cartons of XXXX Gold on special at very close to cost (perhaps 50c per carton above cost). That day we sold an amazing amount of XXXX Gold. I could not believe it, but people were lined up outside, some people brought utes and filled them up with 10 or 20 slabs. It was truly amazing to see that reducing the price like that could induce such an incredible volume of sales.
November 24th, 2009 at 2:35 pm
“Can we combine economics and politics through political economy?”
Just hope that it doesn’t turn Economics into a “bastard” science as that approach did to this science.
November 24th, 2009 at 5:48 pm
[...] This post was mentioned on Twitter by greychampion and John Hacking, Lily Ma. Lily Ma said: Helsinki Economics and Politics Seminar | Steve Keen's Debtwatch: The Departments of Political Science and .. http://bit.ly/07Y58s2 [...]
November 24th, 2009 at 6:03 pm
Hi Gamma,
It’s more an intellectual consistency thing. Students get shown a model of an individual in great detail, and then are shown a market demand curve as if the two are compatible. They are not.
Secondly, there is an alternative explanation of the demand-price relation with respect to individual commodities: that people allocate a fairly constant proportion of their disposable income to different classes of commodities, and will expand purchase of one in quantity terms when prices fall, but make not a great deal of change in terms of share of income.
There are also many other issues on this front that I go into to some extent in my lectures on Managerial Economics. The faults with the conventional theory are that (a) it is internally inconsistent, yet the inconsistency is not admitted (and frequently not known!) by the believers; and (b) its use is more ideological than logical. The idea of utility maximising consumers on one hand and profit maximising firms on the other (which contains a much more significant flaw–see my papers on the theory of the firm) sets up a vision of a free market nirvana that makes economists more zealots than analysts. That is the real problem with the theory.
November 25th, 2009 at 4:16 am
Steve,
I recently read your article “Use-Value, Exchange-Value, And The Demise Of Marx’s Labor Theory Of Value” and thoroughly enjoyed it.
This seems to chime with another article I read last week:
http://sociologias-com.blogspot.com/2009/11/paradox-of-wealth-capitalism-and.html
Am I right in concluding that the crux of the flaws in Neoclassical economics are its failure to admit the difference between real value and Exchange Value (i.e. price)?
If so, then what can you recommend that I read to pursue this thread more thoroughly? Is it inherent in your current models, as this quote of yours suggests:
“Reconstruction indicates that Marx’s neglected dialectical analysis provides a sound foundation for the crucial Minskian concept of two price levels in capitalism.”
November 25th, 2009 at 4:56 am
Welcome aboard Hawkeye,
Yes there is a commonality between the argument in that paper and the Foster/Clark paper you refer to–thanks for the reference.
I develop the history of economic thought aspect of the argument in my Use-Value paper further in “The Misinterpretation of Marx’s Theory of Value“, but the actual positive side of the analysis is covered in an unpublished paper “A Marx for Post Keynesians“. I ran into resistance in the Post Keynesian community with that paper, so I’ve left it unpublished and under-developed. But the ideas are there nonetheless.
November 25th, 2009 at 5:31 am
Steve,
Thanks for the links, I’ll try and digest these over the next few days.
I did stumble across this dissertation today which seems to be along similar tracks (i.e. “two price levels in Capitalism”) :
http://deposit.ddb.de/cgi-bin/dokserv?idn=975523244&dok_var=d1&dok_ext=pdf&filename=975523244.pdf
“The superior applicability of the new derivation of interest is obvious: It is characteristic of a capitalist economy with property rights that interests accrue
and interest payments have to be made, whether or not the added value (profit) can be created by the debtor over time. Interests respectively interest payments do not depend on the profitability or the yield of the economic
employment of physical goods. This fact is ignored in classic and neoclassic theories.” p.156
Also, you made a somewhat cryptic reference in your “Use value….” article. Note 3 states that “there are reasons why price will diverge from value”. What were you referring to here?
I can see why resistance will occur. Surely any proof of “two price levels” will undermine the very edifice of mainstream economic theory.
November 25th, 2009 at 6:19 am
Hi Steve,
When you have a chance, please post some more podcasts.
Also, have you done any consulting work for the Australian (or any other govt.)? Here, I’ve heard of some economists and “political consultants” doing work in the U.K. and various parts of Europe.
November 25th, 2009 at 8:54 am
http://www.smh.com.au/business/australian-banks-fail-new-capital-test-20091124-jhfn.html
Australian banks fail new capital testERIC JOHNSTON
November 25, 2009
RATINGS agency Standard & Poor’s has warned that nearly all the world’s big banks – including Australia’s major lenders – have insufficient funds to cover their lending exposures and risk a ratings downgrade unless they move to bolster their balance sheets over the next 18 months.
The warning follows the release of a tougher global measure of bank capital by Standard & Poor’s, which has found that most large banks do not meet the minimum 8 per cent threshold under the credit ratings agency’s new risk-adjusted capital ratio.
The findings appear to be out of step with claims by Australian banks that they are among the strongest in the world under the traditional measure of bank capital known as the tier 1 ratio.
Over the past year, Australian banks have raised more than $20 billion in new capital to strengthen their balance sheets. This has resulted in an increase in the average tier 1 ratio of the big four banks to 8.9 per cent from 7.8 per cent a year ago.
But critics warn that these measures of tier 1 can be misleading because they fail to distinguish between higher-risk and lower-risk forms of lending. As well, the tier 1 measure is not consistently calculated on an international level.
Australian banks argue that their capital ratios would increase by about 2 per cent on average if they were calculated under existing British rules.
Under the new measure, S&P gives a lower rating to hybrid capital because it behaves more like debt than equity. For Australian banks, hybrid securities can make up to a quarter of their total capital. Specific exposures including trading desks and private equity would require banks to significantly increase the level of capital.
S&P reviewed 45 banks around the world under its new risk-adjusted measure. No Australian banks were included in the handful that hit the minimum threshold to be considered safe.
Of three local lenders included in the review, ANZ scored the highest rating with 7.1 per cent. National Australia Bank was at 6.9 per cent and Commonwealth Bank at 6.3 per cent.
While Australian banks benefited from having a large exposure to low-risk residential mortgages, S&P said a narrow geographic and business base counted as a negative. It also noted that the capital raisings by the local banks had been used mainly to fund acquisitions or balance sheet growth.
Among the global banks considered most vulnerable are Mizuho Financial (2 per cent), Citigroup (2.1), UBS (2.2) and Sumitomo Mitsui (3.5). The global average came in at 6.7 per cent.
”The results to date appear to confirm our view that capital is a rating weakness for a majority of banks in our sample,” S&P said.
The ratings agency said it expected banks to continue strengthening their capital ratios over the next 18 months to comply with tougher regulatory standards. ”Failure to achieve this could put renewed pressure on ratings,” it said.
The top-rated global bank is HSBC on 9.2 per cent, followed by Dexia on 9 per cent and ING on 8.9 per cent.
The review of capital strength comes as Australian banks face a crackdown on rules related to liquidity.
Source: The Age
November 25th, 2009 at 9:05 am
I wish it was mainstream theory that offered the resistance here–if only! Instead it’s so committed to its subjectivist theory of value that it can’t even consider the hybrid theory of value I derive from Marx.
No, it’s Marxists who resist it, because it eliminates the “transformation problem”, the “tendency for the rate of profit to fall”, and many other shibboleths to which they remain committed.
The divergence of price from value etc is covered extensively in the “Marx for Post Keynesians” paper–in a nutshell, a “commodity-non-commodity” dialectic can be derived from the basic use-value-exchange-value dialectic. This leads to the real wage being more than the value of labour-power, and on it goes from there to include new technologies and money.
November 25th, 2009 at 11:20 am
Seems like the RBA is on the ball again.
http://www.smh.com.au/business/high-home-prices-sustainable-rba-20091125-jp4z.html
November 25th, 2009 at 11:43 am
Hi guys,
Good to have a medium online where we can discuss economics and the housing bubble without being ridiculed by those with vested interests.
http://www.businessspectator.com.au/bs.nsf/Article/Land-tax-Latrobe-Valley-carbon-gas-house-prices-in-pd20091125-Y4RRH?OpenDocument&src=sph
I just read the article pasted above on the Business Spectator site. I was going to comment on the site in relation to his article but decided there was no point because it is like talking to a brick wall!
My thoughts on the issue of housing as an investment is that these costs have blown out simply because there is a bubble! I feel that these so called experts get caught up in all the fine details when the simple arithmetic does not make any sense. It just goes to show that many people (even the so called experts) do not understand the power of compounding..
My cousin bought her house in 1992 in the inner west of Adelaide. She paid 105K. That same house today would sell for around 380K. She bought it as a single person and even had to ask for help from her family because the banks at the time were rather tough. My colleague’s wife also was looking to buy in the early to mid 90s and at the time she was looking at purchasing a house for 120K and her income was 30K pa. The bank she was dealing with at the time wanted her husband to go in with her! It’s nothing like that today, any tom dick and harry can get a loan. I think this is the driver of prices.
My opinion is we have no shortage; we just have too much (borrowed) money floating around. This increases demand and artifically lowers supply. More ppl demanding the same # of houses is never bound to be a good thing.
The same can be said for diamonds and fast cars. I have a high demand for those and I am sure many others do too. I however cannot negative gear to purchase a 3 ct solitaire, or a ferrari. Quite simply, it all comes down to money. Don’t have any money? Can’t buy it.. unless of course the bank lends it to you.
I don’t know why people don’t understand that simple concept….
November 25th, 2009 at 12:15 pm
Steve, thanks for the reply.
I am not sure exactly what you mean when you say that an individual and market demand curve are not compatible. My experience in markets has been that demand curves are generally downward sloping for individuals and markets, while supply curves can have a wider variety of shapes, but are often upward sloping.
Of course there are infinite complications such as whether the consumer / supplier is a price-taker or price-maker, whether we are talking about a single instant in time or over a period of time, and so on.
But the value of any theory is that it abstracts essential features from reality which are useful in modelling or predicting behaviour.
Just because the assumptions of a theory are not an exact reflection of reality is not a reason to disbelieve the theory. In a way, the more unrealistic or simplified the assumptions the better, IF the theoretical predictions do accurately confirm to reality, in a wide variety of cases.
November 25th, 2009 at 1:55 pm
Re– the RBA’s new happy attitude to house prices/debt. Compare it to this statement from the same individual in 2007
“…the household sector is running a highly mismatched balance sheet, with assets consisting mainly of property and equities, and liabilities comprised by debt. This balance sheet structure is very effective in generating wealth during good economic times, but households need to recognise that it leaves them exposed to economic or financial shocks that cause asset values to fall and/or interest rates to rise.”
Some Observations on Financial Trends ( Sept 2007) http://www.rba.gov.au/Speeches/2007/sp_dg_250907.html
Ric Battellino Deputy Governor,RBA
With the Internet all statements can be matched historically and are easily found. Officials should be aware that their statements can be checked and validated.
There is an eminent global economist who’s insights are sought by banks and governments all over the world, incl. Australia. His pronouncements/analysis and prognosis over the last 2 years have been so utterly wrong on every occasion that it is a wonder he has any paying clients.
November 25th, 2009 at 2:14 pm
Kat,
You will find lots of comment on this site which will support your views (if that is what you are seeking).
However, if you are in search for a site to discuss housing where there are no vested interests, well i’m afraid that does not exist.
November 25th, 2009 at 3:20 pm
Steve,
I have those water consumption figures provided by South East Water, Melbourne. The figure is for dwellings that consume 0 litres to no more than 1000 litres of water for financial year 2008/2009. Dwellings using 1000 litres or less of water per annum can be deemed to be vacant.
Number of houses on register. 373,000
Number of houses using less than 1000 lites of water annually. 3,651.
Number of flats/units on register. 176,420.
Number of flats/units using less than 1000 litres of water annually. 3,683.
2.1% of all flats/units are vacant.
1% of all houses are vacant.
There are 3 main reasons a dwelling can be vacant for 12 months.
Reason 1) Dwelling is an investment property and investors can not be bothered with tennants as they are only interested in capital gain.
Reason 2) Owner/occupier has been posted oversees by employer.
Reason 3) Property is deceased estate and is in legal limbo.
For reason 3, based on “next of kin” searches in newspapers I doubt there would be more than 200 dwellings of the above sample that are in legal limbo for this period.
If this sample is consistant across Australia then there would be approx. 130,000 dwellings vacant for at least 12 months, most of those being units/flats. At least 65,000 dwellings are assumed to be vacant due to speculation, the other 65,000 dwellings can be assumed to be owner/occupier living-working oversees, but I doubt this figure is that high.
November 25th, 2009 at 3:22 pm
bb,
I understand that there are vested interests around, but I don’t have much time for those who have 100 houses and counting all thanks to debt. It is detrimental to future generations. What hope will my children (when I eventually have them) have in 20 years time if things keep going the way they are? I can see we will have an increase in social problems as a result. Australians have just become so obsessed with collecting houses over the last 10 or so years. Total madness.
Just for the record, I am a renter, and no this is not about me wanting my own house. I am fortunate that my partner and I could buy a house tomorrow without requiring much finance. So for me, this isn’t from a “have not” perspective. I am concerned about where things are going in this world from a social point of view. Just clarifying that incase I offend or annoy anyone with my ranting about prices.
November 25th, 2009 at 3:25 pm
For the above water consumption figures I didnt mention holiday homes. Holiday homes are deemed to be occupied at least 1 week a year (christmas, easter, term holidays etc. )and would consume much more than 1000 litres of water annually.
November 25th, 2009 at 3:26 pm
mfo,
Don’t mean to hijack, but very interesting numbers you’ve come up with.
Just out of curiosity, have dwellings with rainwater tanks been excluded from the figures? I know a few people who live in the Adelaide Hills and they solely rely on rainwater for their domestic use (inside and outside the house). Just a thought.
November 25th, 2009 at 3:28 pm
Kat.
Wait for another 2-3 years before you buy a house. 2009 will go down as the year $500,000 will buy you a house. 2013 will go down as the year $500,000 will buy you the whole street.
November 25th, 2009 at 3:39 pm
Kat, as an example I am entirely dependant on tank water. I need too truck it in when we run out. As such we are not on South East Water’s register.
To be entirely dependant on tank water you need minimum 50,000 litres capacity tanks and average rainfall. I don’t know any flats/units, suburban houses that have tanks anywhere near that capacity. Most suburban tanks allow for some watering and a few flush’s of the toilet and that’s about it. Also remember we are in the middle of a drought and most suburban tanks (5000 litres or less would run dry after a week or two if fully supplying household needs.
November 25th, 2009 at 3:39 pm
http://news.smh.com.au/breaking-news-world/chinese-banks-to-be-punished-for-risky-lending-20091124-jhf5.html
Chinese banks to be punished for risky lendingNovember 24, 2009 – 10:09PM
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China has stepped up its moves to curb banks lending massive amounts of money by issuing a rare warning it will restrict lenders’ access and other operations if they do not meet risk requirements.
Banks that fail to comply will face “restrictions on market access, overseas investment, and outlets and business expansion,” the China Banking Regulatory Commission (CBRC) said.
China’s banking laws have set the capital adequacy ratio — the amount of capital banks must hold against their risk — at a minimum eight percent.
Lenders must also raise their loan-loss provisions to at least 150 percent of their bad loans by the end of the year, the CBRC said in a statement posted on its website late Monday.
Such provisions at China’s commercial banks stood at 144.1 percent at the end of September, latest official data showed.
The published list of punishments banks may face was an unusual move, highlighting Beijing’s rising concern that brisk loan activity could result in asset bubbles and a slew of bad loans.
New bank loans reached 7.4 trillion yuan (1.1 trillion US dollars) in the first half of the year, as banks heeded the government’s calls to pump money into the world’s third largest economy.
The pace slowed after regulators told banks to rein in lending and step up risk management, while seasonal factors also played a role, economists said.
New loans dropped to 253.0 billion yuan in October, the lowest monthly level since the beginning of the year, official data showed.
© 2009 AFP
This story is sourced direct from an overseas news agency as an additional service to readers. Spelling follows North American usage, along with foreign currency and measurement units.
November 25th, 2009 at 3:57 pm
mfo
Very interesting analysis. Well done.
In commercial real estate, <5% vacancy is considered to reflect chronic shortage. I know the break even vacancy rate on resi is lower but would your conclusion therefore be Australia has no oversupply of housing, and possibly undersupply?
November 25th, 2009 at 4:06 pm
mfo,
You say that with such conviction! I wish I had that sort of confidence to predict the future. It just seems to me that the government is hell bent on stopping any falls. What do you think will send things backwards? I think there’s a big risk our “strong” economy will falter once all the stimulus is halted. Plus China has its own stimulus. I question how long they can keep that going.
Don’t worry I am in no rush to buy a place. Renting has made me realise what to look for in a house (if I was buying). Currently renting a place in Adelaide 5 minutes drive from the city for $330/wk… the rent is less than the interest repayments that one would have to fork out at current interest rates (with 20% deposit). We looked up what the landlords are paying in land tax, maintenance, insurance, council rates etc and it works out to 4K. We find it amusing.
November 25th, 2009 at 4:16 pm
mfo,
Thanks for the info regarding water tanks! Good work with the analysis.
November 25th, 2009 at 4:51 pm
Kat
Its not a prediction but a mathematical certainty.
Its also experience. I bought my property which I now own after setting aside 30% of my wage for 5 years when I took full ownership during the recession we had to have. My parents purchased the family holiday house 20 metres from the beach at 2 years average income during the 70’s recession. This will be the mother of all recesions (sorry depessions.) Save your cash for another 3 years and buy what you like and you will soon own it outright.
November 25th, 2009 at 4:56 pm
I don’t know what is low and what is a high number but at around 1.3% long term vacancy I would probably say that it’s low rather than high.
Another point is that you have to be careful with this sample, it’s geographically biased in a very geographically stratified dataset. What I mean is real estate data has a lot of geographical variance, so the particular area serviced by this water company may not be reflective of the entire country.
It’s a nice piece of data and it’s an example of how companies’ customer account statistics can be very useful. I can only imagine what kind of data the banks have on the economy given they have access to people’s financial account information. It would be much more useful to see as the statistic evolves through time, rather than just this one snapshot.
November 25th, 2009 at 4:59 pm
mfo,
I always say to people giving me free financial advice.
“if you are wrong can you agree to pay me the consequence of me making a financial decision based on your advice?” – simple yes/no required…
November 25th, 2009 at 5:06 pm
Hi mfo.
Awesome find with those SE Water usage numbers – thanks for sharing. Any chance that you throw together a histogram of that data, or are the only numbers you have just total <1000L and total on register?
Cheers
November 25th, 2009 at 5:36 pm
Noah, Badger and others,
Here is the link to the research paper by Ric Batellino that outlines his arguments in full. I have noted that the likes of Joye and others in the MSM have already taken taken the parts that suit their argument but have left out some of the most crucial points – these are also points that Batellino glosses over.
http://www.rba.gov.au/Speeches/2009/sp-dg-251109.pdf
I point you all to the last 2 paragraphs and his conclusion on pages 10 & 11.
November 25th, 2009 at 6:06 pm
Thanks debtjunkies.
This RBA speech is an extraordinarily superficial analysis that asks questions and uses doubt to advance an outline of an idea but suspends any concrete analysis. If the RBA is not sure of what forces occur in the housing market: demand, population, credit finance etc, there must considerable concern as to any cogent policy direction coming from them. It is also at odds with that speech from 2007, which drew clear lines as to the household balance sheet equation.
In sum — a lazy series of platitudes designed to please.
November 25th, 2009 at 6:16 pm
South East Water represents about a quarter of the entire Melbourne inner and outer suburban demographic. Their customer base represets about 1.3 million people and about 550,000 residential addresses. To get extremely accurate figures on vacant dwellings then all water authorities across Australia need to be surveyed. I have’t got time at present to do this so my figures are based on this sample. If 2.1% of all flats/units are vacant in this demographic then one could assume that the other regions of Melbourne, Sydney, Brisbane etc. would show similar patterns.
It would be interesting to get figures on inner Melbourne, Docklands, CBD etc which are mainly units/flats/appartments. Reckon that based on the above, figures could be even higher regarding vacancies, so will seek these figures in the next few weeks.
November 25th, 2009 at 6:45 pm
debtjunkies
I agree the speech said more, much more than Joye made out He was extremely selective in making it support his own references and graphs from a previous speech. As for Battellino I have learned a long time ago when organising Guest Speakers for event management syled luncheons and special occasion very often the guest speaker addresses that particualar audience with content that pleases them. In other words not the whole truth and nothing like the whole truth so help me I’m your friend , Thanks for inviting me FIGJAM.
November 25th, 2009 at 8:21 pm
Steve, I’m curious if you’ve tested macro theories of inflation and whether they hold any water or not? My hunch is now that neoclassical was designed purposely to put the blame on governments rather than the banking system. I’ve seen anecdotal data that suggests the banking industry pushing corporate lending rates up is what drives inflation…companies need to raise prices to finance debt and working capital. And pushing treasuries and therefore consumer rates up forces government printing. So for example I don’t blame the Weimar government, but the global bankers who jacked up rates on their exorbitant debt. printing and inflation come later
November 25th, 2009 at 10:01 pm
hi strabes,
too much money chasing too few goods.
so which side of the equation does weimar germany fall into
was hyperinflation in germany to do with government money creation, or was it due to the ridiculous reperation conditions implemented in the treaty of versailles by the victors, which led to german debt default and a massive supply side shock due to the political and military intervention and confiscation of german industrial capacity by the victors of world war 1,
if it only it ended there. hyperinflation is one thing ,but world war 2 as a consequence of a nation hell bent on revenge is another
so yes the ridiculous debt was a catalyst, but to compound the folly by removing germanies productive capacity is another.
pitty mugabe hadnt brushed up on post ww1 german history, he would have realised that forcing productive white farmers off their porperties may sound good on the grounds of equity, but inflationary consequences abound
November 25th, 2009 at 10:32 pm
Hawkeye_Pierce (15),
Thanks for the link to “The Paradox of Wealth”. It’s a must read for any one interested in sustainable development, and ecological issues.
if you’re interested I suggest reading:
Naess,P. 2006. Unsustainable growth, unsustainable capitalism. in Journal of Critical Realism, Vol 5, Number 2
November 25th, 2009 at 10:33 pm
The water studies are an interesting ABSOLUTE MINIMUM annual vacancy rate based on <100 litres p.a. and worth following, however on top of these minimum figures a house may be vacant for 362 days p.a. and only occupied for three days at the rate of 2.5 persons using 200 litres per day = 1500 litres. Yet this gives an effecive 1% housing utilization and 99% vacancy rate.
November 25th, 2009 at 11:06 pm
Interesting graph 9 on page 10 of
http://www.rba.gov.au/Speeches/2009/sp-dg-251109.pdf
A clear trend began in 1988 post stockmarket crash when overall ownership jumped in all age groups followed by a steady 10% decline in <35 year age group ownership.
I read into the graph that the majority of aggregate ownership has concentrated over the past 20 years into the hands of the baby boomer generation who were aged 23 – 43 in 1988 at the exclusion of newly forming families over the following 20 years.
As the baby boomers move into retirement age i.e. 65 in 2010 and become net sellers the reversal of this trend will bust the price bubble.
In market parlance they call this 'a crowded trade'
November 25th, 2009 at 11:48 pm
The following text outlines I think the real boundaries of Chartalism:
http://www.economics.harvard.edu/files/faculty/51_Forgotten_History_Of_Domestic_Debt.pdf
November 26th, 2009 at 12:43 am
mahaish, I’ve had that drilled into my head as well–”too much money chasing too few goods.” but along with everything else Steve proves wrong about econ theory, I think that definition of inflation is probably wrong. I’d like to see the empirical proof anyway. if you and I have a mini economy between the 2 of us where we both happily supply products to the other and we each have 10 bucks, you printing another bill to have 11 bucks doesn’t make me raise prices on my stuff. but if a bank shows up, claims the monopoly power to issue us money via debt and raises rates on us, then we both have to raise prices to pay the bank, and of course we both need more loans to pay the other’s higher prices. the debt growth cycle begins…inflation is then mathematically necessary and depends entirely on the banker’s rates.
so just like neoclassical having flawed macro/micro assumptions and ignoring debt, money, risk helps the banks engage in fraudulent activity for short-term profit, the theoretical explanation of inflation serves banks as well–conveniently puts the blame on our own elected leaders instead of them.
I don’t think what Mugabe did was an accident resulting from his stupidity about history. Monetary warfare is a known science used to maintain control of or conquer people more efficiently than military warfare because people get seduced and don’t realize what’s happening to them (as Hudson pointed out in his talk, global monetary policy has now brought us closer to feudalism). Mugabe went to Oxford…training ground for wannabe rulers and suck-ups who want to help the crown expand its empire.