Talks@Google

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Google runs a regular seminar series on topical issues, which I spoke at last week. There was a substantial audience (see the quick scan of the audience below) and Google’s staff lived up to their hyper-intelligent and hyper-engaged reputation.

Steve Keen's Debtwatch Podcast 

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I gave a presentation that combined my standard talk on debt and Minsky, with some exposition of the Circuit and Minsky models, befitting of an audience to whom simulation is no big deal–unlike economics conferences where such approaches are still fringe activities.

The discussion was also extensive, and intertwined with the talk, so it went for a long time–almost two hours. Most of the first hour was my lecture:

Steve Keen's Debtwatch Podcast 

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And most of the second hour was an extensive discussion with Google staff that I had to call an end to because my voice was about to fail:

Steve Keen's Debtwatch Podcast 

| Open Player in New Window

Next week I hope to post the recent presentation to UNEP of my work with the CSIRO, which will showcase both the dynamic multisectoral monetary model of production I have built, and the CSIRO’s multidimensional-database-driven biophysical model of the economy.

On another note, I have written a feature for the April issue of Dissent (Number 32, Autumn 2010), discussing the usual vexed issue of Australian house prices. As part of it I gave my perspective on why Australia has to date come through the GFC so well, and one aspect of that was being on the receiving end of largess from China’s stimulus.

I noted however that China’s largess may be coming to an end:

China’s stimulus included a lending frenzy that only China could have inspired, since while finance in The West is largely an independent force to which governments kowtow, China is still fundamentally a command society: the best guarantee against criticism when things go wrong is to be able to prove that you carried out instructions to the letter and beyond.

I well remember a tour of China I organized for Australian journalists in 1979, just after the fall of the Gang of Four. An anomalous pair of statistics had turned up just before the tour began: Chinese light industry output had risen 17%, but heavy industry had fallen by 7%: how could these two contradictory things happen, our party of largely economic journalists wondered?

We got our answer from a meeting with the Mayor of Shanghai and an official who title was the “Economic Boss” of Shanghai: the Central Committee of the Communist Party of China had issued a directive to “promote light industry”. So what did they do?

“We stripped heavy industry factories and turned them into light industry”.

In China, if a communist party official tells a bank to lend, it lends. Chinese lending rose 95% in 2009 over 2008 levels, boosting its money supply by over 27%. That has undoubtedly caused unintended consequences that the Chinese government may well now seek to reverse—and its recent decision to increase the reserve ratio is a sign that this reversal may already be in train. If so, our Chinese largess could dry up just as suddenly as it began.

And today we learn that China has instructed its banks to stop lending

To read the rest of the article, buy Dissent when it comes out in April.

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88 Responses to Talks@Google

  1. Eternal Student says:

    FYI – Zerohedge has some interesting comments from Whitney and Berntein:

    http://www.zerohedge.com/article/whither-prop-trading-thoughts-whitney-and-bernstein

    “In addition, we believe the medium term impact of the proposal will be a reduction of liquidity in not only the corporate market but also in the consumer market. For the record, we believe the possibility of this proposal going the distance is high.”

  2. Alan Gresley says:

    @ak 43

    “Somebody with a real web design experience like Alan Gresley would be a better adviser than me.”

    Not me. JW (Jeroen Wijering) Players are JavaScript based. I am good with CSS and semantic HTML/XHTML. This is something to do with the code on this blog. The videos (originals) plays much better from the below location even though it imports the video from this blog.

    http://www.itulip.com/forums/showthread.php?p=145012

    The only thing you need to do is stop both videos from playing at the same time. BTW the caching is fast.

  3. Alan Gresley says:

    @MechanicalEngineer 62

    “If you don’t mind, what do they predict next? Depression/deglobalizaton/war?”

    All three of these are already occurring. With war, it’s largely an information war to begin with. This is not against countries but against the rich and powerful and the rest of us. When hasn’t corporations been the rulers of government? Here is a video that is quite revealing.

    http://www.youtube.com/watch?v=lNe9X1CLV_U

    A question to ask is how long have we lived under Corporatism?

    http://en.wikipedia.org/wiki/Corpratism

    “Political scientists may also use the term corporatism to describe a practice whereby a state, through the process of licensing and regulating officially-incorporated social, religious, economic, or popular organizations, effectively co-opts their leadership or circumscribes their ability to challenge state authority by establishing the state as the source of their legitimacy, as well as sometimes running them, either directly or indirectly through corporations.”

    Or how long have we been on the march to Neofeudalism?

    http://en.wikipedia.org/wiki/Neofeudalism

    “The concept is one in which government policies are instituted with the effect (deliberate or otherwise) of systematically increasing the wealth gap between the rich and the poor while increasing the power of the rich and decreasing the power of the poor.”

  4. d_g_law says:

    Great talk Steve! It’s funny, the following day the Obama announces he is going to put legislation into place to make sure financial institutions can’t get away with this reckless folly of feeding speculation in the future.

  5. Steve Keen says:

    Thanks d_g_law; yes timing is a curious thing. I don’t take that statement by Obama seriously yet however: he has to feel real pain, and really fear a Democrat wipeout, before speeches will translate into backbone. If he goes on an unannounced countrywide tour, sees the real estate disaster first hand, drops in on welfare agencies,… then maybe. I’m still waiting till 2011 for anything really significant to be done by him.

  6. homes4aussies says:

    This “new report” by the usual property spruikers mentions surging household disposable income over the last 6 years or so as a reason for improved housing affordability.

    One hole in the argument for the most recent period is the cash handouts – with Australia having the largest stimulus packages of the OECD, and much of that large direct payments to households, disposable income was boosted simply by one-off gifts.

    Early in 2009 I was informed by the RBA that these payments alone reduced the house price to disposable income ratio that they calculate by 30 basis points. And that was for data that did not include Stimulus II and the full impact of Boosteria (FHVG)

    But in the middle of the naughties I can understand that income growth was genuinely strong for some individuals (thus at the aggregate level) – especially up to 2007 with the resources boom in full swing, and the case can be made that the RBA was too slow in raising rates in response to it.

    But distribution of that income is surely the most important issue. Median house prices should be compared with median household disposable income.

    Is there any data series on median household disposable income? I have not been able to find it if there is.

    The only such data that I have been able to locate is in the Census quickstats where they can be derived for a given area (including statistical division – ie. city)

    I’ve done some quick calculations for Brisbane so I’ll use it as my example.

    At the last census (8/8/06) the Weekly Median Household Income for the statistical division of Brisbane was $1,111 (for an annual income of $57,772). The ABS Brisbane Median House Price for Sept qtr 2006 was $342,000. Therefore, the MHP:MHI was 5.8. (Note, if industry data for house prices was used the ratio would be higher because values are consistently higher than from the ABS.)

    The Median Weekly Individual Income was $516(for an annual income of $26,832), and the MHP:MII was 12.4.

    (I looked for income data for the 2001 census for comparison – unfortunately they do not appear to have published them.)

    From Sep qtr 2006 to Sep qtr 2009 (the latest ABS house price data release), Brisbane median house prices increased 29%.

    How likely is it that median incomes rose at better than 9% pa over this period (even with the unprecedented cash handouts)?

    There is little doubt that the median house price to median individual and household incomes ratios have risen over this period – from what were already very high levels – thus affordability has deteriorated even further in the last 3 years.

  7. Steve Keen says:

    Re #81. Also, the chart I have produced deflating both house prices and disposable incomes by the CPI shoots a rather large hole in that spruiker argument.

  8. Alan Gresley says:

    @Steve Keen 50

    “Thanks d_g_law; yes timing is a curious thing. I don’t take that statement by Obama seriously yet however: he has to feel real pain, and really fear a Democrat wipeout, before speeches will translate into backbone. If he goes on an unannounced countrywide tour, sees the real estate disaster first hand, drops in on welfare agencies,… then maybe. I’m still waiting till 2011 for anything really significant to be done by him.”

    Why do you keep on perceiving that Obama will wake up. If he held to his pledge which he gave when he was sworn in as President, then if he was a true President of change, he would have allowed the previous President and his administration to be impeached on the grounds of launching a war based on lies.

    http://www.youtube.com/watch?v=yJYbgouqlMw

    Iraq had no WMD so the invasion of Iraq was an illegal act based on lies.

    Obama knows the true scope of the destruction to America as he is equally aware of the resistance that opposes him (in the 10 of millions). One person who opposes him is Max Keiser. Max Keiser often uses the term of financial terrorist. He correctly describes what we are now seeing.

  9. homes4aussies says:

    #82. Yes, that would do it, Steve.

    Here is the funniest thing about this “new report”.

    Six weeks ago Dr Joye was out and about talking about his “new report” which he described as the most comprehensive of it’s type – eg. got him a spot on 602 Business Channel.

    It was essentially in response to talk of a bubble, after Ross Garnaut’s book release, and especially a stinging article on Crikey by Adam Schwab a few days earlier http://www.crikey.com.au/2009/12/04/schwab-joye-brings-himself-no-joy-with-coloured-views/

    Here’s a link to one of the consequent media stories on 10 Dec 2009

    http://www.smartcompany.com.au/property/20091210-property-experts-claim-australian-housing-is-not-as-unaffordable-as-you-think.html

    I looked for the actual report then – couldn’t find it – just a blog article on Business Spectator (hardly what could be described as the most comprehensive of it’s type)

    Again, there seems to be no sign of an actual report with this latest round of media reporting.

    However, based on the article below, it would seem that the content is exactly the same. So, the “new” part is highly unlikely, and the “report” part is still debateable

    http://www.brokernews.com.au/forum/expense-of-housing-exaggerated-rismark/39880

    It just shows the bias in the media to reporting positive stories about housing (even though Dr Joye continually claims the opposite) – because there is no greater vested interest than the media with their revenues highly dependent on realestate – yet none of the media has picked up on the bubblepedia\homes4aussies release which is well researched and is newsworthy because of it’s relevance to Australia Day, how Australians view our country, to the upcoming election, housing and the affordability crisis, homelessness, and the Prime Minister.

    But none of this is surprising. Actually, in many ways it is encouraging!

  10. ak says:

    Alan,

    I will put it bluntly: do you prefer the Trilaretral Commission or the Politburo of the Communist Party of China? Because I don’t believe there is any other choice.

    The invasion of Iraq (especially how it was executed) was an act of extreme stupidity. The same applies to the way the war in Afghanistan was prosecuted, it is explained here what was wrong and why the region is relevant to the Americans:
    http://vodpod.com/watch/2854068-brzezinski-on-the-afghan-war-pt1
    This part is more about the events from the late 1970-ties leading to the strategic defeat of the Soviet Union:
    http://vodpod.com/watch/2866154-the-afghan-war-and-the-grand-chessboard-pt2
    This part is also worth watching:
    http://vodpod.com/watch/2884014-zbigniew-brzezinski-on-iran-pt3

    Alan, believe me or not but Zbigniew Brzezinski is treated in Poland as a national hero because he helped to get rid of the Soviet
    oppression. I may not agree 100% with all his opinions but I would never call him “one of the worlds greatest sleaze bags”.
    http://www.dailypaul.com/node/121280

    Of course you are entitled to your own views but please don’t be naive – this is how it works. It is bad that innocent people have died during the first Afghan war but in other scenarios many more people could have died. Libertarians just behave like children and what they are doing may contribute to the demise of their homeland.

    A few months ago I was hoping that a multipolar world could emerge – a kind of “concert of powers” similar to 19th century Europe. This might be better than the American domination and the domination of multinational corporations. It is now pretty obvious to me that I was wrong – the Chinese don’t care about interests of anybody else and they are going after productive economies in any Western country by pursuing hardcore mercantilist policies: flooding markets with cheap export, pegging the currency and acquiring resources in Africa, Latin America and Australia. There was an attempt to engage them in kind of self-limiting agreement in Copenhagen. It failed. Finally the Americans are waking up – just watch what Paul Volcker is doing. Somebody has activated the “human rights and freedom of speech” rhetoric. Do you think that Sergey Mihailovich Brin doesn’t understand how the Communist party of China rules the country and what they have shown us they want to achieve?

    Whatever the Chinese do in retaliation will be disastrous for them in the long run. Hopefully the Chinese technocrats have zero understanding of the dynamics of Western societies – otherwise they would have participated in the game proposed by the Americans and Europeans and signed the Copenhagen accord. (Just don’t tell me it was about polar bears. It was about resources).

    Regarding the domestic American politics:

    There is one keyword “Targowica” which only Polish would instantly understand. It was the ultimate personification of treason, a confederation of magnates bribed by the Russian empress to partition and dismantle the state.
    http://en.wikipedia.org/wiki/Targowica_Confederation

    Unfortunately we are dealing with a similar bunch of magnates in the US in the form of bankers and some corporate executives who make money from “free trade” and “globalisation”. You don’t like them because they are elitist. I don’t care much about that – my current job is to empty ash trays in the global financial casino. But I have chosen to migrate to Australia not to Macao or Hong Kong. Even if I like Chinese cuisine very much, I don’t like communist parties in any form – including the largest one. So I do care about the American Magnates bringing the whole Western civilisation down to be only replaced by the command system based on teachings of Confucius and Chairman Mao. The New Western Magnates are perfectly capable of doing that. People don’t need differential equations to understand why.

    “Supreme Court Rips Up Campaign Finance Laws.”

    “The new ruling blurs the lines between corporate and individual contributions in political campaigns. It also strikes down part of the 2002 McCain-Feingold campaign finance law that banned unions and corporations from paying for political ads in the waning days of campaigns.”
    http://www.npr.org/templates/story/story.php?storyId=122805666

    Regarding Australia:

    I believe that Barnaby Joyce is right. Once they buy up our resources – we are finished as we have had enough local “lobbyists” already:

    “AUSTRALIA’S fifth richest man, mining magnate Clive Palmer, has denounced the federal government’s foreign investment rules as racist, claiming they are skewed against Chinese companies buying into resource projects in Australia.”
    http://www.threeplus.com.au/qmc/01_cms/details.asp?k_id=205

    Just don’t tell me that I am naive and that I don’t understand the rules of the game. I simply don’t think that the rules will ever change. If you don’t like my analysis – read this guy’s blog, he writes about the crisis of the American society and state from the Russian observer’s perspective:
    http://pavelpodolyak.blogspot.com/

    I sincerely hope now that the Americans will prevail and our morally corrupt system (nobody has ever invented a better one) will last for a few more decades. This will happen if their elites and oligarchies really wake up to the emergency we are facing. The financial crisis is just an element of a much larger picture.

    It is so simple: wealth is created when people make more goods (usually by exploiting working class people but who cares?), not by “making” money by speculation. Paul Volcker knows that, will they listen to him?

  11. GSM says:

    ak,
    “I sincerely hope now that the Americans will prevail and our morally corrupt system (nobody has ever invented a better one) will last for a few more decades. This will happen if their elites and oligarchies really wake up to the emergency we are facing. The financial crisis is just an element of a much larger picture.”

    To this point, we may be seeing (MAY) the beginnings of this in the US. The Mas elections sent tremours through Obama’s Administration. The next big litmus test will be the re-conformation of Bernanke. Then it will be how fares young Timmay. I suspect that if Volcker continues to rise in prominence within Obama’s team, Timmy will be looking for a new job.

    I would also say it has nothing to do with “waking up”. More about getting caught. The elites know fully well the game they are playing. To keep it going they require a dumbed down populace, a reliably false regime of statistical distortions and a willing media to barrage citizen with what essentially is populist Govt sponsored BS.

  12. noah cross says:

    84 homes4aussies “shows the bias in the media to reporting positive stories about housing (even though Dr Joye continually claims the opposite) – because there is no greater vested interest than the media with their revenues highly dependent on realestate”

    …all true and if you saw the ‘non-advertising’ ABC finance report in their Friday evening news, this report was given lots of airtime and implied endorsement because no doubt the presenter and the TV crew have mortgages and likes the news to be positive.

    I took this use and reporting of Rismark reports up with Mediawatch (ABC’s media review) in regard to Alan Kohler’s own presentations of data. They called me back inside 10 minutes of my email to them. They are cautious – more so than commercial media- of such reporting but implied endorsements come under individual perception, although there must also be equally critical comments on the same subject to provide balance.

    Any analysis from private research companies (or which has been paid for by vested interests) about the industry they are also paid by is worthless.

    Having worked in the consultancy business in various countries for over 20 years I would only ever use reports or data if the methodology and base data is revealed for independent scrutiny.

    It is an indictment of media and government that they readily use materials supplied by research companies that is in most cases unacceptable.

    Perhaps only with losses in real estate coupled with mainstream economists inability to explain what is going on, will the need for better information to create policy be adopted.

  13. jmihubbard says:

    Thank you for posting the talk at Google. I opened it in IE8 under Windows Vista and had no video and no pause button. It just played.
    What a tragedy that our economy is run by ignoramuses who are educated to the point that they won’t listen to opposing arguments.

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