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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 

| Open Player in New Win­dow

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 

| Open Player in New Win­dow

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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  • ak

    Time to start smok­ing again.

    On a more seri­ous note — I believe this guy can fix the prob­lems but the recov­ery will be long and painful. Rather defla­tion­ary. The Amer­ica is finally wak­ing up…

  • Muzz

    Much bet­ter now thanks Steve.

    I think that JW Player should have dealt bet­ter with the con­tent though. eg buffer data for a rea­son­able stretch rather that just cough and splut­ter the whole way. 

    Maybe the debt-unem­ploy­ment causal­ity argu­ment could be inte­grated into your pre­sen­ta­tion a lit­tle bet­ter. I got the uncom­fort­able feel­ing of that gentleman’s ques­tion being brushed, off even though I saw the logic of your response. 

    Thanks again.

  • Aac


    Glass-Stea­gall II it may be called but deeds not words are required. US indus­try will con­tinue to degen­er­ate and gut­ted were deficit spend­ing and law­less­ness to con­tinue. Imag­ine that many smart folk on blogs like this still think that Zim­barb­wie is a roll model.

    Vol­cker who has been ignored up until now and hope­fully sen­si­ble minds like his can right the sink­ing ship. And of course it will be tough espe­cially for bankers as they need to be retrained; noth­ing like the 30s as some well­fare is a given. 

    What we need is the gov­ern­ment to bring back sen­si­ble laws and to bail out no one. The mess would be cleaned up in mat­ter of a few years as hap­pended in the early 1920s. Money print­ers be damned.

  • #52. Good point Muzz. Some of the dis­cus­sion here by Lyon­wiss and TININT cov­ers this causality/correlation issue. In my mod­els I get the out­come that AggregateDemand=GDP+ChangeInDebt and the causal­ity runs from demand to sup­ply so that cause runs from ChangeIn­Debt to Unem­ploy­ment rather than vice versa. But explain­ing that in a pre­sen­ta­tion gets some­what tricky. I’ll work on it though.

  • noah cross

    The pre­sen­ta­tion played with­out a buffer, load­ing issue etc for me (firefox/adsl2+) and it’s a good talk. The Google peo­ple offered some decent inter­ac­tion too.

    In pass­ing the refu­ta­tion of the supply/demand con­cept and the maths in it was made and I’m inter­ested in ref­er­ences to that. Are they here or else­where?

    The debt-unem­ploy­ment causal­ity argu­ment seems valid and clear to me, notwith­stand­ing more expla­na­tion to really pin it as Muzz says above. 

    As small exam­ple: Any­one who has worked in the media indus­try where rev­enue depen­dence on con­sumer spending/debt has a direct effect on employ­ment will know. It’s one of the rea­sons why that indus­try is an early marker of reces­sion and recov­ery.

  • Muzz

    Just to clar­ify, it ran for me with­out a glitch with the reduced data rate. My com­ments about buffer­ing related to the ear­lier, larger files. My expe­ri­ence with other media play­ers is much bet­ter.

  • TruthIs­ThereIs­NoTruth

    Cir­cum­stan­tial evi­dence is not sta­tis­ti­cal proof.

    Don’t ignore the empir­i­cal sta­tis­tics and sta­tis­ti­cal the­ory.

    The causal­ity runs both ways and is not con­stant, the direc­tion and mag­ni­tude of the causal­ity is prob­a­bly a bit cycle depen­dant. This is just an obvi­ous exam­ple of how a lot of eco­nomic vari­ables behave in real­ity.

    You can­not mea­sure these vari­ables accu­rately enough and you cer­tainly can­not claim causal­ity. All you can use is edu­cated and objec­tive intu­ition.

    Is real­ity really that black and white that rules gov­ern­ing inter­ac­tion of eco­nomic vari­ables remain not only con­stant but totally one sided?

  • Eter­nal Stu­dent

    @winsloreconomics 32:

    Think­ing that the Fed is more pow­er­ful than the mar­ket is a very seri­ous and costly mis­take, IMO. The mar­kets always have, and always will, eat Cen­tral Bankers for lunch. They are just too big.

    I would grant that they can be influ­enced, but only for a while. Even­tu­ally it always catches up. I’d even go fur­ther than that, and bet on a bond mar­ket dis­lo­ca­tion in the next year or two. Cor­rec­tion — I am actu­ally bet­ting on that.

  • Eter­nal Stu­dent

    @Steve #38 (and every­one else)

    I would heartily rec­om­mend read­ing the book. I find it amaz­ing that the
    two edi­tors of the Monthly Review pro­vided a frame­work, in the 1960’s,
    for describ­ing what’s hap­pened over the past 80 years, and what is
    hap­pen­ing now. I find it amaz­ing also that the authors of the book
    pub­lished their pre­dic­tions of what we’ve gone through these past 4
    years back in 2005 and 2006. And they even describe what’s cur­rently
    in the press today pretty well; namely, where does one put one’s money?

    I don’t like the con­clu­sions. Nor did I know any­thing about the Monthly
    Review before this. But I find it extremely ironic that a Marx­ist
    ori­ented pub­li­ca­tion has done a bet­ter job of pre­dict­ing and
    describ­ing what we’ve gone through these past 20+ years than has the
    free-mar­ket pub­li­ca­tions of the neo­clas­si­cal econ­o­mists.

  • Mechan­i­calEngi­neer

    Eter­nal Stu­dent @59,

    What don’t you like about the con­clu­sions? Do you dis­agree with the con­clu­sion, or the argu­ments lead­ing to the con­clu­sion, or is it that the con­clu­sions are that we are headed for a depress­ing future?


  • Eter­nal Stu­dent

    I find the con­clu­sions too depress­ing. In their view, they refer to the past twenty years as the “finan­cial­iza­tion phase”. And that it always implodes, until we go back to the man­u­fac­tur­ing phase.

    The trou­ble is, they’ve been say­ing that we’re in a finan­cial­iza­tion phase for the past 20-some years. And the way they char­ac­ter­ize it, I’d say they are right.

    I’m para­phras­ing it, and have only read through it once. But a lot of the points that they made before 2006 cer­tainly are ring­ing a bell now. 

    I rec­om­mend read­ing it and draw­ing your own con­clu­sions. The first half is down­right dull, until they get to their orig­i­nal papers in the sec­ond half. Then it really picks up. I think one can get it at

  • Mechan­i­calEngi­neer

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

  • winslowre­co­nom­ics

    #58 Eter­nal Stu­dent
    “I would grant that they can be influ­enced, but only for a while. Even­tu­ally it always catches up. I’d even go fur­ther than that, and bet on a bond mar­ket dis­lo­ca­tion in the next year or two. Cor­rec­tion – I am actu­ally bet­ting on that.”

    Inter­est­ing bet you are mak­ing. Is it based on eco­nom­ics or pol­i­tics, per­haps both? Bernanke/politicians decide whether that bet wins or loses. Hope­fully our host isn’t bet­ting on the Aus­tri­alian hous­ing bub­ble bursting.….at least until eco­nomic and polit­i­cal forces align.

    The Fed­eral Reserve’s pledge to stop buy­ing mort­gages by the end of March is spark­ing fears among home builders, mort­gage investors and even some Fed offi­cials that mort­gage rates could rise and knock the frag­ile hous­ing recov­ery off course.”

    I believe you con­fuse inac­tion for inabil­ity. The Fed/gov have a print­ing press that can drive all inter­est rates to zero as shown in Japan. Why does their exchange rate remain so strong? 

    A per­ti­nent ques­tion, will the U.S. dol­lar exchange rate head towards zero as Bernanke uses the print­ing press to drive inter­est rates towards the zero bound? As long as polit­i­cal actions direct new mon­e­tary ‘lend­ing’ towards pro­duc­tive sec­tors of the econ­omy, there will be no infla­tion. Polit­i­cal actions that direct new fis­cal spend­ing towards pro­duc­tive sec­tors of the econ­omy are infla­tion­ary but not by much. Polit­i­cal actions that direct new fis­cal spend­ing towards non­pro­duc­tive sec­tors are more infla­tion­ary.

    But by how much?

    It would be nice to have a sec­toral model for fis­cal spend­ing and mon­e­tary lend­ing as related to exchange rates and infla­tion.

  • Eter­nal Stu­dent

    MechEng 62:

    Depres­sion and Deglob­al­iza­tion. In short, if the econ­omy is to get back on its feet, then the mid­dle class has to start earn­ing money again. And the only way that hap­pens is by pro­duc­ing things, and not just shift­ing paper around. I.e. man­u­fac­tur­ing has to return. Which means the end of glob­al­iza­tion.

    Oh, also, it dri­ves home the point that Steve has been mak­ing about the weak­ness in Eco­nom­ics with respect to the math­e­mat­ics, espe­cially time-based dif­fer­en­tials.

  • Eter­nal Stu­dent

    @winslowreconomics 63:

    I agree that it would be nice to have a model. Some­times it seems like we’re back in the cave­man days.

    I just don’t believe in Ponzi schemes, no mat­ter how very well they are propped up. I’ll admit the Fed still has quite a bit of sway. But IMO they’ve only kicked the can down the road, and haven’t fixed the prob­lem.

    Merideth Whit­ney said she thought they were out of bul­lets. Could well be. I think they are out of nor­mal bul­lets, but might have some unusual ones left. 

    I agree that the Fed can print a lot of money. But IMO, they can’t print enough to over­come all of the debt/credit out there in the form of deriv­a­tives when that House of Cards starts to col­lapse.

    That’s just my opin­ion. Take it or leave it as you will. But I’ve been very happy with it over the past year.

  • Philip

    Eter­nal Stu­dent @ #59,

    I find that ironic too. The Marx­ist econ­o­mist Michael Perel­man pro­duced a great book The Con­fis­ca­tion of Amer­i­can Pros­per­ity: From Right-Wing Extrem­ism and Eco­nomic Ide­ol­ogy to the Next Great Depres­sion in 2007 that exam­ined the finan­cial­iza­tion of West­ern economies since the 1970s.

    He pre­dicted that a depres­sion or eco­nomic storm was soon to hap­pen, and he was right. If he had been more spe­cific about the prob­lems, he could’ve been added to the list of the Gang of 12.

  • GSM

    Eter­nal Stu­dent,

    ” agree that the Fed can print a lot of money. But IMO, they can’t print enough to over­come all of the debt/credit out there in the form of deriv­a­tives when that House of Cards starts to col­lapse.”

    I think we are about to see that premise put to the test. The fun­da­men­tal iner­tia of the huge US econ­omy down­siz­ing itself and reset­ting to a much lower level of eco­nomic activity(one with sub­stan­tially reduced debt/credit fuelled com­merce) has resulted in a decade of zero jobs growth. There will be no 2nd term for Obama and many in his party if jobs are not pro­vided and lick­ety split too. Already we now see Obama rolling out the pop­ulist poli­cies (screw the Banksters) shoring up his declin­ing pop­u­lar­ity and knee jerk response to the MA elec­tion. This is just a start. Unless the US econ­omy can demon­strate organic jobs pro­duc­ing growth (sans Govt stim­u­lous), I expect Obama’s Admin­is­tra­tion to embark on a pro­gram of money spend­ing we will truly stand in awe of. Many tril­lions per year. Masses and masses of new Govt spend­ing, funded by mon­e­ti­za­tion, in order to soak up the now alarm­ing lev­els of wide­spread unem­ployed.

    The key to suc­cess for this strat­egy is to keep the world accept­ing debased US dol­lars. I think the US will suc­ceed in that for some time to come sim­ply because of the lack of viable alter­na­tives on a global scale. No doubt this ticks off many playaz but so be it.In essence a very big kick of the can.

    Given the cir­cum­stances, what other pos­si­ble plan can the US have that could deliver Obama’s 2nd term?

  • Eter­nal Stu­dent

    @GSM 67:

    I agree with many of your points. As to how it’s going to play out, the only cer­tainty that I see is that 2010 is going to be an inter­est­ing year; and that we seem to have some more inter­est­ing years ahead of us. Truly his­tory in the mak­ing, but I’d rather be back in the 1990’s.

    Obama may have made the case of play­ing by the Estab­lish­ments’ rules — only that didn’t work. And now it’s time to stick it to the Bankers like the pub­lic wants. It’s really hard to see at this point. But I’m glad to see that Volker might actu­ally now be in the loop.

  • Muzz

    #63 winslowre­co­nom­ics
    “The Fed/gov have a print­ing press that can drive all inter­est rates to zero as shown in Japan.”

    Do you think there are polit­i­cal lim­its to print­ing?

  • Up And Away

    Read this arti­cel from Michael Pas­coe today.

    Wouldn’t it be funny if Bei­jing did what ratio­nal eco­nomic mar­ket com­men­ta­tors told it to do and the mar­kets reacted as if the cadres had declared an end to cap­i­tal­ism. That’s pretty much what hap­pened this week.

    The con­cern about China eas­ing off the accel­er­a­tor a touch – an accel­er­a­tor that had been flat to the metal – is sim­ply absurd.

    In the same week that any num­ber of fig­ures from BHP pro­duc­tion reports to Beijing’s rub­bery sta­tis­tics showed China rock­et­ing along, news of a lit­tle less stim­u­lus, a tight­en­ing of mon­e­tary pol­icy and a sharper brake on some of the more dubi­ous lenders should have been a cause for cel­e­bra­tion.

    Instead, the lem­mings headed for the near­est cliff. OK, maybe it was just a small ditch, but they still jumped.”

    I have the fol­low­ing ques­tion regard­ing this state­ment–

    but it needs to act more boldly to lift inter­est rates and curb bank lend­ing. That means that the yuan must be allowed to rise.”

    I do not see the rela­tion­ship between lift­ing the value of the Yuan and how it would lift inter­est rates and curb bank lend­ing? Can some­one explain?

  • home­s4aussies

    FYI, the fol­low­ing Press Release was issued today by Bub­ble­pe­dia and home­s4aussies

    Aus­tralia Day Brochure Drops in Prime Minister’s Elec­torate Response to House Price Bub­ble

    Bris­bane, Qld, 22 Jan­u­ary 2010 – This Aus­tralia Day, Aus­tralians con­cerned about the house price bub­ble are deliv­er­ing 20,000 brochures in the inner south Bris­bane elec­torate of the Prime Min­is­ter Kevin Rudd.

    Through online web­sites and, the brochure was devel­oped to high­light the size of the Aus­tralian house price bub­ble and to detail the causes and con­se­quences of the bub­ble to all Aus­tralians.

    On the front page is a graph from the Reserve Bank of Aus­tralia show­ing that Aus­tralian house prices rel­a­tive to house­hold dis­pos­able income has been higher than in all other major Eng­lish-speak­ing coun­tries for nearly three decades.

    Below the RBA graph the reader is chal­lenged to con­sider “Is this really what you want for our coun­try and our kids?”

    Dr Brett Edger­ton, a for­mer research sci­en­tist and founder of the web­site home­s4aussies, said “there is no bet­ter time for Aus­tralians to con­sider whether we really want to give up on our ideal of a fair go for all – a proud egal­i­tar­ian past – for the entrench­ment of a two-tiered soci­ety.”

    The media has been lit­tered over the last sev­eral years of sto­ries of every­day Aus­tralians being squeezed by sky­rock­et­ing house prices and rents. At the same time, we have our politi­cians enact­ing poli­cies which have con­tin­ued the bub­ble and increased the pres­sure on those vul­ner­a­ble Aus­tralians.”

    The brochure includes sev­eral other graphs to sup­port and under­line the extent of the prob­lem. It draws heav­ily on research and analy­sis by the RBA and Dr Steve Keen, as well as the recent book “The Great Crash of 2008” by Prof. Ross Gar­naut in which he unequiv­o­cally states that Aus­tralia has a mas­sive hous­ing bub­ble on its hands.

    Dona­tions received through Bub­ble­pe­dia have funded print­ing of 50,000 brochures as well as the Aus­tralia Day deliv­er­ies in the Prime Minister’s elec­torate of Grif­fith.

    The house price bub­ble and con­se­quent hous­ing afford­abil­ity cri­sis is a key elec­toral issue in this elec­tion year, espe­cially in the elec­torate of Grif­fith where 42% of house­holds rent. This is well above the national aver­age of 27% and is one of the high­est lev­els of any elec­torate in the coun­try.

    The remain­ing brochures are being dropped into mail­boxes through­out Aus­tralia by vol­un­teers. More­over, elec­tronic copies of the brochure are avail­able on the web­sites for view­ing, print­ing and fur­ther dis­sem­i­na­tion.

    Dr Daniel Cox, a Syd­ney anaes­thetist and founder of Bub­ble­pe­dia, said “We intend to snow­ball this effort right up to the fed­eral elec­tion, tar­get­ing mar­ginal elec­torates for addi­tional let­ter­box drops.”

    Through­out human his­tory all spec­u­la­tive bub­bles have popped and it is highly unlikely that our house price bub­ble will be dif­fer­ent. The Gov­ern­ment throw­ing good money after bad on con­tin­u­ing it – thus con­tin­u­ing the pain of the hous­ing afford­abil­ity cri­sis for many, and set­ting us up for future tax increases and reduc­tions in Gov­ern­ment ser­vices – is cer­tainly a lose-lose sit­u­a­tion for Aussies” said Dr Edger­ton.

    The brochure may be viewed at –

    For addi­tional infor­ma­tion “Com­mu­nity Responds to House Price Bub­ble with Aus­tralia Day Brochure Drops in Prime Minister’s Elec­torate”, please con­tact Dr Brett F Edger­ton,,, or Dr Daniel Cox,,

    ABOUT – Bub­ble­pe­dia and home­s4aussies are web­sites which presents the facts and debunks the myths sur­round­ing hous­ing in Aus­tralia. Bub­ble­pe­dia has an active blog as a plat­form for shar­ing infor­ma­tion and ideas rel­e­vant to the hous­ing bub­ble.


  • GSM

    Up and Away,
    The con­stant mis­take made by many China watch­ers is dis­count­ing the fun­da­men­tal dif­fer­ence between the west and China — ie China is a large and grow­ing com­mand econ­omy. Com­bine that with skewed GDP account­ing and you have an econ­omy that will basi­cally per­form as (Party) rote. Until it does not.When might that hap­pen? Not for some time I sus­pect. With a per capita income for it’s 1.3 Bil­lion peo­ple of some USD2,000 — peanuts- and change their exists enor­mous capac­ity to absorb fis­cal and mon­e­tary debauch­ery. And with a war chest of over 2 tril­lion in For­eign Reserves, it is not as if they face any immi­nent dan­ger of a finan­cial calamity they can’t buy their way out of.

  • home­s4aussies

    And this news cycle (i.e. this after­noon), Mr Swan dis­cusses giv­ing hard work­ers “a fair go”, Ris­mark pro­duces another “report” show­ing afford­abil­ity has improved (won­der whether this is an actual report this time??), and Comm­Sec (on the Busi­ness Chan­nel a cou­ple of hours after I sent the chan­nel the PR) is doing it’s best to put a pos­i­tive spin on the hous­ing mar­ket.

    Nice to see they’re tak­ing notice 🙂

  • ango­phera

    #71 home­s4aussies

    Three cheers for you and bub­ble­pe­dia.

    BTW I heard Tanya Plibersek on radio say­ing that all of the first home buy­ers she “spoke to” were well aware that inter­est rates could only go up from the “emer­gency rate” and they had made pro­vi­sion for this in decid­ing to com­mit to the pur­chase of a home.

    I think the Govt can see what is com­ing. Westpac’s deci­sion to dou­ble up on the RBA increase must have rat­tled them. IMO you have a real shot at mak­ing this an elec­tion issue. (If not in this elec­toral cycle it could fly in the next one.)

    Can I sug­gest an alter­nate ver­sion of this cam­paign? Why not also tar­get the younger demo­graph­ics that have been vic­timised by the bub­ble blow­ing in the FIRE econ­omy? eg. it is no acci­dent that the younger can­not afford to buy or rent a place to live at a rea­son­able price.

  • winslowre­co­nom­ics

    #69 Muzz

    Do you think there are polit­i­cal lim­its to print­ing?”

    Yes. Though most lim­its arise from a mis­un­der­stand­ing of the mon­e­tary sys­tem and how it func­tions.