Carson Scott interviewed me for Sky News Business Channel last week for the program On The Record. Rather than focusing on the news of the day, this program attempts to give the background to people in public life.
As such there’s more of a focus on the reasons why I have taken the activist stand that I have on the economy than on my analysis of the economy itself. While some of this focuses on my family and educational background, it also gave me the opportunity to explain that my major motivation was the desire to rid economics of the pseudo-scientific Neoclassical nonsense that dominated economics since the early 1950s.
I can’t embed the video in this post–though I may put up another embedded version when I receive the DVD of the program from Carson–but if you’d like to watch it, please follow this link.
February 28th, 2010 at 9:26 am
Great interview Steve. The Media are being quite brutal with you at the moment with regard to the prediction you did not even make. I recall seeing you on the Sky Business Channel around April/May of last year and prediction was always ‘over the next 10 to 15 years.’ I don’t think anyone could possibly exactly when the credit crunch will hit our shores, but one thing is for sure the more debt (private & public) we rack up the harder we are going to fall. It will be interesting to see who is throwing rock at you when this house of cards all falls down. Hang tough Steve, your doing an awesome job!
February 28th, 2010 at 10:25 am
V Good, although the swirling camera in and out and around, was hard on the stomach.
The interviewer’s end questions: Aren’t prices rising and banks are better and stronger now than before so it’s all good, are typical of many.
The media do it all the time as it assumes that rising prices are good (exponential prices = really good) = economic strength; and as correlated to housing that must be due to supply and demand. It is very superficial.
Pointing out the forces of debt and leverage driving the apparently positive ‘recovering’ economy is going to be constant work this year.
February 28th, 2010 at 11:40 am
Steve, you are totally right…no one can predict when exactly any event will occur. The important thing is to understand how the world of finance works, and you clearly have credit and economic function understanding rock solid.
You are correct….and you will be proven right. Only idiots cannot comprehend how the economy (based on credit) works…that you so clearly understand.
February 28th, 2010 at 12:49 pm
Mr. Keen,
Interesting interview.
With some tinkering I was able to “dig up” the videofile from my harddisk. No need to wait for you to post the video on this blog. Although the videosize may be (somewhat) smaller.
I think the next leg of the crisis “”Down Under”" will occur when e.g the AUD/USD will go down sharply, as a result of the unwinding of the USD Carry Trade. A lot of money flowed into the AUD and it certainly helped to refuel/re-inflate the Australian debtbubble.
A lot of folks think China is still OK but money supply in 2009 went up by some 30%. That’s the US credit expansion from 2001 to 2007 on steroids. When (not if) that bubble pops Australia will suffer massively as well as the demand for commodities dwindles.
I want to share the following with you. Everyone thinks the US economy started to weaken in/around 2001/2002 but the graph below shows that the US economy already peaked in the 4th quarter of 1997 (!!!). Employment in US manufacturing peaked back then and never fully recovered. Greenspan and Bernanke have been able to keep the US economy afloat for over approx. 10 years by injecting lots and lots of money into the US economy. From that moment on the US economy became more and more dependent on the FIRE sector (Michael Hudson) in order to stay afloat.
February 28th, 2010 at 1:59 pm
Steve,
I’m glad you could still touch on the debt to GDP in the face of flying interuptions by the interviewer.
Well if ‘the myth’ still prevails… ie buy a house and make a profit, I think this article settles it.. go into the housing market, you stand a 1 in 4 chance on average to lose money(in the last 5 years – Residex).. in some area higher!!!
http://www.news.com.au/money/property/homeowners-overpayed-for-houses/story-e6frfmd0-1225835163472
February 28th, 2010 at 2:00 pm
Oh ps the chilli con carni looked good..
February 28th, 2010 at 5:42 pm
Debt2death #5
I can confirm that that is exactly what is happening to me. I bought 2 properties in Sydney in about 2004/2005. I sold one this year for marginally more than I paid for it (covers stamp duty but not holding costs). The other is worth about 10% less than I paid for it and going down. I might hold onto it as a retirement plan instead of copping the loss. I have 2 others bought in about 2000. Although worth more than I paid for them, they are not worth what I could have got for them in 2004/5. The question is will they go lower?
The area I have watched over this time is the top end of market (ie $3 mill and over). This area has boomed up until Oct 08, and it seems to have fallen about 20% depending on suburb. It still seems overpriced but, as there doesn’t seemed to be many forced sales, people are holding on.
So as deleveraging proceeds, it will be interesting to see which sections of the market (I can only speak for Sydney)lose value. The lower end should drop as it has just been through a boom. The top end still seems to have some way to go. But the middle has not done much (except go down) since 2004/5.
Interested in hearing anyone else’s views.
February 28th, 2010 at 6:03 pm
Steve
I like the name of the restaurant “Feedback”. Problem is no-one sees this term as control system feedback (negative good positive bad) but as soft and fuzzy type feedback (positive good negative bad).
The popular name for bad positive control feedback is “vicious circle” and this seems to have a bite with it, perhaps a lot more chilli in the chilli con carni.
cheers
February 28th, 2010 at 7:00 pm
BrightSpark1,
If you can stomach a huge load of Central European philosophising I can recommend this site:
http://www.ft.com/indepth/soros-lectures
Soros thinks in terms of feedback loops but he lacks the maths skills to describe it correctly.
He also doesn’t look at the objective (accounting) side of the economy – financial flows and stocks – probably because he is not aware of the work of Steve and the others (Wynne Godley and Marc Lavoie).
They may have maths buy they are USD13bln behind…
The new thing which was mentioned by Soros (with extreme disgust – which I shared) and which is totally alien to me is the so-called postmodernism – the real philosophical foundation of the decay phase of the Western civilisation. Marketing more important than a real product…
“A worldview characterized by the belief that truth doesn’t exist in any objective sense but is created rather than discovered.” Truth is “created by the specific culture and exists only in that culture. Therefore, any system or statement that tries to communicate truth is a power play, an effort to dominate other cultures.”
http://en.wikipedia.org/wiki/Postmodernism
I had heard about it but I considered it to be absolute b..t.
Soros convinced me that people and politicians have really been influenced by postmodernism. I thought they were just plainly stupid. But no – they were sophisticated. They even had philosophy to support their decisions. George Bush often acted directed by the postmodernist views of his advisers that he can bend the reality. So … he bent. And it broke. So what?
I think the politicians will act again in the postmodernist way. The “response” to the first bout of GFC was to restore confidence.
The “response” to the second bout of GFC will be to …
February 28th, 2010 at 7:04 pm
I must say that the interviewer is the most irritating commentator on the airwaves and his cameraman should have gone to the toilet prior to the interview. It was all I could do to stay the time; which I did.
I am with you and your position of the religion of politicized “economics” and I find following you, refreshing, as well as confident that there are persons competent to replace the incompetent “leadership” which we currently have imposed upon us by evolving ignorance; our own ignorance, that is.
Crash, the global economy will, demographically nuanced, of course, and fixing, and rebuilding and tweaking upon a scientific foundation, our socio-economic structure will demand. The greatest fears are the impositions that current “leadership” will impose upon, us, in order to strengthen their tenure and cover their incapacities, both intellectual and of integrity in bringing the state of civilization to its knees. Camp followers, almost all; driven and motivated by fear.
Thank you, for I got to know you, this horrible interview and and even worse interviewer, much better (via your temporal signature). You are the hope of the future for our children and their children’s children.
My position is that the fundamentals of our current faith-based economic practice are religiously based and almost totally ill-founded, a priori, for all the wrong reasons.
http://verbewarp.blogspot.com/2006_07_23_archive.html
http://verbewarp.blogspot.com/2006_08_06_archive.html
On, on!
Ho hum
February 28th, 2010 at 7:06 pm
see chart 1929 and next comment.. see chart 1930….
February 28th, 2010 at 7:08 pm
see chart 2008…. not try to scar u…
February 28th, 2010 at 8:33 pm
ak
I know about this “postmodernism” crap I studied Education at UTS about 16 years ago.
Another offshoot of postmodernism is “competency based training” according to it the “competence” is conferred by the use of the word no more logic is needed. Check that out, and you will discoverer most of the reason for the deaths of the four insulation installers.
I will check out your link.
Many thanks and cheers.
February 28th, 2010 at 8:59 pm
You’re a brave person to subject yourself to Sky News
.
That being said, since you want to shake up the system (in a good way), what do you think about others like John Pilger? In Australia, is asking your political views rude like asking what’s your salary? If not, it would be interesting to see the two of you in an interview.
Despite having a HUGE hangup here in the States about the word “socialism”, Pilger comes here quite often and is well-respected by many progressives. Yet, one thing I disagree with on? He talks a lot about “a growing movement” to overturn capitalism in it’s current form. It’s the “Great Turning Point” idea.
Every day, some people here are becoming homeless or dying because of no health care. Unless you’ve been a cave for the past 10 years or so, you know this is going on. So the old “it doesn’t affect me” line isn’t valid. Yet, unlike Australia, France and other countries, people put up with it.
There are some people here who literally have to emigrate because they can’t get health care. Does this happen in any other Western country?
February 28th, 2010 at 10:14 pm
Extending your ideas a little further:
I agree with you that we need a new economic system. Some call it “socialy responsible capitalism”.
Then, here you get into The Big Hangup with anything “socialist”. We bailed out the banks. We control the car industry. And that’s necessary. Yet, if we extend this idea further into actually improving the current economic system, instantly that’s “socialism”.
It amazes me that you can talk to some bankers here about bailouts and market controls. And with a straight face they’ll actually still say we need a free market. Let the market correct itself.
Hang on a minute. If that’s true, then how do you explain these?:
The govt.’s rewarding incompetent people by bailing out their firms and appointing them in powerful govt. positions to add to this mess. In the real world, if we did that we’d be out of a job and in jail. Yet, that’s perfectly ok with you?
Another thought. If you took a lot of these economic reporters (both here and in Australia) and pressed them on economic theory, how many of them could hold their own? It still seems strange that to this day there are still some who start out with “for the benefit of our viewers/listeners/readers, what exactly is a derivative”?
Is that laziness to the nth degree or what?
February 28th, 2010 at 10:58 pm
By a remarkable coincidence I managed to see an advertisement for this interview and recorded it. It was an interesting interview, yet pretty shallow, all the fault of the interviewer though.
I support your view that your time is much better spent on the book at the moment. No amount of media is going to change much at the moment. Better off getting the guts of the theory right.
Did have a chuckle when you mentioned you were already questioning neoclassical economics after one year! Economics course have the highest dropout rates of any course after just the first year, not because they are difficult but because they are ridiculous.
More power to you Steve, it took me until third year to really begin questioning the orthodoxy. That would not have happened without the wonderful subject of Alternative Theories 3 taught by Prof John King.
February 28th, 2010 at 11:50 pm
Yep the media are being brutal to the prof. Of course he doesn’t pay for advertising on their channel or have a big boss whom can ring a editor or producer up if he doesn’t like the questions being asked. The prof works for a uni!
The people the prof is taking on are quite frankly staggering in terms of their influence, power and logistics they bring to a debate.
The RBA
Major banks
Financial commentators most employed by the largest media owners in the world.
Many of the people directly debating the prof are direct employees of the above whom have access to the best data, coaching and of course research that money can buy. The prof to my knowledge has none of this.
So facing all of the above a one man band called the GFC which none of the above did. The prof slipped up during a debate and is now being loudly called wrong even though the area concerned (housing) has been on the end of a massive government stimulus which a slippery politician would have used as an excuse to get out of the bet. The prof still is walking up the mountain. He sold his house backing up his claims yaddy yadda. In other words I cut the prof some slack and give him a healthy pat on the back. He’s not being paid to run the show but he’s done enough in my eyes to see that the people whom are paid have some rough edges. eg how many ponzi investments schemes have been uncovered in the last 24 months here in Aus? Where were the regulator ASIC and the RBA warning government re this and aggressively chasing after the perpetrators before the schemes imploded? Insert turf war/ legal excuse here of your choice.
I don’t for a second think that the prof shouldn’t be debated as after all he is asking for the fundamental economic foundations of this nation to be changed.
I however just tried to read one of the prof most vocal detractors, Mr Chris Joyes latest missives over at business spectator and this simpleton couldn’t catch on to what he was saying. All I know is that my rent keeps on going up. My pay packet goes side ways or backwards and the chances of my wife and I ever getting a affordable house is plummeting. Saying Keen is wrong is fine. Winning a debate is fine but we need to here from Chris and Rory and others how they will pick any future GFC and what they would do to get the cost of a basic working mans house under control. Their are 8.5 million unemployed yanks who’d love to here what they have to say as well.
I truly respect the views of others and the RBA in particular I’m sure its full of the best and brightest this country can train. But they didn’t call the GFC. I watched the business I work for go from a prosperous and generous employer to a bunch of tight fisted you know what’s. I however feel lucky to still have a job. I haven’t lost my job but I no longer have the same job and realistically I now work for a different employer thanks to the GFC. I think most working Australians would understand this.
So allot of credit is being thrown the RBA’s way that through their stewardship we missed the worst of the GFC. The worry I have is that they have simply postponed it or drawn it out like what has happened in Japan for the last 20 years. I hope I’m wrong but you can take my opinion for what its worth. The RBA are being paid and their opinion matters and has a huge affect on my family as well as everyone else’s. I truly hope Mr Stevens is as good at his job as we all hope.
Finally and I apologise for a long post, I would hope that the pollies and the media cut the prof some slack because I tell you if this country does suffer through an economic crisis like the one currently happening in the US the Australian population will not be looking for the prof!
PS the food looked good!!
March 1st, 2010 at 12:07 am
well yes and no samcyh,
the big difference between now and then is the US was on the gold standard, so its ability to fiscally counter act the de leveraging process was severely curtailed by the gold reserves it held, until it went off the gold standard.
id be more curious about the position after the US went off the gold stndard from say 1934 onwards till 1938, and what happened when FDR started to tighten the government purse strings post 1938
perhaps you could provide
March 1st, 2010 at 1:00 am
tell me steve, are you of irish stock,
i seem to recall a poem about a pessimistic irishman, lamenting about our condition. offcourse then it was the 1890′s drought and the banking crisis.
“we’ll all be ruined said hanrahan, before the year is out”
i suppose the modern day version could be ,
“we’ll all be ruined said professor keen before ten years are out”
the original was written well after the fact, with the benefit of hindsight.
foresight is a less appreciated comodity until it becomes hindsight.
lets hope when we look back in 20years time we dont regret the fact that we should have paid attention to keens lament
March 1st, 2010 at 1:06 am
Read Michael Pascoe’s article in The Age entitled “What happens when an Aussie housing bubble bursts” (22 Feb) with interest. In it he unfairly implies that you predicted that a 40% short-term decline in home prices was imminent. Like most his articles this one is notable for its inaccuracy and lack of analysis. He attributes the continued buoyancy of the house market to “Australians’ dogged belief in home ownership”.
He further writes that “…Among the side issues Keen and his few allies have failed to adequately assess is willingness of Australian property owners to either soldier on servicing their mortgage or take their lumps by selling up before the bank forces them to.”
Geez! No economic stimulus in play there at all nor declining interest rates, nor home grants. It all comes down to the stoic qualities of our heroic home buyers.
More fundamentally for Pascoe, the core issue for Australian home owners isn’t the relative “expensiveness of a house or the size of the debt, but the ability of the owner to service that debt.” There’s a lot to unpack in that statement, as Pascoe seems to be saying that there should be a relationship between the level of debt and income. But at current mortgage levels many people’s interest payments are barely sustainable ever with our relatively low rates. What happens if they rise by 4%.
Pascoe doesn’t state it in those terms but the condition of the market comes down to three things, interest rates, which until recently have declined, high employment rates and a continued pool of people willing to buy at ever increasing prices. But sadly for new market entrants all of these factors will soon turn against the market and no level of soldiering on will help.
I’ve seen nonsense in print about Melbourne home prices reaching a million dollars with statements encouraging people to buy now before they miss the boat forever, as though a viable housing market is possible in a city where people on average incomes can no longer afford to buy a home.
Congratulations for your consistent warnings. I admire your courage in presenting a voice of sanity to counter the delusional “prices can only go up mentality” and destructive pecuniary interests of the property spruikers.
March 1st, 2010 at 1:08 am
Sky does not provide news, it provides entertainment.
In all my years in business, I am yet to see anyone that can forecast accurately and yet we do not crucify people for being wrong, nor do we ridicule them. A forecast by its very nature requires a number of assumptions to be made and as long as those assumptions were reasonable and logical at the time of preparation of the forecast, we should not fault the forecaster.
March 1st, 2010 at 1:31 am
Good for you for working on the book and developing your own network to get the word out.
I’m doing essentially the same thing (on various progressive issues). If the MSM won’t listen to me, fine. I’ll create my own network.
March 1st, 2010 at 6:00 am
Look at the price of gold in Australian dollars and tell me that we are in a deflation? Deflation does not and will not exist, Bernanke has a printing press that will be going into wild overdrive, more than it has been.
We begin the next upside move in April 2010 in gold and from this move we will see $1650 US by years end at latest, this will happen and please use this information as you will.
I only come on this site when gold is close to moving seriously higher.I did it last year and was totally correct with the 1224 call and will be correct again this time.
To be clear March will be your last chance to get involved in gold because in APRIL 2010 we begin the real ride that will make you wish you had listened to me in June last year when gold was in the 900’s.
March 1st, 2010 at 6:04 am
This chart kind of makes Steve’s comments at the Google office talk look quite silly.
He said that people on his website talk gold , but if you actually look at gold priced in australian dollars you would have lost money in the last year.
Wow Steve i bet that you wish you had not said that?
Loss of purchasing power?
Paper money = toilet paper
Gold = money
Buy Gold
March 1st, 2010 at 7:30 pm
@ Elliotwave: The US can not – for the time being – (hyper-)inflate the USD, because the USD is the senior currency. The US has had a Currency Account Surplus since the 1960s (keyword: Vietnam war) and now all these USDs are coming home to roost. What the US will experience is HYPER-DEFLATION, IMO.
Bernanke should print a lot of money (e.g. $ 10 or 30 trillion) and put that in the hands of consumers on the condition that they pay down their debt. And even then there wouldn’t be (hyper-)inflation, IMO.
When I look at Australia I see folks that still are disconnected from reality. Buy a house in this terrible economic environment ? One has to be insane, nuts.
March 6th, 2010 at 1:15 am
Hi Stev,
Don’t set up a fund, just donate the money to a charity.
Perhaps the Salvo’s they provide assistance to people effected by this economic situation.
You have people trying to shoot you down.
Do not touch money.
Give it away, all of it.
And get a receipt.
Good luck and thank you very much for the information you have and are providing
If you are in Western Australia i would value your opinion regarding a review of our family business.
Peter