West­ern Eco­nomic Asso­ci­a­tion Pre­sen­ta­tion: Debt & House Prices

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The USA’s West­ern Eco­nomic Asso­ci­a­tion Inter­na­tional holds a Pacific Rim con­fer­ence every two years, and this year the host was the Queens­land Uni­ver­sity of Tech­nol­ogy in Bris­bane, Aus­tralia.

I spoke in two ses­sions on what Amer­i­cans call “The Great Reces­sion” and Aus­tralians calls the “GFC”–the Global Finan­cial Cri­sis. The first ses­sion had two other papers of inter­est to read­ers of this blog: a paper on house prices by Jakob Mad­sen, one of the “Beze­mer Twelve” who pre­dicted and warned of the impend­ing cri­sis, and another on the dan­gers inher­ent in Australia’s high level of for­eign debt by QUT’s Mark McGov­ern.

My screen record­ing soft­ware stuffed up–the sound was fine, but it recorded the blank screen­saver rather than the slides. To make amends I redid my pre­sen­ta­tion, using the sound record­ing and try­ing to sync it with the audio (with only par­tial suc­cess! The tim­ing is slightly out–my voice runs ahead of the slides).

A sim­i­lar stuff-up applied in the sec­ond session–I dis­con­nected the pro­jec­tor before sav­ing the record­ing, and the pro­gram crashed. So I will do the same for that presentation–re-record it and post it here–but unfor­tu­nately I have no record of the dis­cus­sions.

Before these has­sles, I had planned to post all videos in one blog entry; now I’ll just post the first ses­sion here. The screen cap­ture of my talk for the sec­ond ses­sion will have to wait till I have time to re-do it on the week­end.

My presentation on the statistical dynamics of debt

Steve Keen’s Debt­watch Pod­cast 

| Open Player in New Win­dow

Unfor­tu­nately I couldn’t do that with Mark and Jakob’s papers, but the audio below is com­plete, from Jakob’s paper through to mine. How­ever for some rea­son I can’t get that to play on my PC! I’ll leave it here for now and pub­lish, and see if the has­sle can be sorted out later.

Madsen on house prices, McGovern and Keen on debt (probably won’t run! Sleuthing apreciated)

Mad­sen on house prices, McGov­ern & Keen on debt

Steve Keen’s Debt­watch Pod­cast http://www.debtdeflation.com/blogs/wp-content/uploads/talks/MadsenMcGovernKeen.m4a

| Open Player in New Win­dow

Papers and pre­sen­ta­tions from ses­sion one:

My pre­sen­ta­tion “More on the GFC: Pre­lude to a Mon­e­tary Min­sky Model of the Great Mod­er­a­tion and the Great Reces­sion

Jakob Mad­sen “A Repay­ment Model of House Prices”

Mark McGov­ern “Beyond the Debt Dream­time: Defus­ing and Resolv­ing Cri­sis”

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • djc

    I know what you mean but r^2=-0.7 doesn’t look right. How about r^2=0.7 (neg­a­tive cor­re­la­tion)?

  • Debt goes up, unem­ploy­ment goes down djc–a neg­a­tive cor­re­la­tion.

    When I use employ­ment data, it’s a pos­i­tive cor­re­la­tion.

  • djc

    Sure, but when r is neg­a­tive r^2 is pos­i­tive.

    BTW, I was watch­ing a pre­sen­ta­tion by Jim Rickards where he used a car career­ing down an icy road as a metaphor for an econ­omy about to go out of con­trol. He argues for a non­lin­ear sys­tems approach (but I can’t see where he’s actu­ally done any) and points out what a poor under­stand­ing you get of what’s about to hap­pen by a series of snap­shots, by which he means con­ven­tional eco­nom­ics. Tak­ing the metaphor a step fur­ther I was think­ing that as a pas­sen­ger I would pre­fer at the wheel a skilled rally dri­ver rather than a sys­tems engi­neer. The trou­ble with economies is that while eco­nomic his­tory might have lots of lessons it’s a bit hard for the peo­ple dri­ving to get much real time expe­ri­ence.

    So that set me won­der­ing whether your work could be best devel­oped and pre­sented as an Econ­omy Sim­u­la­tor. So not try­ing to pre­dict the future course of economies but pre­sent­ing sce­nar­ios where would-be dri­vers can get some idea of the kind of thing that might hap­pen as a con­se­quence of pos­si­ble pol­icy deci­sions. Just a thought …

  • I’m using R^2 as a short­hand djc: i mean the cor­re­la­tion coef­fi­cient, which ranges from –1.0 to +1.0.

    And yes, that’s pre­cisely what QED does, and I’m now arrang­ing fund­ing to pro­duce sev­eral fur­ther ren­di­tions of that basic concept–one in Math­e­mat­ica and the other hope­fully as a native sim­u­la­tion pro­gram, but pos­si­bly as an exten­sion to Vis­sim.

  • kys

    Hi Steve,

    I just spent this morn­ing study­ing these two out­stand­ing research papers, still need more time to digest them, but buy­ers’ behav­iour described in Dr Madsen’s model (p11 — p15) espe­cially caught my eyes.

    A sig­nif­i­cant frac­tion of house buy­ers
    (1) focus on the ini­tial cost of hous­ing and dis­re­gard the pay­ment over the whole time-span of the loan;
    (2) dis­re­gard the poten­tial adverse effects of increas­ing inter­est rates on flex­i­ble rate loans;
    (3) suf­fer from infla­tion illu­sion; and
    (4) react to price level incen­tives.”

    They are worth a read. Thanks.

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  • myopia


    You need to speak more slowly.