Western Economic Association Presentation: Debt & House Prices

[video src="http://www.debtdeflation.com/blogs/wp-content/uploads/talks/KeenMoreOnGFC_WesternEAconference20110427.flv" width="500" height="400" ][video src="http://www.debtdeflation.com/blogs/wp-content/uploads/talks/MadsenMcGovernKeen.m4a" width="500" height="400" ]

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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 a professional economist 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 debts accumulated in Australia, and our very low rate of inflation.
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7 Responses to Western Economic Association Presentation: Debt & House Prices

  1. djc says:

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

  2. Steve Keen says:

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

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

  3. djc says:

    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 …

  4. Steve Keen says:

    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.

  5. kys says:

    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.

  6. Pingback: House Prices and the Credit Impulse | Economics for People

  7. myopia says:

    Steve,

    You need to speak more slowly.

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