Excellent Switzer interview on Sky News Australia

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I have just been interviewed by Peter Switzer on the Switzer show on Sky News Australia. Peter interviewed me for over 15 minutes, which allowed plenty of time to discuss such things as:

  • The "Revere Award” and the econ­o­mists who pre­dicted the cri­sis–includ­ing Michael Hud­son, Wynne God­ley, Ann Pet­ti­for as well as myself, Roubini and Baker;
  • Why we saw a cri­sis com­ing (run­away pri­vate debt bub­ble that had to burst);
  • Why some of my post-crisis calls were wrong–at least in the imme­di­ate term in Aus­tralia (huge gov­ern­ment stim­u­lus and the First Home Ven­dors Boost [see also this link]);
  • What the prospects were for Aus­tralian real estate (down about 40% over 10–15 years, maybe 15–20% over next 2–3 years);
  • What the next two years might hold for asset mar­kets and unem­ploy­ment (stag­nant asset prices and ris­ing unem­ploy­ment); and
  • Whether it might be pos­si­ble to have a “Goldilocks Down­turn” where asset prices rise but slowly, unem­ploy­ment rises but not too much, and it’s all over in a few years rather than a decade (my answer was that “you can’t have all three”).

Click here to watch the inter­view on Sky News at a full frame rate, or click below to watch a record­ing at a lower frame rate. And hats off to Peter for an excel­lent inter­view.

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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13 Responses to Excellent Switzer interview on Sky News Australia

  1. alex78 says:

    Great inter­view Steve. Are those declines you pre­dicted in real or nom­i­nal terms? ( might not mat­ter so much given the dis-inflation we’ll have for the next few years)

  2. peterjbolton says:

    For the first time in my Life, I find myself floored by Dr Paul Krug­man: this is heart attack coun­try! Is there a human being, a Homo sapien sapien in that integu­men­tal vol­ume known as Paul Krug­man? A: It appears so!

    Fake heroes like Bernie Kerik, Rudy Giu­liani, and, yes, George W. Bush raced to cash in on the horror. ”

    I wish to for­mally acknowl­edge here, Dr Krugman’s com­ments and extend a hand of grat­i­tude for a vitally impor­tant pub­lic state­ment of absolute honesty.

    Well done Sir!


  3. peterjbolton says:

    US Mil­i­tary Occu­pa­tion of Aus­tralia: it begins while the road between Par­lia­ment House and the US Embassy gets too much heavy traf­fic. And, per­haps a direct cable with mul­ti­ple links cour­tesy of the Aus­tralian Taxpayer?

    Pos­si­bil­i­ties included increas­ing U.S. access to Aus­tralian train­ing exer­cises and test ranges, poten­tial pre-positioning of U.S. equip­ment in Aus­tralia, greater use by the United States of Aus­tralian facil­i­ties and ports, and options for joint mil­i­tary activ­i­ties in the region.

    We are look­ing to enhance our pres­ence in Asia, not decrease it. And Aus­tralia would be part of that,” the defense offi­cial said.”


  4. peterjbolton says:

    If you think that Econ­o­mists have any role in run­ning the World, think on this: The Econ­o­mists’ role in the Global socio-economies is to fraud­u­lently pro­vide cover for the Recur­sive scam­ming and war-warmongering of the high­est level Bank­ing Sys­tem: Econ­o­mists are merely deluded but use­ful fools that are com­plicit in crim­i­nal acts against humanity…

    The world is being led by politi­cians and cen­tral bankers who have no inter­est in the one viable solu­tion to the world’s mon­e­tary prob­lem: the clos­ing of all cen­tral banks and the open­ing of all mar­kets to free mar­ket coinage. This would mean get­ting gov­ern­ment out of the money business.

    They have no inter­est in re-establishing an inter­na­tional gold stan­dard, with open coinage and free mar­kets in money.

    Politi­cians want to con­trol money for their pur­poses. Senior offi­cers of large banks want to con­trol money for their pur­poses. Usu­ally, their goals fit together well. They fit together because of the short-term effects (polit­i­cally pos­i­tive) of mon­e­tary inflation.

    The present sys­tem of reserve cur­ren­cies favors the United States gov­ern­ment and Amer­i­can con­sumers. It is a sub­sidy to exports to the USA by way of hold­ing down inter­est rates for U.S. gov­ern­ment debt. Cen­tral banks inflate. They can buy any asset, but export mer­can­til­ism favors the U.S. dol­lar and the euro. The cri­sis in Europe favors the dollar.

    There are lots of things to worry about, The loss of the dollar’s world reserve sta­tus is not high enough on the list to be of much concern.



  5. brett123 says:

    Nice inter­view Steve. It’s the first time I’ve actu­ally heard you claim credit for the gov­ern­ments stim­u­lus pack­age and I actu­ally believe you do deserve some credit…but once again this also sup­port the hypoth­e­sis that Aus­tr­lalia is dif­fer­ent (ie we have Steve Keen! :) )

    It inter­est­ing regard­ing the stim­u­lus package..some peo­ple still com­plain it was money wasted (like gov­ern­ments don’t nor­mally waste money!?!?).. My way of think­ing is that Aus­tr­lalia stay­ing out of reces­sion for so long has given peo­ple a chance to heed your warn­ings on debt and get them­selves into a bet­ter posi­tion. If you haven’t heeded the warn­ing by now..you deserve what you get when the crunch comes.

    On another point, I find it a lit­tle hyp­o­crit­i­cal that you allow credit card pay­ments when sign­ing up for membership…but this sup­ports the idea not all debt is bad! :)

    Also, I hope it works out with you mak­ing money from the site. To me (as a bit of an IT nerd) your great­est asset is not your eco­nomic the­o­ries but your web­site. The last few years of TV inter­view etc is a great exam­ple in how to pub­li­cise a web­site. The blog posts, the com­ments and forums has proven a great way to keep peo­ple com­ing back. (I’m not sure if you planned it this way though?). I know how hard it can be to make money on web­site when every­thing is free on the net, so good luck with it.

  6. Steve Keen says:

    Thanks Brett. It’s actu­ally going quite well–I am pleased with how peo­ple have responded to the mem­ber­ship options. There are a few teething prob­lems of course, but it’s pos­si­ble that this could be self-funding one day, which would make it pos­si­ble for me to hire some­one to take the admin load off my shoul­ders, leav­ing more time to get my research done.

  7. myne says:

    Steve, on the topic of the RBA and inter­est rates, I con­tend that a much bet­ter infla­tion tool would be to give the RBA the abil­ity to change the super­an­nu­a­tion contributions.

    RBA ups rates by .25% from 4.5%.

    A per­son who bought their prop­erty in 2001 for 200k has their annual inter­est por­tion of their repay­ments change from 9000 to 9500.

    A per­son who bought the house next door in 2007 for 400k has their annual inter­est por­tion of their repay­ments change from 18000 to 19000.

    The per­son who bought ear­lier, is likely to be older. They’re likely to have pro­gressed in their career more, and are there­fore more likely to be earn­ing more to start with. So not only do their repay­ments rise less, but they rise by a lot lower per­cent­age of income.

    The argu­ment that inter­est rates affect renters also comes undone in stag­nant or falling mar­ket. Land­lords can’t get blood from a stone, so they face higher neg­a­tive gear­ing rather than ris­ing rents. In the cur­rent mar­ket, if the RBA upped rates, only recent own­ers would suf­fer. Renters and older own­ers wouldn’t even notice the change.

    Now, lets take two peo­ple. One’s a miner on 100k, and one’s Joe aver­age on 50k. Let’s up super­an­nu­a­tion by .25%.

    The miner is now pay­ing 9250 a year in Super, and Mr Aver­age is now pay­ing 4625. Regard­less of their prop­erty val­ues, they are both affected. Impor­tantly, only the work­ers are affected. Unem­ployed renters, retirees and other net ben­e­fi­cia­ries are not affected at all. Their rel­a­tively low share of aggre­gate demand does not get hit.

    Now, I realise the RBA is charged with mon­e­tary pol­icy and not fis­cal pol­icy, but with only one lever to pull, their con­trol is hap­haz­ard. Fis­cal pol­icy would raise taxes. A very unpop­u­lar move. Cor­a­geous as Sir Humphrey would put it. Super offers the sys­tem a third option. One that greatly improves the RBA’s gran­u­lar­ity of con­trol over infla­tion, and is not polit­i­cal suicide.

    It also offers work­ers the chance to see their money again one day. Unlike bank inter­est. I’m sure that the politi­cians will one day intro­duce mar­ginal tax rates to Super too (at approx­i­mately half the rates of PAYG), so this lever, under the con­trol of the RBA will also aid the gov­er­ment in bal­anc­ing superannuation.

    I’m sure there are exploits, but as a gen­eral con­cept, what are your thoughts?

  8. myne says:

    I should add that it appears to me to be about the only way a ‘soft land­ing’ in real estate could be engi­neered with­out exces­sive inflation.

    The RBA will have to drop rates soon as unem­ploy­ment rises, but they’ll also have to raise them to fight infla­tion. An impos­si­ble choice as we all know, and I doubt there’s a mid­dle ground.

    Drop­ping rates and rais­ing super will simul­ta­ne­ously cut incomes across the board thus fight­ing infla­tion, and take pres­sure off those super vul­ner­a­ble recent home buy­ers and busi­nesses. Thus hope­fully achiev­ing the impos­si­ble dual mandate.

  9. Steve Keen says:

    I’d rather see the Cen­tral Bank focus on sys­temic sta­bil­ity than infla­tion Myne. This also begs ques­tions about the causal links in inflation–or rather assumes the demand pull causal mechanism.

  10. myne says:

    I’m work­ing on what I know so far, and the Aus­trian def­i­n­i­tion of infla­tion makes sense to me. There­fore I see the goal of pre­vent­ing infla­tion being achieved by suck­ing money from the sys­tem arti­fi­cially through the RBA.

    I’d love if they focused on sys­tem­atic sta­bil­ity too. I’m just pretty sure it’s too late to fun­da­men­tally change it, and as much as I’d like them too, i doubt they’re ready to accept your models.

    Which leaves us with lit­tle option but to mod­ify the cur­rent sys­tem for the cur­rent sit­u­a­tion. I expect some time in the near future, when either Europe or the US fall over; or China depeg, the AUD will tum­ble in a mas­sive liq­uid­ity sell­off. Some time before or after that, I expect unem­ploy­ment to rise, forc­ing the RBA to either accept unem­ploy­ment or accept infla­tion. I think they’ll accept infla­tion. They’ve only got one lever, so they’ll drop rates.

    This in my mind sounds a lot like the 70’s. Stagfla­tion ahoy!

    Now, if our dol­lar dives, and there is no price defla­tion else­where, we’ll have huge infla­tion overnight. Petrol’s been hang­ing around 1.30–1.40 for a while now, so if it drops to 70c again with­out a cor­rospond­ing oil price col­lapse like last time, we’re screwed. If it’s Europe or the US that fall, then it will be short term. A year or so. If China depegs, we could be look­ing at rapid struc­tural inflation.

    Stim­u­lus would most likely aggri­vate the sit­u­a­tion, so that’s off the table. But the sys­tem will need a way to take money out of the sys­tem AND encour­age lend­ing. It’s polit­i­cally unac­cept­able to have job losses or raise taxes.

    Super is per­fect. Our banks are going to suf­fer, so any­thing that can help their tier 1 cap­i­tal ratios will be wel­comed by them. Polit­i­cally that may solve the issue of back­ing the deposits. It’s applied to every­one evenly like a tax but is not entirely like a tax because we still own it, we just cant spend it. Inter­est rates hurt the youngest the most. As I stated ear­lier, some­one who bought in 2001 for 200k is pay­ing half the inter­est of some­one who bought recently.

    This is because of the gov­ern­ment grants, obvi­ously, but from the RBA’s per­spec­tive, it’s because the CPI was mod­i­fied in 1997 to remove mort­gage inter­est. There­fore, the RBA was adjust­ing rates for 14 years based on flawed CPI report­ing. There­fore their one tool is com­pletely inap­pro­pri­ate for this mess.

    I don’t want Glen Stevens replaced with a Bernanke fig­ure. I think he’s a decent man who really respects the power he holds. Only thing is, he’s been work­ing off the wrong fig­ures. If that one change didn’t hap­pen in 1997, then the FHOG should have been eaten up by rapid rate rises in the early 00’s.

    If we accept that mis­takes were made, that Aus­tralia is largely at the mercy of inter­na­tional forces, and there’s no way it can be dealt with using the tools that match the pre­vi­ous met­rics, then we have to think of a solu­tion that causes the least pain.

    Bernanke’s answer is to fire up the print­ing press, to buy every asset, to manip­u­late the stock mar­ket, all in his mis­guided belief that con­fi­dence is all that needs to change. We can see how well that’s working.

    I think Aus­tralia has a chance to spread the dam­age. Rather than a small minor­ity of bankruptcy’s caus­ing huge flow on effects, I think the pres­sure can be taken off them directly, and redis­trib­uted. But not redis­trib­uted through infla­tion. No. Redis­trib­uted through (albeit forced) saving.

    Per­son­ally, I’m prob­a­bly going to do great if it all falls over. I have net sav­ings, don’t own a house, and I’m wait­ing for our house bub­ble to col­lapse so I can afford one.
    But I have to accept that my inter­ests are not on the polit­i­cal agenda, won’t be on the agenda, and if this hap­pens, many peo­ple are going to be very mis­er­able while a small minor­ity of us will be happy. That’s not good for the country.

    I can’t see any other polit­i­cally accept­able ways out of this that could pos­si­bly hope to cope with the stagfla­tion I expect. There is no inter­est rate mid­dle ground with stagfla­tion. It’s med­i­cine time through high rates and high unem­ploy­ment, or it’s flirt with hyper infla­tion. Nei­ther are fun for anyone.

    So if you want to encour­age lend­ing, limit infla­tion, keep peo­ple work­ing, and engi­neer a soft land­ing, so that one day when the fun­da­men­tals are back into rea­son­able ranges so that we CAN imple­ment your method­ol­ogy with­out a prior crash, what else could pos­si­bly do this?

    - Super up (judged by the RBA at their meet­ings) = spread the short term pain
    – Rates down (Judged by the RBA as nor­mal) = keep emply­oment sta­ble
    – Taxes stable/bracket creep = polit­i­cally acceptable

    I love your research, I know in my gut that it makes sense, that if it was lis­tened to 10 years ago we’d be in a lot bet­ter posi­tion now. But it wasn’t. The only play book any­one reads from is the Neo­clas­si­cal twisted Keyn­sian play­book, so that means we’re going to copy the US and/or Europe. That scares the crap out of me.

    I think we’re just a few years behind them. We had their 2003 reces­sion in 2008. They breezed through their 03 reces­sion with com­pa­ra­ble inter­est rates to our cur­rent rates. We breezed through the 08. We can already see what hap­pens when we get their 08 reces­sion. Frankly, I’d rather try and engi­neer the soft, gen­tle nominally-static decline many hope for.

    Then, in 2018 or when­ever, when after years of care­ful manip­u­la­tion of rates, and super, when most of the ratios have fallen in real terms to near their mean, then mate, I hope they do every­thing you tell them to. Because you’re right, but your way can only be imple­mented after the delever­ag­ing — one way or another.

    Haha sorry, I got pretty car­ried away. Hope­fully you get my per­spec­tive at least.

  11. mahaish says:

    the gov­ern­ment debt or so called waste is yours or my sav­ing brett123.

    it ends up in pri­vate sec­tor bank accounts,

    atleast in this coun­try even if it didnt in america

    and if a build­ing con­trac­tor got paid a 100 grand extra for a school hall than he prob­a­bly should have, well it ended up in his bank account, and the wife could by a new pair of shoes, and the kids get the lat­est 3d tv.

    the main thing is the sub­bies and sales ladies still have a job, becaus if they didnt that would be a real waste and we would be in a hole as big as the amer­i­cans have to fill.

    the part of aus­tralians reduc­ing their gear­ing on their bal­ance sheet is very depen­dent on the gov­ern­ment run­ning large enough deficits well into the future, and not run­ning hair brained scemes like fhog.

    fis­cal sur­plus is only remotely pos­si­ble care of a terms of trade and trade sur­plus fill­ing up the deposit and cap­i­tal base of our bank­ing system.

    it aint going to last,

  12. Lyonwiss says:

    Mahaish Sep­tem­ber 17, 2011 at 1:43 pm

    You are still talk­ing the same mis­guided non­sense: “the gov­ern­ment debt or so called waste is yours or my sav­ing brett123.” Con­sider the fol­low­ing example.

    Gov­ern­ment taxes me $10, pays soe­mone to dig a hole in the ground, then fills it up again. My money has been trans­ferred to some­one else via the gov­ern­ment. My loss is some­one else’s gain. There has been a waste of human resources which could have more pro­duc­tively used for eco­nomic ben­e­fit and there has been no net sav­ings. Hence, gov­ern­ment waste does not lead to pri­vate sec­tor savings.

  13. Robert K says:

    How I wish we has inter­view­ers in the USA main­stream media like a
    Peter Switzer, on eco­nom­ics top­ics. Alas, it is not to be. For that, we must
    go to blogs, but even the blo­gos­phere here is inten­tion­ally clut­tered with vast
    swathes of dis­in­for­ma­tion. Oh well, caveat emptor.

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