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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  • alex78

    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)

  • 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!


  • 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.”


  • 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.



  • bret­t123

    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.

  • 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.

  • myne

    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?

  • myne

    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.

  • 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.

  • myne

    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.

  • mahaish

    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,

  • Lyon­wiss

    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.

  • Robert K

    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.