Canada’s Debt Bubble

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Below is the talk I gave to the Cana­dian Cen­tre for Pol­icy Alter­na­tives on the Debt Bub­ble and its impli­ca­tions for Canada. I cover my Min­skian analy­sis of the Depres­sion in gen­eral, and con­clude with data on the Cana­dian econ­omy. The mort­gage accel­er­a­tion data in par­tic­u­lar implies that the Cana­dian house price bubble–which is not as big as those in Aus­tralia, the USA or the UK–is close to being over.


This is the screen record­ing of the talk–better for read­ing the slides themselves.

I’ll edit the post tomor­rrow to add links to the Pow­er­point slides and an audio recording–I can’t access the servers right now to upload them.

 Pow­er­point slides

 

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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14 Responses to Canada’s Debt Bubble

  1. Derek R says:

    Excel­lent! I was really pleased when you told us you were com­ing to Canada, then a bit depressed when I dis­cov­ered that you were only vis­it­ing Toronto. I would have attended the talk if you had been vis­it­ing Alberta or BC but Toronto is a bit far, so it’s good to see a video.

  2. impermanence says:

    Hous­ing bub­bles demon­strate very clearly how com­plex mod­ern soci­eties function.

    While every­body in the hous­ing indus­try [with an IQ over 30] under­stands that hous­ing prices are directly linked to the avail­abil­ity of bank credit, and afford­abil­ity, to incomes, as if by some mag­i­cal incan­ta­tion, when the insa­tiable desire to gen­u­flect at the alter of easy money rears its ugly head, these “pro­fes­sion­als” take off their busi­ness suits and put on their pirate hats, hoist the skull and cross­bones, and have at it.

    The entire pro­fes­sional class has sold-out in this cri­sis to a degree that would make even Mitt Rom­ney blush.

  3. allis2 says:

    Great pre­sen­ta­tion. Your high­light­ing of the impor­tance of finan­cial assets in the econ­omy is long over­due. Defla­tions and infla­tions are reflec­tions not only of quan­ti­ties of money and debt, but also of its dis­tri­b­u­tion between the financial-assets-sector and the domes­tic consumer-real-investment-sector. Put another way, it mat­ters how much of the economy’s wealth goes to pro­duc­ers and how much to the trib­ute collectors–governments, real estate ren­tiers, banks, finan­cial firms. pen­sion funds, col­lege endow­ments, mutual funds, etc.

    Money can flood an econ­omy with only min­i­mum infla­tion as long as most of it is siphoned off into finan­cial assets. The ques­tion is, who will own these finan­cial assets?

    Dur­ing World War II the gov­ern­ment spent masses of money and financed it with masses of fed­eral debt. How­ever, infla­tion was con­trolled as most of this money was with­drawn from the econ­omy via war bonds owned by U.S. cit­i­zens; even school chil­dren had their book­lets of sav­ings stamps. At the end of the war, there was a mass con­sumer mar­ket of pentup pur­chas­ing power. The own­ers of finan­cial assets were will­ing and able to spend them in the real domes­tic econ­omy. More impor­tantly, there were fac­to­ries, resources and labor skills to pro­duce con­sumer wealth; all that was needed was to con­vert wartime pro­duc­tion to peace­time pro­duc­tion.
    The sit­u­a­tion now is dif­fer­ent. Lots of money being cre­ated by the finan­cial sec­tor and being sucked up by the trib­ute col­lec­tors. But are they spend­ing it in the real domes­tic econ­omy? Do we even still have the domes­tic fac­to­ries, resources and labor skills for increased pro­duc­tion? It seems we’re liv­ing in a new economic-political world ruled now by finaciers rather than gov­ern­ments or cap­i­tal­ists. Good to find econ­o­mists who are work­ing to try to under­stand this new world.

  4. Infinum says:

    Hello Pro­fes­sor Keen,

    Great talk as usual!
    Would you be will­ing to give a sim­i­lar one in War­saw, Poland? :)

    Best regards,
    Maciej J. Ba?kowski (Infinum)

  5. Steve Keen says:

    Def­i­nitely Maciej,

    If my travel and accom­mo­da­tion expenses can be cov­ered, and a suit­able time chosen.

  6. impermanence says:

    Steve, it goes with­out say­ing that the Elite are the Elite because they do what­ever is nec­es­sary to reach that lofty perch, but in a “rep­re­sen­ta­tive democ­racy” that oper­ates under the rule of law, it is the pro­fes­sional class that admin­is­trates the system.

    It would be hard to deny the enor­mous lack of respon­si­bil­ity shown by this class, not only in finan­cial mat­ters, but in every insti­tu­tion [pro­fes­sion], from Account­ing on down the line.

    In my own pro­fes­sion, Med­i­cine, the same non-sense goes on as you would have to be pretty much brain-dead [as a prac­ti­tioner] not to under­stand the mas­sive sell-out of the Amer­i­can peo­ple to cor­po­rate interests.

    Unfor­tu­nately, nobody takes the Amer­i­can doc­tor to task for allow­ing this trav­esty to take place.

    As an econ­o­mist in Acad­e­mia, I would be very inter­ested in your per­spec­tive on how the pro­fes­sional class has avoided cul­pa­bil­ity with this breech of pro­fes­sional and moral respon­si­bil­ity. Thanks.

  7. LCTesla says:

    There is much that still isn’t clear to me about the way in which reserves enter the sys­tem after the cre­ation of deposits. Steve men­tions that the lag between deposit cre­ation and the draw­ing in of reserves is about 1 month. When I asked the ques­tion of “what are reserves needed for” on this blog a few months ago, I got the response from Neil Wil­son that reserves are only needed to set­tle net inter­bank pay­ments. Doesn’t this imply that deposits that are cre­ated for the pur­pose of set­tling trans­ac­tions between clients within one bank are not matched by reserves at all?

    I guess I’d be expect­ing a qual­i­fier added to that “1 month lag” expla­na­tion: is it just a 1 month lag in case they are needed? Can the lag be con­sid­er­ably longer when the need for net inter­bank pay­ments does not arise for a long time?

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  9. John LikesPrivacy says:

    Sorry to nit­pick, but some­thing that really gets my goat is the claim that some­one received the Nobel prize in eco­nom­ics. Just to be clear, THERE IS NO NOBEL PRIZE IN ECONOMICS. The actual award is Sveriges Riks­bank Prize in Eco­nomic Sci­ences in Mem­ory of Alfred Nobel.

    Yes, that’s right, it’s a prize awarded by A BANK! To call it the Nobel Prize is offen­sive, and only serves to inflate the egos of those who in no way deserve to have their own name and Nobel men­tioned in the same sentence.

    To claim that Krug­man, Hayek and Frei­d­man share the same lau­rels as Marie Curie, Linus Paul­ing, Enrico Fermi or Albert Ein­stein is just offensive.

    I admire your work Steve, and I believe it is impor­tant from a social pol­icy per­pec­tive, par­tic­u­larly if democ­racy is to sur­vive the crises of cap­i­tal­ism, but I don’t see Eco­nom­ics becom­ing a life-affirming or pros­per­ity gen­er­at­ing sci­ence any­time soon. I would be happy for you to prove me wrong though.

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  13. sum says:

    Excel­lent pre­sen­ta­tion Steve. When you explained Minksy’s equi­lib­rium caus­ing insta­bil­ity I thought of the sky­scraper index.

    The idea is that when some­one fin­ishes the tallest/boldest build­ing in the area it often co-insides with a com­mer­cial prop­erty crash.

    The rea­son this seems to cor­re­late is that after sta­ble growth some­one with more money than sense decides to build with even higher expec­ta­tions. By the time they have com­pleted the plan­ning and build­ing process the bub­ble has started to deflate and then the project is no more than a totem to hubris and offices to rent for vain companies.

    Any­way, in Lon­don we’re about to fin­ish the tallest build­ing in the EU. So fin­gers crossed :-).

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