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 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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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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