Interview with FNN
Aug07
on August 7, 2012
at 11:30 am
Steve did an interview with the Finance News Network that was released yesterday. Lelde Smits hosts the interview and asks why Steve Keen refuses to back down.
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Very good interview. Credible interviewer asking questions that the mainstream public are ready to have answered.
Absolutely forthright, correct and courageous defense of the concept of monetary Grace. Cost accounting’s conventions combined with technology’s inexorable march demand an evolution of consumer finance from loan ONLY to individual dividend and loan if desired. The financial and monetary systems must adapt to this evolution, and Free market economic theory which is not free as it is currently constructed must also adapt to these truths and realities or keep pretending that they don’t exist right up until the system collapses and the chaos overwhelms the world.
The idea behind your new book is also a theoretical step in the right direction as it indicates the proper starting point for any truly workable and humane system….the individual. The primary intention of economics has too long been the will to power of the business entities of the system. It is now time to stress the will to economic freedom for the individual. Philosophy is the beginning and end everything and policy is what occurs in between. Align that policy honestly with the best ideas, values and experiences you can….and you’ll have a new and better, if not perfect, world. Wisdom, the proper basis for individual development and systemic policy.
She seems lovely.
Steve :
Once again a good interview. Just the facts.
Living in Vancouver ,with an average annual 3% reduction in Condo prices this past two years ,it looks like the changes made by our Federal Govt on more restrictive mortgages is working as planned.(Changing from 40 year max.to30 years.)
and no Federal guarantee over $1 Million house values.
A long overdue change
Much to the consternation of some developer interests,but accepted so far
by the public as necessary and long overdue.
Farnorth5
Hi Steve,
How do you arrive at the 2 year figure to end the mining boom? Usually economists specialising in commodities would have exact details about projected demand and supply based on depletion and timing of new production. Did you factor in the mining investment mix in Australia, which is quite diverse in the range of natural resources it relates to. Also resource projects, particularly related to energy have forward contracts which ensure the viability of the project for several years in advance. Did all these factors weigh in to the 2 year prediction or was it just an off the cuff comment?
Steve, you seem to be rewriting history here.
You DID say in 2008 that prices would fall 40% in a few years, and the terms of your bet with Rory were predicated on prices not rising to a new peak. Now you’re saying you didn’t call peak in 2008?
So 2010 is the new peak? But according to the ABS, RPData and APM, Australian house prices have been rising for the past few months.
And prices are NOT down over 10% in real terms and 7% in nominal terms as you state in the interview. It’s 9% in real terms, 4.7% nominal, according to the latest ABS data!
For another approach data provider Residex bases their indices on ‘same property’ sales.
http://www.residex.com.au/indices?state=NSW&dwelling=H#indices
Bullocks. “Printing more money” won’t help at all. Blaming the Maastricht treaty is a straw man. Using money from the ECB won’t help to solve the problem. It would bankrupt the ECB. Like “printing more money” will bankrupt the RBA, BoE, BoC, Federal Reserve or the BoJ. It would only kick the can (sorry, snowball) down the road even more. It contradicts mr. Keen’s own views.
People vastly understate the chronic and petulent nature of deflation.
central banks cant go bankrupt willy2,
they can even have negative net worth and still function without a care in the world.
infinite liquidity at a price
they have the legal authority to financially engineer just about any financial balance sheet structure of their choosing ,between them and the banking system.
and the ecb is part of the solution, if the powers that be change the regs and allow them to be more proactive, which they have been in recent times, albeit far too late.
they can certainly take put a gun to the heads of bond traders if they so wished.
and thats a very important part of stabilising the sovereign debt crisis in europe. the central bank can drive bond yields down significantly through their liquidity swap ops.
it would involve an end to greenspanian central bank transperancy,
but it would be good sport to keep bankers guesing and making them sweat a little more
I love that this site is not simply a chorus of support for Steve. But critiques need to be grounded not just in mathematical models of old Austrian theorists but also in common sense. Given the anniversary post I thought it was time to mention a few things.
A prediction is something that happens *before* an event, not a weak post hoc “we saw this coming but didn’t want to say it”. So in the scheme of things, being a tad early on the peak is irrelevant (and debatable given the numerous sources of dubious data).
If this is a cycle that takes some 15-20 years to play out then the start date is hardly the point and if people pin their money/investment plans on the idea that it’s a 9% loss not 10% (or 7 vs 4.7) then that’s a worrying strategy, because the trend is very clear.
This is a hugely diverse country in terms of housing types, skills, range of ASXstocks, cost of living, employment levels, policy impacts and other economic variables. Some people are hurting way more than 10% (and some are feasting on bargains) and often these averaged data don’t reflect this.
For me, I’ve spent four years reading this blog and trying to learn the theory. Now I just keep looking for disconfirming evidence of Steve’s predictions and what little is about is still unconvincing.
Thanks for your continuing education here Steve. I enjoyed your recent interviews
The only certainty about markets and the economy in general is that it is uncertain. It is inevitable that bold forecasts will continue to be proven incorrectly. In terms of predictions it is also inevitable that a prediction comes true in due time, it is no different to predicting a six on a dice after an undefined number of rolls. How fast you learn that is a matter of luck and stubborness. Luck will make you think you actually can make accurate forecasts, stubborness determines how long it takes before you learn from bad calls.
Steve has done a lot of good and detailed work highlighting the inadequacies of current economic theory. There are also some promising steps in the right direction in terms of theoretical developments. But it is a huge leap of subjective judgement to turn those theories into forecasts/predictions which in the end, unfortunately discredit and take attention away for Steve’s real work.
@Mahaish: Central Banks certainly can go bankrupt. And they’re very well aware of that. That’s why the FED:
- confiscated gold in the early 1930s.
- devalued the USD against gold.
That recapitalized the Federal Reserve and brought back the credibility of the US government.
There’s more to this. Non US central banks own some 50% of US debt. These T-bonds constitute the reserves of those central banks. So, when (not IF) interest rates in the US start to rise then the ENTIRE current monetary system is effectively bankrupt. Then we have a world wide monetary crisis of the fiat system based on the USD as the centre of the world’s monetary system.
Yes, the FED WILL “print” LOTS of money to buy back all those foreign owned T-bonds in an attempt to the USD centered monetary system afloat. But it won’t help, the current system is doomed as a result of the GIANT US debt burden. The US WILL default.
I used to think that Central Banks could go bankrupt too, Willy2 but I now realise that that can only happen when the currency they issue has a fixed exchange rate with some other currency or commodity. For a floating-rate fiat currency where the Central Bank has no obligation to exchange its money for anything else of any value whatsoever there is no possibility of bankruptcy.
In the early 1930s the Fed was not that type of central bank and the USD was not that type of currency. In the early 2010s it is. So US inflation? Maybe. US Bankruptcy? Not a chance.
@Derek R: No, the US won’t go bankrupt, it will default on its debt obligations. Countries don’t go bankrupt, they default. And it will shatter the wealth of A LOT OF people. IMO, the US will “print” A LOT OF new “money” in an attempt to rescue the current financial system (based on the USD denominated debt). But it will be to no avail.
(Hyper-)Inflation ? Depends on how desperate the FED gets.