Can we avoid another financial crisis?

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Help me rebuild economics at https://www.patreon.com/ProfSteveKeen

Help me rebuild economics at https://www.patreon.com/ProfSteveKeen

Can we avoid another financial crisis?

In 2008, conventional economics led us blindfolded into the greatest economic crisis since the Great Depression. Almost a decade later, with the global economy wallowing in low growth that they can’t explain, mainstream economists are reluctantly coming to realise that their models are useless for understanding the real world.

How did mainstream economists not see the crisis coming? Was it unpredictable, as they now assert, or did their theory blind them to the real causes? Will another financial crisis occur?
These questions and others are asked and answered in Can we avoid another financial crisis? , a short (25,000 word) explanation for the lay reader of how we got into this economic mess, and why we are unlikely to get out of it.

The book is available now in the UK. It will come out in mid-May in the USA. A e-book version will also be available in May.

Support my work by becoming my Patron on Patreon. Economics is broken, and Universities won’t fund the repair job. Research funding is controlled by and goes overwhelmingly to Neoclassical economists. Innovators outside the Neoclassical mainstream aren’t even considered for positions at leading Universities, and have to survive if at all at lowly ranked institutions where their existence is subject to whims of government policy. If you want a new economics, you–the public–are going to have to fund its development directly.

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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4 Responses to Can we avoid another financial crisis?

  1. mattnewman says:

    Hi Steve
    Re the Australian housing bubble;
    You mention the acceleration in mortgage debt is the key driver to property prices and I see you reference America as a marker in a lot of your commentary.

    I was in the uk during gfc and now being in Aus it all feels very bubble like however the one question I can’t answer is the effect immigration has on demand. Immigration as a % of working population in Aus I assume is a lot higher than in the US?

    My point is, assuming 1/4 of the immigrants are median earners (I.e. Single earner in a 4 person family), we may have to assume that in 2-3 years AFTER arriving in Aus (457 visa rules) they would be looking to take on maximum mortgage debt to get on the ladder. As long as the flow of immigrants continues, does this snot prop up demand in 2-3 years ahead?

    Thus, debt to GDP in Aus is a skewed ratio as immigration drives GDP (even thou there are more mouths to feed from a slightly larger pie) and immigrants need to (and will) take on debt to enter the game ?

    If your prediction comes true, there will be an absolute economic bloodbath with serious political and economic

    Many thanks, Matt Newman

  2. mattnewman says:

    Hi again Steve,
    Watching your interview with “on property” which I think took place in April 2016, you said their were signs of slowing in the acceleration of mortgage debt in Australia.

    Knowing prices in Melbourne and Sydney rose by c15% last year I questioned your theory (i.e. Acceleration in mortgage debt leads to house price inflation) however I then noticed the RBA cut rates in May and August by 25 BASIS POINTS.
    If memory serves, in April 2016 mortgage debt as a % of GDP = 90%, now I think it’s c120% which goes to prove an ever increasing acceleration in mortgage debt and resultant house price inflation.

    My question is, where is the tipping point in terms of %:GDP? I.e. When does it become a bankrupt position?

  3. Steve Keen says:

    Hi Matt, Yes that’s the basic way the property bubble has been sustained. Check the charts at my new website:

    http://www.profstevekeen.com/data-on-credit-employment-and-house-prices/

    Australia (and about a dozen other countries) are well past the tipping point, which starts at around 160% o GDP. This is why I expect a second wave of the GFC between now and 2020, not in the USA etc., but in countries that evaded the 2008 event by continuing to lever. I cover this in my new book Can we avoid another financial crisis?, which isn’t yet available in Australia–but I hope it will be by May. You can order it from the UK now at http://eu.wiley.com/WileyCDA/WileyTitle/productCd-1509513728.html

  4. Steve Keen says:

    PS Mortgage debt is accelerating in Australia right now:

    Australian mortgage accerlator and house prices

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