It goes with­out say­ing that I’m a Cas­san­dra amongst the Pollyan­nas crow­ing about Aus­trali­a’s cur­rent eco­nom­ic per­for­mance data. Low infla­tion, low unem­ploy­ment, and no sign of a wages break­out, are the usu­al­ly-quot­ed sweet eco­nom­ic indi­ca­tors (admit­ted­ly with some strange bed­fel­lows, includ­ing a rel­a­tive­ly slow rate of eco­nom­ic growth for these con­di­tions, and a huge bal­ance of trade deficit despite the best terms of trade in his­to­ry).

So how do I jus­ti­fy the stance of a Cas­san­dra? Because things can’t con­tin­ue as nor­mal, when nor­mal involves an unsus­tain­able trend in debt. At some point, there has to be a break–though tim­ing when that break will occur is next to impos­si­ble, espe­cial­ly so when it depends in part on indi­vid­ual deci­sions to bor­row.

I dis­cuss a Mod­ern Debt Jubilee On Macro’n’Cheese today, and this is a quick expla­na­tion of how it could be done.

Jubilees were com­mon in antiq­ui­ty. The Lord’s Prayer did not orig­i­nal­ly say “And for­give us our sins, as we have for­giv­en those who sin against us”, but “And for­give us our debts, as we also have for­giv­en our debtors”. But an old-fash­ioned Jubilee would reward those who gam­bled with bor­rowed mon­ey, and thus effec­tive­ly penalise those who did not. It would also effec­tive­ly bank­rupt the banks, since their assets—our debts—would fall, while their liabilities—our deposits—would remain con­stant.

Finan­cial Self-Defense Dur­ing a Delever­ag­ing Cycle

By Paul Valle­jo

It is always use­ful to read out­side-of-the-box thinkers. It is a well known max­im in the invest­ing world that “you can­not make mon­ey off of what every­one knows,” as mar­ket prices have already react­ed to what every­one knows.  This makes the field of per­son­al finance some­thing par­tic­u­lar­ly dan­ger­ous to be over­ly reliant on wide­ly held “expert” advice.

Click here for this data in Excel: Debt­watch; CfE­SI
Click here for this post in PDF: Debt­watch; CfE­SI

Steve Keen, Uni­ver­si­ty of West­ern Syd­ney
Matheus Gras­sel­li, Fields Insti­tute, Toron­to

“It ain’t what you don’t know that gets you into trou­ble. It’s what you know for sure that just ain’t so.” (Mark Twain)

Introduction

That the Euro has fall­en into cri­sis a mere decade after its intro­duc­tion is hard­ly sur­pris­ing. The intrin­sic prob­lems in its design were evi­dent to econ­o­mists as wide­ly sep­a­rat­ed intel­lec­tu­al­ly as Wynne God­ley and Mil­ton Fried­man. Writ­ing in 1992, God­ley observed that

In a very time­ly move, the Aus­tralian Sen­ate Stand­ing Com­mit­tee on Eco­nom­ics estab­lished a hear­ing into the post-GFC bank­ing sec­tor. I was pleased to be invit­ed to make a sub­mis­sion, which I com­plet­ed just before leav­ing Aus­tralia for one mon­th’s research into mon­e­tary eco­nom­ics with math­e­mati­cians at the Fields Insti­tute in Toron­to.

The sub­mis­sions have just been made pub­lic. Mine is avail­able here in PDF, and is also repro­duced below. I have improved on my mod­el­ing of mon­ey cre­ation in the last two weeks at the Fields, but I’ll leave details of that for a lat­er post.

By Craig Tin­dale

There is a cri­sis of con­fi­dence unfold­ing in Chi­na that is like­ly to end in a full scale cap­i­tal flight and a dis­or­der­ly col­lapse in both eco­nom­ic and polit­i­cal cohe­sive­ness. The low­er­ing of the reserve require­ments for Chi­nese banks, while report­ed in the media as a loos­en­ing of cred­it, is more like­ly an ear­ly sign of cap­i­tal flight. Sim­i­lar­ly reflec­tive of this, are the large increas­es of gold pur­chas­es by Chi­nese cit­i­zens who have few diver­si­fi­ca­tion options away from the RMB.

Krug­man would def­i­nite­ly sub­ti­tle a post like this “Wonk­ish”!

Click here for this post in PDF: Debt­watch; CfE­SI

This is a paper I’ve recent­ly sub­mit­ted by invi­ta­tion to an Aus­tralian eco­nom­ics jour­nal. I have been very qui­et on the blog while fin­ish­ing this in the last 2 weeks. I’m like­ly to remain qui­et for the next fort­night, since I leave for the Fields Insti­tute in Toron­to on June 1^st, where I’ll be work­ing for a month with the math­e­mati­cians there to ana­lyze and refine my var­i­ous mod­els of finan­cial insta­bil­i­ty. Gras­sel­li and Cos­ta Lima have already done a bril­liant job ana­lyz­ing my 1995 mod­el in this paper.

Below is the video of my talk at INET’s Berlin 2012 con­fer­ence. The oth­er videos for the con­fer­ence are avail­able from INET’s web­site: Day 1; Day 2; Day 3.

Bear­ing in mind that I did­n’t see all pre­sen­ta­tions,  my favourite talks (in deliv­ery order) were those by: George Soros; Gerd Gigeren­z­er; Axel Lei­jon­hufvud; Michael Hud­son; Yanis Varo­ufakis; Dirk Beze­mer; and Moritz Schu­lar­ick.

 INET will pub­lish this paper on their web­site in due course. Click here for the Pow­er­point file;
Click here for the data: Debt­watch mem­bers; (CfE­SI mem­bers link to come in Syd­ney morn­ing)