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.

Western Economic Association Presentation: Debt & House Prices

Flattr this!

The USA’s West­ern Eco­nom­ic Asso­ci­a­tion Inter­na­tion­al holds a Pacif­ic Rim con­fer­ence every two years, and this year the host was the Queens­land Uni­ver­si­ty of Tech­nol­o­gy in Bris­bane, Aus­tralia.

I spoke in two ses­sions on what Amer­i­cans call “The Great Reces­sion” and Aus­tralians calls the “GFC”–the Glob­al Finan­cial Cri­sis. The first ses­sion had two oth­er papers of inter­est to read­ers of this blog: a paper on house prices by Jakob Mad­sen, one of the “Beze­mer Twelve” who pre­dict­ed and warned of the impend­ing cri­sis, and anoth­er on the dan­gers inher­ent in Aus­trali­a’s high lev­el of for­eign debt by QUT’s Mark McGov­ern.

This Time Had Better Be Different: House Prices and the Banks Part 2

Flattr this!

Click here for this post in PDF

Fig­ure 1


In last week’s post I showed that there is a debt-financed, gov­ern­ment-spon­sored bub­ble in Aus­tralian house prices (click here and here for ear­li­er install­ments on the same top­ic). This week I’ll con­sid­er what the burst­ing of this bub­ble could mean for the banks that have financed it.

Betting the House

For two decades after the 1987 Stock Mar­ket Crash, banks have lived by the adage “as safe as hous­es”. Mort­gage lend­ing sur­passed busi­ness blend­ing in 1993, and ever since then it’s been on the up and up. Busi­ness lend­ing actu­al­ly fell dur­ing the 1990s reces­sion, and took off again only in 2006, when the Chi­na boom and the lever­aged-buy­out fren­zy began.

Rally for Research

Flattr this!

The Dis­cov­er­ies Need Dol­lars cam­paign to stop the rumoured cuts to research fund­ing will now have ral­lies in Syd­ney and Ade­laide as well as in Mel­bourne:

MELBOURNE — State Library of Victoria (Swanston St) — Tuesday 12 April @ 12:45–2PM

RSVP via Ral­ly for Research Face­book page (you need to be logged into Face­book to view this page).
Down­load the Mel­bourne ral­ly fly­er

SYDNEY — Belmore Park (Near Central Railway station) — Tuesday 12 April @ 12:45–2PM

RSVP via Ral­ly against NHMRC Bud­get cuts Face­book page (you need to be logged into Face­book to view this page).
Down­load the Syd­ney ral­ly fly­er

Europe trip mid June

Flattr this!

I’m attend­ing the Soci­ety for the Advance­ment of Socio-Eco­nom­ics (SASE) annu­al con­fer­ence in Madrid on June 23–25. Giv­en that I have to fly from Aus­tralia, I’m mak­ing this an extend­ed trip. I will spend 3 days in Lon­don (June 13–15), 3 in Paris (16–18), 3 in Barcelona (19–21) and 4 in Madrid (22–25).

As well as some tourism and meet­ing up with friends like Max Keis­er in Paris, I’m open to giv­ing a talk or three, if there is suf­fi­cient inter­est.

Digging another hole in our future

Flattr this!

There are wide­spread reports that the polit­i­cal fetish with return­ing the Fed­er­al gov­ern­ment to a sur­plus will result in cuts to Aus­trali­a’s research fund­ing bud­get of close to half a bil­lion dol­lars:

Research cuts put lives at risk, say med­ical insti­tutes

Research cuts will cre­ate ‘brain drain’

These cuts are dri­ven by an obses­sion with run­ning a per­ma­nent bud­get sur­plus that is good pol­i­tics but bad eco­nom­ics. For Aus­tralia to con­sid­er achiev­ing this point­less goal by fur­ther under­min­ing its already pathet­ic lev­el of research fund­ing is even more insane.

This Time Had Better Be Different: House Prices and the Banks Part 1

Flattr this!

Click here for this post in PDF

Before the US house price bub­ble burst, its banks and reg­u­la­tors claimed (a) that there was­n’t a bub­ble and (b) that, if house prices did fall, it would­n’t affect the sol­ven­cy of the banks.

The same claims are now being made about Aus­tralian house prices and Aus­tralian banks. On the for­mer point, Glenn Stevens recent­ly remarked that:

There is quite often quot­ed very high ratios of price to income for Aus­tralia, but I think if you get the broad­est mea­sures coun­try-wide prices and coun­try-wide mea­sure of income, the ratio is about four and half and it has not moved much either way for ten years.

Another Getup idea–direct attack on the FHOS

Flattr this!

Reg­u­lar read­ers of this blog would know that I am a staunch crit­ic of what I pre­fer to call the “First Home Ven­dors Grant”, which is why I quick­ly sup­port­ed the pro­pos­al on GetUp’s sug­ges­tion box for a boy­cott cam­paign by first home buy­ers.

That sug­ges­tion has become a suc­cess in its own right even before Get­Up decides whether to pur­sue it or not, with the cam­paign being report­ed in the Fair­fax media: see Online cam­paign tar­gets high cost of hous­ing. Chris Zap­pone’s arti­cle head­lines The Age and the Syd­ney Morn­ing Her­ald’s home pages, and it had 364 com­ments as of 3.30pm today–a remark­able num­ber for a sin­gle sto­ry in less than six hours.

Getup proposed campaign against negative gearing

Flattr this!

In just a few days, Pros­per Aus­tralia’s pro­pos­al that Get­Up should cam­paign for a First Home Buy­ers Strike has gone from last posi­tion in Getup’s sug­ges­tion box to first. At 7.15AM this morn­ing, it had 3,113 votes–almost 500 ahead of the next-ranked pro­pos­al.

In its essence, this pro­pos­al is aimed at remov­ing gov­ern­ment inter­fer­ence in the prop­er­ty mar­ket which pur­port­ed to improve home own­er­ship, but which in essence has made it worse by feed­ing the prop­er­ty price bub­ble.

GetUp campaign suggestion: First Home Property Buyers Strike

Flattr this!

The cam­paign group Get­Up has a “sug­ges­tion box” in which new cam­paign ideas can be sug­gest­ed, debat­ed, and if they receive suf­fi­cient votes, adopt­ed.

Pros­per Aus­tralia recent­ly sug­gest­ed a First Home Prop­er­ty Buy­ers Strike (click here for the Pros­per Aus­tralia press release), and after a week or so it is the 9th ranked cam­paign idea with 1700 votes.

I just logged on and vot­ed for it, with the fol­low­ing com­ment: