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.

More on the Commonwealth Bank

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My last post on the Com­mon­wealth Bank’s “there’s no hous­ing bub­ble in Aus­tralia” doc­u­ment focused sim­ply on the use of two dif­fer­ent data sources for the House Price to Income ratio; I left the argu­ments the bank made untouched.

Not so David Llewellyn-Smith, who ran a logi­cian’s eye over the bank’s doc­u­ment and found “log­ic” of Mon­ty Python “if she weighs more than a duck, she’s a witch” cal­i­ble. David pub­lished this post in the Hen­ry Thorn­ton blog, and he has kind­ly con­sent­ed to me repro­duc­ing it here.

Overseas Investors & the Commonwealth Bank

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On Thurs­day Sep­tem­ber 9th 2010, the Com­mon­wealth Bank released a doc­u­ment on the Aus­tralian hous­ing mar­ket, to sup­port a tour that its senior exec­u­tives are mak­ing to meet over­seas investors.  The press release for the doc­u­ment was as fol­lows:

Aus­tralian Res­i­den­tial Hous­ing

Syd­ney, 9 Sep­tem­ber 2010: Senior exec­u­tives from the Com­mon­wealth Bank of Aus­tralia (“the Group”) will soon be trav­el­ling over­seas to meet with some of the Group’s off­shore share­hold­ers and oth­er investors inter­est­ed in Aus­tralia and the Aus­tralian bank­ing sec­tor.

GDP plus Change in Debt—and the US Flow of Funds

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My recent post “What Bernanke does­n’t under­stand about defla­tion” has hit a chord, with a num­ber of sites around the world repro­duc­ing it—including John Mauld­in’s Out­side the Box col­umn. But it has raised a cou­ple of queries in peo­ple’s minds too:

  1. Does my def­i­n­i­tion that “aggre­gate demand equals GDP plus the change in debt” involve dou­ble-count­ing?
  2. My fig­ures for the USA are dif­fi­cult to rec­on­cile with the pub­lished US Flow of Funds data.

Back to the Future?

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Things are look­ing grim indeed for the US econ­o­my. Unem­ploy­ment is out of con­trol—espe­cial­ly if you con­sid­er the U‑6 (16.7%, up 0.2% in the last month) and Shad­ow­stats (22%, up 0.3%) mea­sures, which are far more real­is­tic than the effec­tive­ly pub­lic rela­tions U‑3 num­ber that pass­es for the “offi­cial” unem­ploy­ment rate (9.6%, up 0.1%).

The US is in a Depres­sion, and the soon­er it acknowl­edges that—rather than con­tin­u­ing to pre­tend otherwise—the bet­ter. Gov­ern­ment action has atten­u­at­ed the rate of decline, but not reversed it: a huge fis­cal and mon­e­tary stim­u­lus has put the econ­o­my in lim­bo rather than restart­ing growth, and the Fed’s con­ven­tion­al mon­e­tary pol­i­cy arse­nal is all but deplet­ed.

Recording of Webinar on Australian Economy

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The webi­nar organ­ised by Phil Dob­bie for BTNet went over very well this morn­ing, with about 80 atten­dees and a live­ly dis­cus­sion medi­at­ed by Phil. Unfor­tu­nate­ly a pow­er out­age meant that GoToMeet­ing’s record­ing of the pre­sen­ta­tion only com­menced half way through, so to make amends Phil and I re-record­ed it this after­noon. We lost some of the inter­ac­tiv­i­ty, but the infor­ma­tion comes through very well in this for­mat.

To see this re-record­ing, please click on either of the fol­low­ing links:

Phil Dob­bie’s BTNet page “Aussie Rules”; or

A direct link to GoToMeet­ing.

What Bernanke doesn’t understand about deflation

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Bernanke’s recent Jack­son Hole speech did­n’t con­tain one ref­er­ence to the key force dri­ving the Amer­i­can econ­o­my right now: pri­vate sec­tor delever­ag­ing (here’s the pre­vi­ous year’s speech for com­par­ison’s sake). The rea­son the US econ­o­my is not recov­er­ing from this cri­sis is because all sec­tors of Amer­i­can soci­ety took on too much debt dur­ing the false boom of the last two decades, and they are now busi­ly get­ting them­selves out of debt any way they can.

Webinar on the Australian Economy

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Broad­cast­er and pod­cast­er Phil Dob­bie, who amongst oth­er roles con­ducts the pod­casts for BNET.com, is launch­ing a Webi­nar sem­i­nar series with a talk by me on the Aus­tralian econ­o­my.

A webi­nar is an online ver­sion of a sem­i­nar at which the speak­er can give a lec­ture (com­plete with slides, sim­u­la­tions, etc.) that up to 1,000 peo­ple can attend, and atten­dees can ask ques­tions dur­ing the talk.

This first webi­nar is enti­tled “The Aussie Econ­o­my – Good Times or Stormy Waters? “, and it will take place at 11am (Aus­tralian East­ern Stan­dard Time) on Fri­day Sep­tem­ber 3rd 2010.

Giving the Bird to the Stimulus?

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Peter Mar­tin reports in The Age today that Pro­fes­sor Ron Bird of UTS has weighed into the debate over the Rudd stim­u­lus pack­age. Pro­fes­sor Bird claimed that the stim­u­lus was far less impor­tant than our strong econ­o­my pri­or to the cri­sis, and the sec­ondary effect on our exports of stim­u­lus pack­ages under­tak­en else­where.

”The posi­tion we find our­selves in today is more due to our strong eco­nom­ic posi­tion going into the cri­sis and the mas­sive stim­u­lus pack­ages under­tak­en by our trad­ing part­ners,” Pro­fes­sor Bird says. ”The gov­ern­ment can take lit­tle or no cred­it for either of these, a point it (and our learned aca­d­e­mics) con­ve­nient­ly for­get.” (Peter Mar­tin, “Reserve Bank back­ing for stim­u­lus”, The Age August 18 2010)

Bank Profits a sign of economic sickness, not health

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The record $6 bil­lion prof­it that the Com­mon­wealth Bank is expect­ed to announce today is a sign of an econ­o­my that has been tak­en over by Ponzi finance. Fun­da­men­tal­ly, banks make mon­ey by cre­at­ing debt, and the amount of debt we’ve been enticed into tak­ing on is the sign of a sick econ­o­my rather than a healthy one. The lev­el of pri­vate debt that is actu­al­ly need­ed to sup­port busi­ness and main­tain home own­er­ship at his­toric lev­els (own­er­ship lev­els have fall­en over recent years!) is pos­si­bly as lit­tle as one sixth the cur­rent lev­el.

IQ Squared debate on capitalism and the planet

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I’m tak­ing part in an Intel­li­gence Squared debate on Tues­day next week–August 10 2010–on the top­ic:

That only capitalism can save the planet”

I’m on the Oppo­si­tion side, along with the poet and nov­el­ist Kate Jen­nings, and for­mer Exec­u­tive Direc­tor of Green­peace Inter­na­tion­al Paul Gild­ing. The Gov­ern­ment side is Eco­nom­ics Edi­tor of The Syd­ney Morn­ing Her­ald Ross Git­tins,  busi­ness­woman and com­pa­ny direc­tor Lucy Turn­bull, and busi­ness­man, activist and writer Geof­frey Cousins.

The full descrip­tion of the debate can be found here on the IQ Squared web­site.

We’ll be rang­ing across quite a few top­ics with­in that “That only cap­i­tal­ism can save the plan­et” rubric. To quote the IQ Squared head­er: