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.

Debt is the Finan­cial system’s Car­bon Diox­ide

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Steve Keen’s DebtWatch No 23 June 2008

RBA Assis­tant Gov­er­nor Guy Debelle and I spoke at a con­fer­ence on Sub­primes in Ade­laide last month. One aspect of my analy­sis that Guy queried was my empha­sis upon the Debt to GDP ratio. He noted that this appeared sus­pect, because it was com­par­ing a stock (the out­stand­ing level of debt) to a flow (annual GDP).

It’s a valid point to make. The engi­neer-turned-econ­o­mist Mickal Kalecki once caus­ti­cally observed that “eco­nom­ics is the sci­ence of con­fus­ing stocks with flows”, and I’m a stick­ler myself for not mak­ing that mis­take. So mak­ing a song and dance about a stock to flow com­par­i­son like debt to GDP has to be jus­ti­fied by a sound argu­ment.

A new Nouriel Roubini Blog

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Nouriel Roubini is one of the world’s fore­most experts on the finan­cial sys­tem, and like me, was warn­ing of poten­tial crises while most other com­men­ta­tors could only see roses bloom­ing. He is Pro­fes­sor of Eco­nom­ics at New York University’s Stern School of Busi­ness, and founded the RGE Mon­i­tor, a highly suc­cess­ful com­mer­cial intel­li­gence web­site. He has recently estab­lished a new blog with a focus on Asia, and has kindly asked me to be one of the con­trib­u­tors.

Nor­mally I will sim­ply cross-post my Debt­watch blog, but on occa­sions I’ll write spe­cial pur­pose entries there. Nouriel has also assem­bled an inter­est­ing team of non-ortho­dox com­men­ta­tors from the aca­d­e­mic and busi­ness sec­tors.

Defer the RBA “Enhanced Inde­pen­dence” Act

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Steve Keen’s DebtWatch No 22 May 2008

The Reserve Bank Amend­ment (Enhanced Inde­pen­dence) Bill 2008, which was tabled in Par­lia­ment in March, aims to give the RBA Gov­er­nor and Deputy Gov­er­nor “the same level of statu­tory inde­pen­dence as the Com­mis­sioner of Tax­a­tion and the Aus­tralian Sta­tis­ti­cian” (Wayne Swann, Hansard, Thurs­day, 20 March 2008, p. 2381).

Under the cur­rent Reserve Bank Act, the Gov­er­nor and Deputy are appointed by the Trea­surer, and the Trea­surer must remove them from their posi­tions if either of them:

My sub­mis­sion to the 2020 Sum­mit

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Sec­tion One on ” The future of the Aus­tralian econ­omy” starts with the fol­low­ing pre­am­ble:

The Aus­tralian Gov­ern­ment is com­mit­ted to mod­ernising our econ­omy so that we can com­pete with the lead­ing nations in a world econ­omy that is being trans­formed by glob­al­i­sa­tion, new tech­nolo­gies, and the rise of China and India. While we take full advan­tage of the min­ing boom, we must also build long term com­pet­i­tive strengths in the global indus­tries of tomor­row — indus­tries that will pro­vide the high-pay­ing jobs of the future.

The Aus­tralia 2020 Sum­mit will exam­ine:

The Daily Tele­graph ter­rorises the RBA

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This blog entry first appeared as a fea­ture in the Daily Tele­graph on Wednes­day April 9th 2008. If you’re a new­comer to it cour­tesy of that fea­ture, and you want to look at this issue in more depth, there are links below to more detailed analy­sis.

The Daily Tele­graph lived up to its nick­name of “The Daily Ter­ror” last week, with a front­page attack on Reserve Bank of Aus­tralia Gov­er­nor Glenn Stevens enti­tled “Is he Australia’s most use­less?”, and an edi­to­r­ial that was no less provoca­tive: “RBA boss is los­ing inter­est”.

Talk on Sub­primes

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I’m giv­ing a talk on sub­primes to the “Monty Pel­i­can Soci­ety”:

  • Date: Wednes­day April 2nd
  • Venue: Syd­ney Mechan­ics School of Arts, 280 Pitt St, Syd­ney NSW 2000 (near Town Hall)
  • Time: 6.30pm-8pm
  • For more infor­ma­tion, con­tact Troy Hen­der­son (troyh@search.org.au), or just rock up on the night.

Debt­Watch No 21 April 2008

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At Last, the 1975 Show?

My main topic this month is a com­par­i­son of the eco­nomic events of today to those of 1973–75, but the most recent Case-Shiller data on US house prices sim­ply has to be “the Chart of the Month”. Last *month* the index dropped by 2.3 percent–implying an annual rate of decline in the realm of 25%! US house prices are down 13% from the peak in mid-2006, and in free-fall now.

Sky News Inter­view Sun­day March 23rd

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Helen Dal­ley of Sky Busi­ness News inter­viewed me and Tim Mul­hol­land, of Melamed and Asso­ciates, a Chicago-based con­sult­ing firm, about the Sub­prime cri­sis. If you’d like to see the video, click on this link:


Then use the selec­tion panel to choose the third story–with the head­ing “Sun­day Biz”, and the descrip­tion “Sky News Reporter Helen Dal­ley talked finance with Uni­ver­sity of West­ern Syd­ney Pro­fes­sor, Steve Keen”.

Why Now?

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Why Now?

       There has been no short­age of com­men­ta­tors and play­ers will­ing to vouch that this is the worst finan­cial cri­sis they have ever seen. Equally, there has been no short­age of bailout moves by the Fed­eral Reserve–remedies that put “the Greenspan Put” to shame in their mag­ni­tude.
       And yet the mar­ket melt­down con­tin­ues, and the casu­al­ties con­tinue to mount, with Bear Stearns the latest–and surely not the last.
       In all this, no one yet seems to have posed the ques­tion of “why now?”. Why is the cri­sis clearly more severe this time than ever before, and why are reme­dies that worked rel­a­tively quickly in the past (remem­ber the fast turn­around of the mar­ket after Octo­ber 1987, and the rapid recov­ery from the res­cue of Long Term Cap­i­tal Man­age­ment?) failling today?
       The answer is, sim­ply, that the world has never in its his­tory car­ried the level of debt that it is car­ry­ing today. The reme­dies that worked when America’s pri­vate debt to GDP ratio was a mere 150 per­cent (see Fig­ure 1) are inad­e­quate when that ratio is 275 per­cent.