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.

June & July Debtwatch PDFs posted

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I have now post­ed the PDFs of my June and July reports; hope­ful­ly in the next week or so I’ll get a chance to post the text to the blog as well. Apolo­gies again for the slow­ness here, but con­fer­ences and the sud­den press cov­er­age on debt wor­ries!

Post coming shortly

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This is basi­cal­ly an apol­o­gy for a slow update rate on the blog right now. I have had two con­fer­ence trips sep­a­rat­ed by exam mark­ing and stu­dent super­vi­sion loads; and I’m sit­ting in a con­fer­ence right now. I have two Debt­watch reports to post, updates to do to the Charts page, and plen­ty of press cov­er­age details to add, plus at least one com­ment to reply to. They will be forth­com­ing I hope by Fri­day.

The BIS Annual Report: From Goldilocks to the Three Bears

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Pri­or to the NASDAQ crash in ear­ly 2000, Amer­i­can com­men­ta­tors were fond of describ­ing their econ­o­my as being in a “Goldilocks” phase–with all eco­nom­ic indi­ca­tors being “just right”.

That phrase dropped out of cir­cu­la­tion after April 2000, but a lev­el of com­pla­cen­cy still ruled when that stock mar­ket crash appeared to have lit­tle impact on the real econ­o­my.

Com­pla­cen­cy dra­mat­i­cal­ly left the build­ing today, with the release of the Bank of Inter­na­tion­al Set­tle­men­t’s (BIS) 77th Annu­al Report. The BIS turns the Goldilocks sto­ry around, and sees it not from Goldilocks’ per­spec­tive, but from that of the Bears. Just as the Bears’ domes­tic idyll was dis­turbed by Goldilocks the Home Invad­er, the appar­ent­ly neat glob­al finan­cial sys­tem has been put at risk by out of con­trol spec­u­la­tive lend­ing.

Debtwatch gets a mention in Parliament

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It’s not yet the main top­ic of debate between Lib­er­al and Labor, but some of the argu­ments in Debt­watch have at least made their way into Hansard cour­tesy of a speech by Lau­rie Fer­gu­son. The full extract from the speech is shown below.

This makes a mock­ery of the claim by the Prime Min­is­ter that we have nev­er been bet­ter off. Whilst the Howard gov­ern­ment crows about the suc­cess in the econ­o­my, which was large­ly inher­it­ed from Labor and fuelled by the raw mate­ri­als demands of India and Chi­na, there is an alter­na­tive real­i­ty of an out-of-con­trol per­son­al debt spi­ral. Steve Keen from the Uni­ver­si­ty of West­ern Syd­ney writes:

First home payments hit $3000 per month

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Jes­si­ca Irvine from the SMH has writ­ten an excel­lent piece with this head­line in today’s SMH. I’ve linked it on the blog roll, but it’s linked here too for quick ref­er­ence.

 My Debt­watch report will be very brief this com­ing month: I’m off to the USA tomor­row for some con­fer­ences, and I’m “under the gun” to pro­duce papers and pre­sen­ta­tions to suit. I also won’t be avail­able for com­ment at the time of the RBA’s next meeting–which is of course high­ly unlike­ly to move rates in either direc­tion.

Great post on debt on Sam de Brito’s “All men are liars” Blog

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I reg­u­lar­ly peruse, and enjoy, the “All Men Are Liars” blog at the SMH on-line. Today’s post there is on a top­ic dear (in every sense of the word…) to this blog. I rec­om­mend check­ing it out–and engag­ing in the debate, if you have time (I’ve just post­ed a quick com­ment):

Suck­ers: slave to your mort­gage

PM on New Zealand Reserve Bank Policy Shift–transcript

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Will Bud­get tax cuts fuel inflation?  (click here for the MP3 file)
PM — Wednes­day, 9 May , 2007  18:14:52
Reporter: Stephen Long
MARK COLVIN: Now, will the tax cuts in the Bud­get cause infla­tion?

Some lead­ing econ­o­mists argue that the Reserve Bank could be forced to lift inter­est rates down the track because Gov­ern­ment spend­ing and tax cuts will increase con­sump­tion and prices.

But oth­ers dis­agree. They argue that debt lev­els are so high that many peo­ple will be hand­ing their tax cuts straight to the bank.

ABC PM tonight–major policy shift by New Zealand RB?

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Stephen Long from ABC News brought to my atten­tion the fact that the Reserve Bank of New Zealand appears to be con­tem­plat­ing a return to reg­u­lat­ing lend­ing.

This is only hint­ed at at present, but it rep­re­sents a major shift in Cen­tral Bank thinking–and a wel­come one, from a debt-defla­tion­ary point of view.

I’m inter­viewed about it on PM tonight; in the mean­time, here are some rel­e­vant excerpts from the Reserve Bank of New Zealand: Finan­cial Sta­bil­i­ty Report, May 2:

Why have the Liberals got it in for business students?

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This is anoth­er non-debt post. I’ve just heard Costel­lo describe tonight’s bud­get as an “Edu­ca­tion Bud­get”. There was a wel­come “equi­ty” bequest to uni­ver­si­ties, to fund infra­struc­ture and research: but there was also a shal­low “shell and pea” trick in the allo­ca­tion of fund­ing for Uni­ver­si­ty places.

The com­pli­cat­ed CGS band­ing system–which deter­mines what the Gov­ern­men­t pro­vides per stu­dent, and varies depend­ing on the dis­ci­pline being studied–is being ratio­nalised from 14 bands to 7. In 6 of those new bands, the amount being giv­en in 2008 is slight­ly more than the high­est amount giv­en to the pre­vi­ous bands. For instance, the four bands of Maths, Behav­iour­al Sci­ences, Edu­ca­tion and Com­put­ing are being amal­ga­mat­ed into one band; the high­est fund­ing lev­el per stu­dent in 2007 was $8,057 for Com­put­ing, and the low­est $5,381 for Maths; the new fund­ing lev­el is $8,217–a 2% rise for Com­put­ing, and a 52% increase for Maths.

Debtwatch May 2007: Booming on Borrowed Money

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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.