Rudd’s essay is on the money

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Aus­tralian Prime Min­is­ter Kevin Rudd has fol­lowed up his cri­tique of neolib­er­al­ism with a new essay in the Syd­ney Morn­ing Her­ald on the causes of the cri­sis, and the poli­cies needed after recovery.

With one excep­tion, his key expla­na­tions for the cri­sis are the same as those iden­ti­fied by myself and the hand­ful of other econ­o­mists who pre­dicted this cri­sis before it hap­pened:

Talk to the Fabian Forum: The Global Financial Crisis: How bad will it get?

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Broad­cast on March 11 2009 by ABC Radio National Big Ideas

A blog mem­ber has kindly pro­duced a tran­script of the off-the-cuff talk I gave at this forum. I’ve made minor cor­rec­tions to the punc­tu­a­tion below, but the text is oth­er­wise as deliv­ered on the night with­out speak­ing notes–so there are some gram­mat­i­cal slips. For those who want to lis­ten to this alone–without also lis­ten­ing to Bernie Fraser beforehand–here is a link to the MP3 of my talk.

Steve Keen’s Debtwatch No. 33 April 2009: Lies, Damned Lies, and Housing Statistics

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Lies, damned lies, and sta­tis­tics” is part of a phrase attrib­uted to Ben­jamin Dis­raeli and pop­u­larised in the United States by Mark Twain: “There are three kinds of lies: lies, damned lies, and sta­tis­tics.” The state­ment refers to the per­sua­sive power of num­bers, the use of sta­tis­tics to bol­ster weak argu­ments, and the ten­dency of peo­ple to dis­par­age sta­tis­tics that do not sup­port their posi­tions. (Wikipedia)

Two recent speeches by the RBA sup­ported the con­tention that Aus­tralian house prices are no longer over­val­ued, that mort­gage repay­ment costs have returned to his­toric aver­ages, that Aus­tralia is suf­fer­ing a hous­ing short­age, and there­fore that the Aus­tralian hous­ing mar­ket should not expe­ri­ence the cat­a­strophic falls that are now com­mon­place across the OECD–and espe­cially in the USA.

It’s just a flesh wound…”

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It seems we’ve moved from Stan­ley Kubrick to John Cleese. Rory Robertson’s reply to my “Rory Robert­son Designs a Car” post reminds me of one of my many favourite scenes from Monty Python, the fight between King Arthur and the Black Knight:

King Arthur: [after Arthur’s cut off both of the Black Knight’s arms] Look, you stu­pid Bas­tard. You’ve got no arms left. 

Black Knight: Yes I have. 

King Arthur: *Look*! 

Black Knight: It’s just a flesh wound…

I do not know anyone who predicted this course of events…

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Sev­eral peo­ple have com­mented on the speech by Glenn Stevens (for inter­na­tional read­ers, Stevens is the Gov­er­nor of Australia’s cen­tral bank, the Reserve Bank of Aus­tralia) yes­ter­day in which he com­mented, inter alia, that:

I do not know any­one who pre­dicted this course of events. This should give us cause to reflect on how hard a job it is to make gen­uinely use­ful fore­casts. What we have seen is truly a ‘tail’ out­come – the kind of out­come that the rou­tine fore­cast­ing process never pre­dicts. But it has occurred, it has impli­ca­tions, and so we must reflect on it.”

Always look on the bright side of … economic data?

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If things are really grim, it helps to have an inde­fati­ga­ble nature, and there’s no doubt that RBA Deputy Gov­er­nor Ric Bat­tellino has that in spades—at least in the speeches he makes at pub­lic con­fer­ences. Were I being cru­ci­fied, I’d like to have Ric up there with me, singing “Cheer up Brian!…”, to take my mind off the nails.

But were I still in the Gar­den of Geth­se­mane, and actu­ally try­ing to avoid the Romans (and an extended Pilates ses­sion the next day), I think I’d want some­one else on look­out duty.

Debtwatch 27 October 08: The Failure of Central Banks

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Just two years ago, Cen­tral Banks appeared tri­umphant. Infla­tion, the scourge of the 1970s and 80s, appeared dead, the finan­cial cri­sis of the Tech Wreck had been con­tained, economies world­wide were boom­ing, and stock mar­kets and house prices were spi­ralling ever upwards.

Then along came the Sub­prime Cri­sis, and we received a rude reminder of why Cen­tral Banks were cre­ated in the first place: to ensure that the world would never again expe­ri­ence a Great Depression.

DebtWatch No 26 September 2008: Losing control of the margin?

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Late last year on SBS News, when Stan Grant asked me which way the RBA would move rates in 2008, I replied “Up, and then down”, Stan quipped “Spo­ken like a true economist–an even handed answer!”–to which I replied “More down than up”.

I expected the intial rate rises because of the RBA’s focus on the rate of infla­tion, and a sub­se­quent fall, not because infla­tion would be head­ing down, but because the econ­omy would be–and the RBA rate would be forced to fol­low it

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: