The Our Finance Blogs site (http://ourfinanceblogs.com/forum/) is hosting an online debate on “Property 2009: Crash, Boom or Stagnate?!”. I will be one of the protagonists in the debate. If you’d like to take part, go to:
http://ourfinanceblogs.com/forum/index.php?action=register
and sign in. Check:
http://ourfinanceblogs.com/forum/index.php?topic=7.msg9#msg9
for further details.
Click here to log access the debate
The sheer volume of coverage I’m getting now, and the level of discussion on this blog, are making it difficult for me to maintain this page. So it will grow less rapidly than the Gems and Brickbats pages, which I regard as more important for keeping a record of this crisis.
At the end of March 2009, the blog had 1137 enrolled members, and a daily average of 5,556 unique readers. Blog participants post up to 100 comments a day in a discussion that is remarkable for its civility as well as its intelligence.
Senator Nick Sherry, as Minister for Superannuation and Corporate Law, has released a Green Paper Financial Services and Credit Reform: Improving, Simplifying and Standardising Financial Services and Credit Regulation (June 2008)
This is a very apt time for such an enquiry. It is now over a decade since the Wallis Committee supported further deregulation of the financial system, and the consequences of that deregulation are now evident. I doubt that a complete reversal of policy is politically feasible now, but this inquiry may set the high water mark in the belief that the less regulated financial markets are, the better.
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.
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:
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:
http://www.skynews.com.au/video/video.aspx?id=43
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”.
The current turmoil on the Stock Market—and especially the sudden collapse of many once high-flyers—has taken a lot of people by surprise.
One person who, were he alive today, wouldn’t be the least bit surprised, is Hyman Minsky, who predicted that events like this would be a regular feature of a deregulated financial system.
He developed what he called “The Financial Instability Hypothesis”, and anyone who wants to understand today’s events needs to know about it.
The following is an extract from an article by Minsky in Challenge in 1977—well before even the 1987 Stock Market Crash—that provides a nutshell-sized precis of his theory.
I’m currently in Norway, and was invited to talk on the global debt crisis to a local discussion group. They videotaped the talk, and put it up on Google Video. The link is:
http://video.google.com/videoplay?docid=1375113008927627575
There is also a copy on my site–with the opening trivia about how I met my Norwegian host and fellow researcher Trond Andresen deleted:
http://www.debtdeflation.com/podcast/SteveKeenDebtTalkNorway20080131.mov
I give an overview of the debt situation, using the graphs that I customarily put into the Debtwatch Report, as well as explaining Hyman Minsky’s “Financial Instability Hypothesis”, which I regard as the only economic theory that can explain the current state of financial markets and the global economy.
Today’s blog was published as a feature “A lose-lose election for home buyers” by The Age Business. Click here to download this post as a PDF file (with charts).
Both Liberal and Labor housing policies will make Australia’s debt and housing affordability crises worse. The only difference between the two is how much damage they will do.Both parties have promised tax-advantaged savings systems that will enable First Home Buyers to accumulate larger deposits. This will undoubtedly help them compete with other buyers in the housing market, but a lack of competition amongst buyers isn’t the problem.
I provided a number of comparisons of real wages, mortgage payments, interest rates and the like in my interview on the 7.30 Report this evening. I’ll post a table containing those data by tomorrow morning.
If you’re a new visitor and would like to receive my Debtwatch Report, which Kerry mentioned in tonight’s interview, please click here to send me an email about it. Or you could sign up for the blog, after which I will add you to the subscribers list (there have been some hassles reported by some users on this front by the way, so if that happens to you, please follow the First Rule of computers–“If at first you don’t succeed, give up”–and send me an email instead).
