There is no GFC…

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One of the unexpected things I’ve learnt in Boston is that the Global Financial Crisis is not called the Global Financial Crisis in America–and therefore the TLA of the GFC has no meaning here.

Instead, in America this might be The Crisis That Has No Name (TCTHNN), because they don’t call it anything at all: it’s just how the economy is right now.

Australians, it seems, are the ones who invented the moniker GFC as a way of describing what they think they don’t have to understand. Over here, where it is actually happening, it is just the day to day reality that must be contended with.

Steve Keen Talk in New York

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A blog member has arranged for me to give a talk during my trip to NY.  I will cover the causes of the global financial crisis, the policy response thus far, and the outlook for the world economy, with a focus on the US and Australia.

LOCATION: ‘In Good Company’ workplaces, 4th floor of 16 West 23rd Street in Manhattan.  Google Maps link.

DATE & TIME: Wednesday 7th July, from 6-9pm

AVAILABILITY: the space has capacity for 20 people, so please confirm your attendance ASAP so spaces can be offered to others who may be interested in attending.

Commemorative Envelopes

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Unexpected and wonderful things can happen when you stick your neck out, as I have done over Australia’s private debt bubble. The “tall poppy” syndrome can still cut you down, but you also find that people are willing to assist in ways that you’d never think of yourself.

One of those has just occurred with respect to the Keen Walk to Kosciuszko, where out of the blue Noel Almeida has prepared a commemorative envelope–the sales of which will raise money for Swags for Homeless. Here is a sample:

Noel has made a mere 23 for sale, and he describes the product in the following way:

Grantham on the Australian Housing Market

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Jeremy Grantham pricked, if not the housing bubble itself, then at least the bubble that property market spruikers live in, with the quip that:

“Bubbles have quite a few things in common but housing bubbles have a spectacular thing in common, and that is every one of them is considered unique and different.” (Housing market a ‘time bomb’, says investment legend: The Australian June 16, 2010)

Empirical and theoretical reasons why the GFC is not behind us

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Preliminary Remarks

As noted in Debtwatch No. 44, I have stopped writing the monthly Debtwatch Report to focus on my more long term research. I’m still posting occasional blog posts when I feel the need—like the two recently on Australia’s new resources tax—but generally I’ll be working on more technical matters, and posting entries based on those here in lieu of the more topical Debtwatch. This post is a halfway post between the two: it’s a paper that I have just submitted to the 2010 Australian Conference of Economists, which will be held in Sydney in September. I have written it largely as a briefing paper for mainstream economists who would not have come across the analysis that I present here before, let alone the vast volume of literature in Post Keynesian and Austrian economics.

Boston & New York, June 20-July 9

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I will be in Boston and New York soon, either side of the Hyman Minsky Conference that I’m speaking at at the Levy Institute.

I am committed to meetings on Tuesday-Wednesday June 22-23 (and possibly Friday June 25), to the Levy conference June 27-29, and there may be a seminar jointly organised with Eric Janszen of iTulip on July 2. I will be free at other times, and open to suggestions for meetings or seminars. If you’d like to arrange something, please contact me via my gmail email address (debunking at gmail.com) or via a comment to this blog entry.

Does the RSPT deserve ReSPecT Part II

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As I explained in my last post, the cost curve in the Treasury’s model of the RSPT is based on a fantasy. The situation is even worse when we turn to the other side of the model, the demand curve: it is based not merely on a fantasy, but an outright fallacy.

Legions of economists believe that the demand curve for a competitive firm is horizontal, but their belief is based on the most fundamental of mathematical errors: confusing a very small amount (an infinitesimal) with zero. The Treasury repeats this fallacy—without knowing it is one—in its explanation of why a royalty reduces output levels but the RSPT won’t.

Does the RSPT deserve ReSPecT?

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I support the idea that mining companies should pay a tax that distributes some of the profits from mining to the wider Australian community, and that this tax should be based on prices, rather than merely on volumes sold. The miners have clearly made windfall profits in the last few years as prices for minerals have skyrocketed, and those profits should be shared with the wider community since it, and not the miners, is the ultimate owner of Australia’s mineral resources.

However I can’t go along with the Resource Super Profits Tax (RSPT) as it has been designed, and precisely for the reason given by Ross Gittins in the SMH:

News item on Interest Only Mortgages

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Channel 7’s Today Tonight is doing an item on “Interest Only Mortgages”–like the product that ING has recently promoted–and the whole housing bubble issue.

They are looking for anyone who has been “burnt” by either an interest-only loan, or a loan that was predicated on the expectation that house prices would always rise–as is ING’s new product–who is willing to be interviewed about the experience on camera.

The item is being put together by James Thomas, who did the excellent–and yes, I do mean excellent!–“Changing Times” on debt deflation in February of last year (unfortunately the clip is no longer available online). I can vouch for James’s professionalism and tact: the item will be well constructed, and interviewees will be treated well.

Deleveraging returns

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Market economists have spent the past few months searching each major data release for confirmation of their hope that the economy is returning to growth and that a ‘sustainable recovery’ is underway.

Most currently argue that the fundamentals in Australia are good – low unemployment, a strong recovery in equity markets (notwithstanding the 14 per cent sell-off in the past month), a significant number of companies’ results beating expectations and so on.