Sydney Morning Herald commentator Gareth Hutchens commented that the Rogoff and Reinhart affair shows how slow economists are to realise that their data may be dodgy, but to my mind that is insignificant compared to how slow they are to realise that their theories are dodgier still.
The bulls are roaring, house prices are rising, and all’s well with the world.
Or maybe not. Certainly house prices have risen — and contrary to popular opinion, I expected price rises this year, since mortgage debt has been accelerating since the beginning of 2012 (see Figure 1). One of my many economic heresies is the argument that asset prices are driven by rising debt. Rising asset prices — in this case, houses — require accelerating debt (in this case, mortgage debt), and that’s indeed what we’ve had since the beginning of 2012.
Sorry for the late notice here (the total crash of my ISP prevented me from posting when I had hoped to—and thanks to Phil Stevens for his brilliant work in reviving the site from the wreckage), but if anyone in Sydney has free time today (Sunday 14 April) I recommend attending this event between 2:00 pm and 5:00 pm. It is a festschrift to Eric Aarons, a remarkable man whom I am proud to call a friend.
Last week’s column on margin debt and the US stock market confirmed that leverage plays a key role in driving movements in share markets – and vice versa. But it left one technical question unanswered for me: is the causal link between change in debt and change in asset prices, or between acceleration in debt and change in asset prices?
Stock markets are booming — not only in USA and Australia where economic growth is positive, but even in economies still locked in the doldrums like the UK and Japan.
Alan Greenspan observed last month that this augured well for the economy, since
For participants of the Hong Kong INET Conference
What is the
World Economics Association?
The World Economics Association (WEA) was launched in May 2011. The WEA seeks to increase the relevance, breadth and depth of economic thought. Its key qualities are worldwide membership and governance, and inclusiveness with respect to: (a) the variety of theoretical perspectives; (b) the range of human activities and issues which fall within the broad domain of economics; and © the study of the world’s diverse economies.
I’m loving the final sprint that people are doing as the campaign approaches its end–many thanks!
At the same time, I’ve been using Minsky to write my paper for the forthcoming annual INET conference in Hong Kong on April. I can’t upload them here–I’m at a friend’s place in San Diego with a new laptop and I’ve forgotten my cPanel login details to debt-deflation!–but I’ll post them when I get home. In the meantime, here is a screenshot.
John Lennon’s best line in a lifetime of song-writing was “life is what happens when you’re busy making other plans”. I had planned today to write about the excellent Atlantic Monthly The Economy Summit 2013 conference I spoke at in Washington on Wednesday, where it seemed that senior figures in the US were finally starting to realise that private debt, not public, was the main game in a debt-deflation.
The Kickstarter campaign for Minsky has been a success–almost $70,000 has been raised–but as with any software project, so much more can be done with more programming time. Each additional $140 buys another hour of programming by both Dr Russell Standish & Nathan Moses. We’ve done a lot with just over 1,000 hours of programming funded by the original INET Grant, and the money raised by Kickstarter will add roughly another 500 hours to that. But I estimate that to take Minsky to its full potential will take 10 to 20 thousand hours of programming.
This is the concluding article in a four-part series. View part one here, part two here, and part three here.
But first, a word about my Kickstarter campaign to raise funds to develop Minsky, a tool for designing strictly monetary macroeconomic models:
There are only 58 hours left to help Kickstart Minsky! We’ve raised $65,000 now, which puts us within striking distance of our first stretch goals: