A sudden conversion of property bubble doubts

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Back in the Olde Days, before the global finan­cial cri­sis, when I was one of a hand­ful rais­ing the alarm, some of the most stri­dent oppo­si­tion to my opin­ion about what this might mean for hous­ing in Aus­tralia came from Christo­pher Joye (who was then a Direc­tor at Ris­mark). We went head to head on many occa­sions, with me argu­ing that our prices were a debt-fuelled bub­ble, and Joye argu­ing that ris­ing house prices sim­ply reflected ris­ing house­hold incomes.

Vale Ted Wilshire

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There are very few peo­ple who qual­ify as unfor­get­table in your life, and Ted Wilshire was one of those for me. A larger than life char­ac­ter in every sense of the word, Ted was best known as the Research Offi­cer for the Aus­tralian Metal Work­ers Union (AMWU) who penned the then-influential pam­phlets Aus­tralia Ripped Off and Aus­tralia Uprooted in the days prior to The Accord under the Hawke and Keat­ing Gov­ern­ments.

How not to win an economic argument

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cri­tique of a yet-to-be-published paper of mine (“Loan­able Funds, Endoge­nous Money and Aggre­gate Demand”, forth­com­ing in the Review of Key­ne­sian Eco­nom­ics later this year; the link is to a par­tial blog post of that paper) by non-mainstream econ­o­mist Tom Pal­ley reminds me of one of my favourite ripostes by a politi­cian, back in the days before spin doc­tors stopped them say­ing any­thing offen­sive — or indeed any­thing interesting.

As Sir Robert Men­zies, for­mer Aus­tralian prime min­is­ter and leader of the con­ser­v­a­tive Lib­eral Party, was giv­ing a cam­paign speech in 1954, a heck­ler called out “Mr Men­zies, I wouldn’t vote for you if you were the Archangel Gabriel”. Men­zies shot back: “Madam, if I were the Archangel Gabriel, you would not be in my constituency.”

Why the US can’t escape Minsky

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My call a few weeks ago that the global finan­cial cri­sis is over was very much an Anglo-centric one, and a US-centric one in par­tic­u­lar (Clos­ing the door on the GFC, March 10).

Europe’s con­tin­u­ing own goal from the euro and aus­ter­ity, and credit excesses in emerg­ing economies, could still derail a global recov­ery. But the epi­cen­tre of the cri­sis was the US, and the indi­ca­tions are solid there that this par­tic­u­lar ‘Min­sky moment’ is behind it.

Putting China’s dramatic transformation into perspective

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I have been to so many coun­tries in the last decade that my car­bon foot­print is Yeti-size. But one coun­try I haven’t been to for 32 years is the one I’m in now: China.

What a dif­fer­ence three decades makes: my visit in 1981–82 coin­cided with the trial of the Gang of Four; now many sub-25 Chi­nese think that must be the name of a new boy band they yet haven’t heard of.

Monetary Realism from the Bank of England

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A cou­ple of weeks ago I took a swipe at Bank of Eng­land over a speech by its Gov­er­nor Mark Car­ney that was unre­al­is­tic about the dan­gers of a bloated finan­cial sec­tor (Godzilla is good for you? March 3). Today I’m doing the oppo­site: I’m doff­ing my cap to the researchers at Thread­nee­dle Street for a new paper “Money cre­ation in the mod­ern econ­omy,” which gives a truly real­is­tic expla­na­tion of how money is cre­ated, why this really mat­ters, and why vir­tu­ally every­thing that eco­nomic text­books say about money is wrong.

Closing the door on the GFC

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(At least for the Anglo zone; more on Europe and Emerg­ing Mar­kets in com­ing weeks).

One of the ironies of the eco­nomic cri­sis that began in late 2007 is that the best acronym for it — the “GFC” for “global finan­cial cri­sis” — was coined in the one coun­try that suf­fered the least from it, Aus­tralia. The year 2014 is the sev­enth of the “GFC” (the panic began on August 9, 2007, when BNP Paribas shut down three of its subprime-based funds), but at last the major­ity of eco­nomic reports are of sus­tained if anaemic growth, rather than of bank fail­ures and reces­sion. Australia’s reported growth rate for 2013 of 2.8 per cent fol­lows the UK report­ing 1.9 per cent and the US 2.4 per cent; even the EU, where sev­eral coun­tries are still mired in out­right Depres­sions, recorded an over­all growth rate of 0.1 per cent for 2013.

Godzilla is good for you?

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The big­ger the finan­cial sec­tor gets, the more it can destroy. And Bank of Eng­land Gov­er­nor Mark Carney’s vision of British banks nine times the size of GDP is pos­i­tively terrifying…

Fans of Japan­ese schlock fic­tion will be pleased to know that that old mega-favourite Godzilla is return­ing in 2014, to stomp on sim­u­lated cities in a cin­ema near you. And of course, he’s big­ger and bet­ter: the orig­i­nal Japan­ese movie had him at about 50–100 metres and weigh­ing 20–60,000 tons; I’d guess he was about twice that size in the 1998 US remake; and by the looks of the trailer for the 2014 movie, he’s now a cou­ple of kilo­me­tres tall and prob­a­bly weighs in the millions.

Minsky users please update

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The penul­ti­mate Win­dows ver­sion of Min­sky (released a few days ago) inad­ver­tently installed an old ker­nel with a very low exe­cu­tion speed. This has been fixed in the lat­est ver­sion. If you down­loaded a few days ago and now find that mod­els run very slowly, please down­load the lat­est ver­sion today (it has the same name: Minsky.1.D32). If you down­loaded before then, the exe­cu­tion speed will be fine, but a few bugs have also been fixed in this release: see Tick­ets for the details (from my per­spec­tive, the main bug was a fail­ure to pass LaTeX for­mat­ting codes between God­ley Tables).

Australia’s RBA is asleep at the wheel

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Last week I satirised Australia’s out­moded belief that the rate of inter­est can be used to fine tune the econ­omy. This belief was ensconced in the so-called “Tay­lor Rule”, which accu­rately described what cen­tral banks tended to do until the eco­nomic cri­sis hit in 2007. That rule saw the infla­tion rate and the unem­ploy­ment rate as the two key eco­nomic indi­ca­tors, and the inter­est rate as the key mech­a­nism needed to achieve an accept­able bal­ance between them.

Of course, the cri­sis blew that rule out of the water, and issues that cen­tral bankers once dis­missed as unim­por­tant — like, for exam­ple, asset price bub­bles or the level of pri­vate debt — sud­denly had to be discussed.