The Pool Room Friday 19th June 2009

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AUSTRALIAN-RELATED LINKS:

Aussie Banks Addicted To For­eign Bor­row­ing, Daily Reck­on­ing, 18 Jun
“The deposit base of Aussie banks is ‘too low’. Aussie banks are over-reliant on off­shore money. This entire sit­u­a­tion is a ‘threat to eco­nomic recov­ery’. So it appears Aussie banks are addicted to for­eign bor­row­ing and are cur­rently suf­fer­ing from with­drawal symp­toms… Australia’s prop­erty boom was bought with bor­rowed money. Both res­i­den­tial and com­mer­cial prop­erty val­ues soared with the credit boom. If you think the banks are fine because they don’t have a sub­prime prob­lem, think again. The banks have a prop­erty prob­lem, and you can find it on the asset side of the bal­ance sheet.” Well said. Our robust and con­ser­v­a­tive bank­ing car­tel hasn’t had to account for a prop­erty crash. Yet. Green shoots com­men­ta­tors claim that high unem­ploy­ment is the only fac­tor that may cause a dip in prop­erty prices, ignor­ing the role of the whole­sale for­eign fund­ing required to keep the Aussie Ponzi scheme alive and kick­ing. We put our­selves in hock to for­eign cred­i­tors to cre­ate the illu­sion of dou­bling or tripling house prices. Col­lec­tively, we are all the Greater Fool.

Are the students revolting?

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I’ve had a few exchanges with neo­clas­si­cal econ­o­mists recently via the East Asia Forum blog, whose edi­tor approached me to write  a ver­sion of my “What a load of Bol­locks” post on this site. That piece “Why neo­clas­si­cal eco­nom­ics is dead”, cri­tiqued an East Asia Forum post “The state of eco­nom­ics” by neo­clas­si­cal text­book authors McTag­gart, Find­lay and Parkin.

A reply to my arti­cle by Ade­laide University’s Richard Pom­fret, enti­tled “Too soon for obit­u­ar­ies: eco­nom­ics is alive and (rea­son­ably) well”, con­cluded with the fol­low­ing statement:

An economic counter-revolution begins… in Reykjavik

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In Debunk­ing Eco­nom­ics, I argued that eco­nomic the­ory had done such dam­age to soci­ety that human­ity would be bet­ter off if every­thing ever writ­ten about eco­nom­ics by anyone–including yours truly–were oblit­er­ated, and the world had to start again from scratch.

Unfor­tu­nately that can’t be done–everything, even eco­nom­ics, devel­ops in an evo­lu­tion­ary way–but the next best thing is to admit how wrong neo­clas­si­cal thought has been, and to start devel­op­ing alternatives.

There are many such endeav­ours around the world, and one of them is tak­ing place in the very appo­site loca­tion of  Reyk­javik, Ice­land, in Sep­tem­ber this year.

The Pool Room–Week Ending Friday 5th June 2009

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Before the Pool Room, a quick com­ment on Australia’s recent 0.4% growth in GDP in the first quar­ter of 2009–largely due to a sur­prise growth in net exports–and the sequel the next day of a sur­prise trade deficit.

Briefly, the “text­book” def­i­n­i­tion of GDP is:

GDP = C+I+G+X-M

GDP equals Consump­tion plus Invest­ment plus Govern­ment spend­ing plus eXports minus iMports”

M fell by 9 bil­lion, X (more on this below) fell by 3 bil­lion, so there was a +6 bil­lion turn­around in the “net exports con­tri­bu­tion to GDP” (as it’s known).

Unmasking the Economics Profession: the challenge of political economy

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STEVE KEEN and EVAN JONES in con­ver­sa­tion with FRANK STILWELL

In this event to cel­e­brate the pub­li­ca­tion of Polit­i­cal Econ­omy Now!–the his­tory of the Polit­i­cal Econ­omy strug­gle at Syd­ney University–Evan Jones, Frank Stil­well and Steve Keen will dis­cuss the strug­gles inside the uni­ver­sity eco­nom­ics depart­ments and their sig­nif­i­cance, not only for teach­ing, but for the world econ­omy itself.

Polit­i­cal Econ­omy Now! by Gavan But­ler, Evan Jones and Frank Stil­well is the story of one of the most sub­stan­tial and endur­ing con­flicts in the his­tory of Aus­tralian uni­ver­si­ties. Begin­ning in the late 1960s, it pit­ted those com­mit­ted to the teach­ing of main­stream eco­nom­ics at the Uni­ver­sity of Syd­ney against the pro­po­nents of an alter­na­tive pro­gram in polit­i­cal econ­omy. It explores issues such as

Debtwatch No 35: Let’s Do the Time Warp Again

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Eco­nomic debate in Aus­tralia today reminds me of one of the great lines in The Rocky Hor­ror Show. As he invites Brad and Janet to meet Rocky, Frank-N-Furter taunts Janet with the lines:

I would like--if I may--to take you on a strange journey...

I would like–if I may–to take you on a strange journey…

I see you shiver with anticipation!

But maybe the rain is really to blame

So I’ll remove the cause,…

But not the symp­tom!”

It seems that in Aus­tralia, the reverse can apply: the symp­tom can be removed with­out elim­i­nat­ing the cause. We can avoid a seri­ous reces­sion while doing noth­ing to reduce pri­vate debt. 

Weekly GFC Roll for May 29th 2009

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Thanks again to blog mem­ber Evan Har­ris for com­pil­ing this weekly list, and for blog mem­bers pass­ing on their sug­ges­tions. If you see any arti­cle or blog entry that you think deserves record­ing for pos­ter­ity, send the link to gfcwrap at gmail.com.

And a reminder for any blog mem­bers in Syd­ney that I’ll be speak­ing at Pol­i­tics in the Pub tonight at the Gaelic Club in Devon­shire St Surry Hills, start­ing at 6pm.

The Pool Room – Week End­ing Fri­day 29th May

Australian-Related Links:

Hous­ing & Hous­ing Finance: The View From Aus­tralia & Beyond, Luci Ellis [RBA Research], Dec 2006

What a load of Bollocks

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Two promi­nent eco­nom­ics text­book writ­ers have recently writ­ten that the Global Finan­cial Cri­sis (GFC) shows that the world needs more eco­nom­ics rather than less.

Writ­ing in the New York Times, Gre­gory Mankiw could see some need to mod­ify eco­nom­ics courses a bit in response to the GFC, but over­all he felt that:

Despite the enor­mity of recent events, the prin­ci­ples of eco­nom­ics are largely unchanged. Stu­dents still need to learn about the gains from trade, sup­ply and demand, the effi­ciency prop­er­ties of mar­ket out­comes, and so on. These top­ics will remain the bread-and-butter of intro­duc­tory courses.” (That Fresh­man Course Won’t Be Quite the Same, New York Times May 23 2009)

The Pool Room, Week Ending May 22nd 2009

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Fans of the Aus­tralian movie clas­sic “The Cas­tle” will remem­ber the arche­typal line “This one’s going straight to the Pool Room”, uttered by the ever-optimistic Dar­ryl Ker­ri­gan when­ever he was given a gift. If you haven’t yet seen the movie, con­sider set­ting aside a cou­ple of hours to watch it.

Debtwatch’s “Pool­room gifts” come from the media cov­er­age of the Global Finan­cial Cri­sis. Some are gems–incisive bits of analy­sis that are an infor­ma­tive read. Oth­ers are … well, best char­ac­terised as spin, though they range from out­right spin, to delu­sion derived from think­ing like a neo­clas­si­cal economist.