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 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.