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.
More gems and brickbats from the world’s media and blogs gathered by Evan, with contributions from other blog members. Please keep those tips coming in to gfcwrap at gmail.com.
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:
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.
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).
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
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 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.
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
Housing & Housing Finance: The View From Australia & Beyond, Luci Ellis [RBA Research], Dec 2006
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)
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.