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The sheer vol­ume of cov­er­age I’m get­ting now, and the level of dis­cus­sion on this blog, are mak­ing it dif­fi­cult for me to main­tain this page. So it will grow less rapidly than the Gems and Brick­bats pages, which I regard as more impor­tant for keep­ing a record of this cri­sis.

At the end of March 2009, the blog had 1137 enrolled mem­bers, and a daily aver­age of 5,556 unique read­ers. Blog par­tic­i­pants post up to 100 com­ments a day in a dis­cus­sion that is remark­able for its civil­ity as well as its intel­li­gence.

April 17 2009: Lat­est fig­ures show investors return­ing to prop­erty mar­ket. Des­ley Cole­man, Late­Line busi­ness (video)

STEVE KEEN, UNIVERSITY OF WESTERN SYDNEY: The basic rea­son I’m a scep­tic is that I’m expect­ing a depres­sion to come out of this global finan­cial cri­sis. And for prop­erty to con­tinue to be a good invest­ment, it would need to be able to sur­vive a depres­sion, and I sim­ply I don’t believe that’s fea­si­ble. 

April 1, 2009: Hold on to your home. Eli­nore Mar­tel, SMH.

A lot of peo­ple think mort­gage insur­ance pro­tects them but it only pro­tects the bank,” he says. That means con­trol is passed to a “face­less man in an office tower who doesn’t know the bor­rower and doesn’t want to”.

In Mendelson’s expe­ri­ence, they look at the val­u­a­tion. “If they think they will lose money or are a risk, they will insist that the lender calls in the loan and puts it up for sale,” he says.

Asso­ciate Pro­fes­sor Steve Keen of the Uni­ver­sity of West­ern Syd­ney believes the grants for first home­buy­ers will make the cri­sis worse. “It’s just defer­ring and mak­ing worse the inevitable,” he says.

 

March 24 2009: Economist’s View dis­cus­sion on “Neo­clas­si­cal Eco­nom­ics: Mad, Bad, and Dan­ger­ous to Know”.

March 22, 2009: First home buy­ers face ‘sub-prime’ cri­sis. Glenn Milne and Nick Gard­ner, Daily Tele­graph

AUSTRALIA is fac­ing its own ver­sion of the US sub-prime hous­ing cri­sis, with thou­sands of young home own­ers risk­ing bank­ruptcy as a result of Kevin Rudd’s eco­nomic stim­u­lus pack­age.

That’s the grim warn­ing from the eco­nomic expert who first called the debt cri­sis that is dri­ving the global finan­cial melt­down. Dub­bing the loom­ing cri­sis “Sub-Prime Lite,” Pro­fes­sor Steve Keen told The Sun­day Tele­graph Aus­tralia was mak­ing the same mis­takes as the US.

Pro­fes­sor Keen said that in try­ing to avoid an eco­nomic cri­sis caused by too much bor­row­ing, Aus­tralia was in effect encour­ag­ing the poor­est in the com­mu­nity to take on even more debt.

Yet these low-paid first-home buy­ers are the peo­ple who are most vul­ner­a­ble to the eco­nomic down­turn,” he said.

March 11: Here’s hop­ing Steve Keen takes his hike, Bloomberg via the SMH

Speak­ing with Keen is a bit like inter­view­ing doom­sayer econ­o­mist Nouriel Roubini. Your brain tells you his sce­nario has a cer­tain basis in real­ity; your heart hopes he will be proven wrong a year from now. A depres­sion of the kind Keen expects is almost too dis­turb­ing to con­tem­plate.

The oppo­site emo­tions crop up when chat­ting with Robert­son. Your heart wants him to be right; your brain wor­ries that an open $1.1 tril­lion econ­omy like Australia’s isn’t as resilient as opti­mists say.”

Octo­ber 13th 2008: Will Debt Drive Us to Depres­sion? | BTalk Aus­tralia By Phil Dob­bie. (Pod­Cast 11 min 39 sec).

Prof Steve Keen believes that neo-clas­si­cal eco­nomic the­ory has caused the world to repeat the debt prob­lem that led to the Great Depres­sion, except now we have twice the level of debt.

On today’s BTalk Aus­tralia he tells Phil Dob­bie that bail outs, nation­al­i­sa­tions and inter­est rate drops are not enough to end the cri­sis. So, is there any­thing we can do to res­cue the econ­omy?

March 3: Back after these mes­sages: Inter­view on Busi­ness Spec­ta­tor. Com­ment­ing on the Reserve Bank’s deci­sion to leave the overnight cash rate on hold at 3.25 per cent after cut­ting rates by 400 basis points since Sep­tem­ber 2008, Dr Steve Keen, asso­ciate pro­fes­sor in eco­nom­ics and finance at the Uni­ver­sity of West­ern Syd­ney tells Busi­ness Spectator’s James Frost the fol­low­ing:

James Frost: The RBA has announced that it plans to leave rates on hold. What’s been your view of the RBA’s actions up until this point?

Dr Steve Keen: The RBA didn’t even see this cri­sis com­ing because they were too busy obsess­ing about the rate of infla­tion. I mean, Blind Freddy could tell by look­ing at the data on debt that there was a finan­cial cri­sis com­ing our way. So they were rais­ing inter­est rates try­ing to fight off infla­tion when the more seri­ous dan­ger was a debt cat­a­stro­phe, which we are now clearly in around the globe. They didn’t start cut­ting rates until after they had already added to the debt bur­den, com­pound­ing the level of debt with higher inter­est rates and now they’re stop­ping because they believe there’s no prob­lem.

And then you’ve got this state­ment from RBA board mem­ber War­rick McK­ib­bin a few weeks ago where he says: “If it is a cri­sis – and I am not sure we are in a cri­sis – that sug­gests mak­ing the cash hand­outs even big­ger will be prob­lem­atic.” Only an econ­o­mist … only a neo­clas­si­cal econ­o­mist, could believe that we are not in a cri­sis right now. It’s a sign of just how out of touch neo­clas­si­cal thought is and, of course, the RBA board in gen­eral.

Feb­ru­ary 7: James Bone, SMH. Finally, a buy sig­nal gives us hope.

Pro­fes­sor Steve Keen keeps us alert with his weekly Debt­watch Alert. In fact, I’ve rarely felt so alert after see­ing this week’s.

Steve writes: “With the depth of the US down­turn now becom­ing appar­ent and defla­tion turn­ing up in the Aus­tralian con­sumer price index data as well as in the USA, there is no doubt that the Reserve Bank will cut rates by at least 0.75 per cent at its Feb­ru­ary meet­ing — and pos­si­bly 1 per cent or more.”

Indeed, the Reserve Bank did just this.

While I wel­come this cut,” Steve adds, “nei­ther rate cuts nor fis­cal stim­uli will be enough to avoid a seri­ous reces­sion — and prob­a­bly a Depres­sion.”

That cheered every­one up.

Steve seems to be han­ker­ing for a Depres­sion, so loudly has he pinned his pro­fes­sional cred on one.

In fact, Steve can be so depress­ing he makes Dooms­day — never one for happy-go-lucky pro­jec­tions — look like Julie Andrews in The Sound Of Music.

Prof Keen hates the banks. He even draws on old Karl Marx, his eco­nomic hero, in rip­ping into the blood­suck­ers:

The credit sys­tem, which has its focus in the so-called national banks and the big money-lenders and usurers sur­round­ing them, con­sti­tutes enor­mous cen­tral­i­sa­tion, and gives this class of par­a­sites the fab­u­lous power, not only to peri­od­i­cally despoil indus­trial cap­i­tal­ists, but also to inter­fere in actual pro­duc­tion in a most dan­ger­ous man­ner, and this gang knows noth­ing about pro­duc­tion and has noth­ing to do with it.”

Karl didn’t stop there: he urged us all to rush out and slaugh­ter the bankers. A lit­tle extreme, per­haps, but I can already hear Prof Keen sharp­en­ing the machetes.

Feb­ru­ary 6: Andrew Boughton with Michael West, SMH and The Age. Wanted: A new eco­nomic the­ory.

Now that Prime Min­is­ter Kevin Rudd has hailed in his “Monthly’ essay a new polit­i­cal era of ”social cap­i­tal­ism” and embarked on another stim­u­lus pack­age it merely remains to find an eco­nomic the­ory to accom­pany it. 

Eco­nom­ics has failed man­i­festly to see the global finan­cial cri­sis com­ing. Only those once derided as doom­say­ers and crack­pots were any­where near the mark. An entire gen­er­a­tion of richly-remu­ner­ated experts got it wrong, once again

A few years ago, Uni­ver­sity of West­ern Sydney’s Pro­fes­sor Steve Keen took up the cud­gels for real estate and finance, sup­ported by the the­o­ries of Min­sky and col­leagues back at the Merewether Build­ing at Syd­ney Uni­ver­sity, hav­ing long held an inter­est in the math­e­mat­ics of polit­i­cal econ­omy.

Keen, whose pre­dic­tions of reck­less lever­age and spec­u­la­tion in recent years have been vin­di­cated over­all through the present credit cri­sis, declared this week that Aus­tralia was bound for a Japan­ese-style expe­ri­ence of drawn out reces­sion. Stim­u­lus mea­sures were not resolv­ing the prob­lem, he said, sim­ply adding to the Gov­ern­ment debt. 

The same theme was cur­rent in Boughton’s ear­lier work, along with other cor­re­spon­dents in the United States such as Charles R Mor­ris and Low­ell Bryan, though he dif­fers from Keen on the role of gov­ern­ment. 

While cit­ing Marx on the pro­cliv­ity of the ”par­a­sites”, the banks, to ”peri­od­i­cally despoil indus­trial cap­i­tal­ists” and ”inter­fere in actual pro­duc­tion”, Keen noted that he did not expect cap­i­tal­ism to col­lapse.

 

Feb­ru­ary 5: David Hirst, The Age. US gam­bles free­dom on risky print­ing press pol­icy. I wouldn’t have cho­sen the title, tone or slant of this arti­cle myself, but the data is unmis­take­able: Bernanke is putting into prac­tice his “logic of the print­ing press” anal­ogy (se e Debt­watch No. 31). 

Keen, who last week was inter­viewed by The Wall Street Jour­nal and is fast becom­ing a world-recog­nised eco­nomic author­ity, out­lined in his recent Debt Watch Report that Bernanke’s famous “heli­copter drop dou­bling of base money will be impo­tent against the US’s credit crunch”.

Most econ­o­mists believe the US and China are bound irrev­o­ca­bly by US debt and China’s con­tin­ued pur­chase of that debt. They assume the US, with 46 states insol­vent or approach­ing insol­vency, will suf­fer imme­di­ate MAD if China ends the long finan­cial arrange­ment.

But with the US enter­ing a period of defla­tion, its eco­nomic lead­er­ship appears to be doing the unthink­able — going it alone and let­ting the elec­tronic print­ing presses take care of the huge sums required to keep the nation afloat. The con­se­quences for the world econ­omy are incom­pre­hen­si­ble as China’s pur­chases of US trea­suries under­write the US’s unquench­able demand for money to ser­vice its mul­ti­tril­lion-dol­lar pub­lic debt, which Pres­i­dent Obama said recently would reach $US11 tril­lion ($A17 tril­lion) this year.

Faced with the huge sink­hole cre­ated by the finan­cial melt­down and the prospect of defla­tion, US Fed boss Ben Bernanke has been print­ing money so rapidly that the US is being flooded with liq­uid­ity. This is beyond unprece­dented.

Many Amer­i­cans believe print­ing money can free the coun­try from the suf­fo­cat­ing embrace of mutual depen­dence with China. In his blog ear­lier this week, Brad Setser from the US Coun­cil on For­eign Rela­tions, and one of the world’s most respected China com­men­ta­tors, out­lined the US posi­tion: “Exchange rate poli­cies can also influ­ence the allo­ca­tion of resources across sec­tors. China’s de facto dol­lar peg is an obvi­ous exam­ple … it is hard for me to believe that as much would have been invested in China’s export sec­tor if China had had a dif­fer­ent exchange rate regime …

Those who attribute the growth of the past sev­eral years solely to the mar­ket miss the large role the state played in many of the world’s fast grow­ing economies.”

Setser and oth­ers close to pol­i­cy­mak­ers are real­is­ing the boom in China may not be a rerun of the Japan­ese and Ger­man post­war eco­nomic mir­a­cles but more akin to the cre­ation of a giant sweat­shop for the ben­e­fit of West­ern com­pa­nies and the Chi­nese Com­mu­nist Party. But this required US con­sumers to play their role as the linch­pins. Now the linch­pin has bro­ken. There is no way the old arrange­ment can con­tinue and the US is real­is­ing the sys­tem will end. By revert­ing to the print­ing press it can free itself from depen­dency on China.

 

Feb­ru­ary 4:  Big slump because Marx ignored: aca­d­e­mic.  “Uni­ver­sity of West­ern Syd­ney asso­ciate pro­fes­sor of eco­nom­ics and finance Steve Keen said Marx’s words, pub­lished in 1894, pre­dicted the dam­age big banks would cause to the econ­omy.”

Feb­ru­ary 3: Inter­view on Chan­nel Nine’s Today Show with Karl Ste­fanovic.

FEBRUARY 02: Post Neo­Clas­si­cal Defla­tion Eco­nom­ics in Tom Drake’s Mar­ket Notes: Putting the pieces together…

Eco­nom­ics pro­fes­sor Steve Keen presents con­vinc­ing evi­dence (and he does so in layman’s lan­guage and with great clar­ity) that the stan­dard eco­nomic mod­els and beliefs about money sup­ply and its cre­ation are com­pletely wrong.”

Feb­ru­ary 3: Aus­tralia fac­ing debt-dri­ven depres­sion, ABC. “The world is fac­ing a “full-blown depres­sion” and Aus­tralia needs to dras­ti­cally rethink its atti­tude to debt if it is to climb out of its cur­rent eco­nomic trap, says lead­ing econ­o­mist Steve Keen.”

Feb­ru­ary 3: BETTINA WASSENER and MERAIAH FOLEY, New York Times. Aus­tralia and Japan Offer New Stim­u­lus Plans. “Just like much of the indus­tri­al­ized west­ern world, “the Asian region is also going into seri­ous reces­sion,” said Steve Keen, a pro­fes­sor for eco­nom­ics at the Uni­ver­sity of West­ern Syd­ney.”

Decem­ber 30: Paul Wise­man, USA TODAY: Boom in Aus­tralia goes bust as global slow­down hits. “Keen pre­dicts the down­turn will unfold a bit dif­fer­ently than it did in the USA, where prob­lems began in the hous­ing mar­ket and spread to the broader econ­omy. “We’re likely to go into the macro cri­sis first as debt growth plum­mets; then a hous­ing cri­sis as the newly unem­ployed are unable to main­tain their mort­gages; and finally a credit crunch where the banks’ sol­vency doesn’t look so hot any­more.””

Decem­ber 26: Lil­iana Molina, Investors got them­selves in trou­ble with shares, Courier Mail.

Decem­ber 12: Al Jazeera’s cur­rent affairs pro­gram 101 East, dis­cus­sion of the impli­ca­tions of the finan­cial cri­sis (YouTube video).

Decem­ber 11th: SMHHow low can they go?

Decem­ber 2nd: 7.30 Report on the Decem­ber RBA 1% inter­est rate cut

Novem­ber 28th: Bloomberg, ‘Rate Cut’ Rory Bets Australia’s High­est Peak on House Prices

Novem­ber 27th: Give us real con­fi­dence, ABC Unleashed

Novem­ber 25th: When debt gets per­sonal, Deputy Leader of the Oppo­si­tion Julie Bishop’s Blog, SMH

Novem­ber 13 2008: Dire fore­casts get louder, John Col­lett SMH

Dis­cus­sion with Mar­garet Lomas of Ric Battellino’s opti­mistic por­trayal of house­hold finances in Aus­tralia(Novem­ber 10th broad­cast I think)

Novem­ber 5th 2008, Nick Gar­diner in the Daily Tele­graph: Reserve Bank urged to con­tinue aggres­sive inter­est rate cuts

Novem­ber 5th 2008: SMH notes my accu­rate guess for the RBA Rate cut

Novem­ber 4 2008: How safe are gov­ern­ment bonds?, Paul Amery, Money Week

Novem­ber 3rd: My com­ment on Greenspan’s tes­ti­mony to Con­gress, ABC RN Per­spec­tive

Novem­ber 3rd, The Bal­ti­more Chron­i­cle: More from the Front Lines of the Finan­cial Cri­sis

Octo­ber 29th: Peter Switzer on my analy­sis, The Aus­tralian

Octo­ber 29th: Fea­ture on Greenspan before Con­gress, The Age

Octobe 24th: Expec­ta­tions for unem­ploy­ment, SMH

Octo­ber 23rd: John Quiggin’s blog

Octo­ber 21st: My rejoin­der to Ger­ard Henderson’s arti­cle in the SMH

Octo­ber 18th 2008: Sixty Min­utes: The Big Bust

Octo­ber 16, Aus­tria (trans­la­tion appre­ci­ated!) Han­dels­blatt: Aus­tralien schwächelt

Octo­ber 15th 2008: Inter­view with Mar­garet Throsby on ABC Clas­sic FM

Octo­ber 14th 2008: BNET Aus­tralia pod­cast inter­view

The Age’s Multi-media ver­sion of my Eco­nom­ics 101: Mak­ing Sense of the Cri­sis

Octo­ber 11 2008: Hold­ing tight: can Aus­tralia ride the storm?, The Age

Octo­ber 10 2008: Fea­ture on News.com.au The finan­cial cri­sis explained: Gov­ern­ment resources ‘puny’ com­pared to mar­ket bub­ble

Octo­ber 8th 2008: 7.30 Report: Clarke and Dawe’s bril­liant expose of the whole cri­sis

Octo­ber 8th 2008: 7.30 Report: Kerry O’Brien inter­views Prime Min­is­ter Rudd

Octo­ber 8th 2008: Kerry O’Brien inter­view on 7.30 Report

Octo­ber 5th 2008: Gen­er­a­tion Debt–Sixty Min­utes on Gen Y and Debt

Octo­ber 5th 2008: Meet the Press Inter­view Tran­script and video; Chan­nel Ten

Octo­ber 3rd 2008: Brace for eco­nomic mis­ery; Michael West, SMH

Octo­ber 1st 2008: Mort­gage insur­ance claim con­cerns; ABC Late­Line

Sep­tem­ber 28th 2008: Finan­cial chick­ens are flock­ing home to roost; The Age

Sep­tem­ber 21 2008: Sale of my flat; Sun­day Tele­graph (large [11MB] scan)

Sep­tem­ber 10th 2008: Date­line dis­cus­sion of Fan­nie and Fred­die bailout with George Negus & Peter Schiff

Sep­tem­ber 8th 2008: Insight on the hous­ing bub­ble

Sep­tem­ber 2nd 2008: Sky News on the RBA rate cut; SBS News on banks pass­ing on the cut;

August 27 2008: SMH Money Pro­file

August 4 2008: Late­Line Busi­ness with Phillip Lasker

July 2 2008: Why defla­tion is really pos­si­ble, Paul Amery, Money Week