About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.

Total, total bullshit”?

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Oh dear. When Nas­sim Khadim from The Age asked me to com­ment yes­ter­dy on the elec­toral asser­tion being made by the Lib­er­al Party–that ris­ing State debt was putting upward pres­sure on inter­est rates–I respond­ed that the asser­tion was:

Total, total bull­shit. It’s like say­ing that some­body dropped a peb­ble into the ocean and that caused a tsuna­mi. And you can quote me on that.”

Well, I expect­ed just to see the “peb­ble and tsuna­mi” anal­o­gy turn up in the report. Instead, I saw the first two sen­tences of the above–and learnt the hard way that edi­to­r­i­al stan­dards at Aus­trali­a’s major dailies are no longer as reserved as I took for grant­ed:

Debtwatch No. 10: America’s Ponzi Schemes Unravel

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Named in mock hon­our of Amer­i­ca’s great­est swindler, a Ponzi Scheme is a finan­cial ruse that, for a time,  gen­er­ates appar­ent­ly great returns from an invest­ment that in fact pro­duces noth­ing. Ponzi Schemes ini­tial­ly appear to work because the pro­mot­ers pay ear­ly entrants seem­ing­ly fan­tas­tic returns, by the sim­ple expe­di­ent of giv­ing them mon­ey deposit­ed by lat­er entrants. So long as the Scheme con­tin­ues to grow, it can appear successful–and indeed indi­vid­u­als who get in and out before the Scheme col­laps­es can become fab­u­lous­ly wealthy.

Submissions to Parliamentary Enquiry released

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As you may know, the House of Rep­re­sen­ta­tives Stand­ing Com­mit­tee on Eco­nom­ics, Finance and Pub­lic Admin­is­tra­tion has arranged an Inquiry into home loan lend­ing prac­tices and process­es, to which I have been invit­ed. The sub­mis­sions have just been released; click on the link to access them.

My sub­mis­sion is here for speedy ref­er­ence. Apolo­gies to all for the absence of posts recent­ly, but if can be allowed some Aussie ver­nac­u­lar here, I’ve been busier than a blue-arsed fly in recent weeks, and (now you’ll have to allow a very inept mix­ing of metaphors!) won’t get my head above water for some weeks yet.

June & July Debtwatch PDFs posted

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I have now post­ed the PDFs of my June and July reports; hope­ful­ly in the next week or so I’ll get a chance to post the text to the blog as well. Apolo­gies again for the slow­ness here, but con­fer­ences and the sud­den press cov­er­age on debt wor­ries!

Post coming shortly

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This is basi­cal­ly an apol­o­gy for a slow update rate on the blog right now. I have had two con­fer­ence trips sep­a­rat­ed by exam mark­ing and stu­dent super­vi­sion loads; and I’m sit­ting in a con­fer­ence right now. I have two Debt­watch reports to post, updates to do to the Charts page, and plen­ty of press cov­er­age details to add, plus at least one com­ment to reply to. They will be forth­com­ing I hope by Fri­day.

The BIS Annual Report: From Goldilocks to the Three Bears

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Pri­or to the NASDAQ crash in ear­ly 2000, Amer­i­can com­men­ta­tors were fond of describ­ing their econ­o­my as being in a “Goldilocks” phase–with all eco­nom­ic indi­ca­tors being “just right”.

That phrase dropped out of cir­cu­la­tion after April 2000, but a lev­el of com­pla­cen­cy still ruled when that stock mar­ket crash appeared to have lit­tle impact on the real econ­o­my.

Com­pla­cen­cy dra­mat­i­cal­ly left the build­ing today, with the release of the Bank of Inter­na­tion­al Set­tle­men­t’s (BIS) 77th Annu­al Report. The BIS turns the Goldilocks sto­ry around, and sees it not from Goldilocks’ per­spec­tive, but from that of the Bears. Just as the Bears’ domes­tic idyll was dis­turbed by Goldilocks the Home Invad­er, the appar­ent­ly neat glob­al finan­cial sys­tem has been put at risk by out of con­trol spec­u­la­tive lend­ing.

Debtwatch gets a mention in Parliament

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It’s not yet the main top­ic of debate between Lib­er­al and Labor, but some of the argu­ments in Debt­watch have at least made their way into Hansard cour­tesy of a speech by Lau­rie Fer­gu­son. The full extract from the speech is shown below.

This makes a mock­ery of the claim by the Prime Min­is­ter that we have nev­er been bet­ter off. Whilst the Howard gov­ern­ment crows about the suc­cess in the econ­o­my, which was large­ly inher­it­ed from Labor and fuelled by the raw mate­ri­als demands of India and Chi­na, there is an alter­na­tive real­i­ty of an out-of-con­trol per­son­al debt spi­ral. Steve Keen from the Uni­ver­si­ty of West­ern Syd­ney writes:

First home payments hit $3000 per month

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Jes­si­ca Irvine from the SMH has writ­ten an excel­lent piece with this head­line in today’s SMH. I’ve linked it on the blog roll, but it’s linked here too for quick ref­er­ence.

 My Debt­watch report will be very brief this com­ing month: I’m off to the USA tomor­row for some con­fer­ences, and I’m “under the gun” to pro­duce papers and pre­sen­ta­tions to suit. I also won’t be avail­able for com­ment at the time of the RBA’s next meeting–which is of course high­ly unlike­ly to move rates in either direc­tion.

Great post on debt on Sam de Brito’s “All men are liars” Blog

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I reg­u­lar­ly peruse, and enjoy, the “All Men Are Liars” blog at the SMH on-line. Today’s post there is on a top­ic dear (in every sense of the word…) to this blog. I rec­om­mend check­ing it out–and engag­ing in the debate, if you have time (I’ve just post­ed a quick com­ment):

Suck­ers: slave to your mort­gage

PM on New Zealand Reserve Bank Policy Shift–transcript

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Will Bud­get tax cuts fuel inflation?  (click here for the MP3 file)
PM — Wednes­day, 9 May , 2007  18:14:52
Reporter: Stephen Long
MARK COLVIN: Now, will the tax cuts in the Bud­get cause infla­tion?

Some lead­ing econ­o­mists argue that the Reserve Bank could be forced to lift inter­est rates down the track because Gov­ern­ment spend­ing and tax cuts will increase con­sump­tion and prices.

But oth­ers dis­agree. They argue that debt lev­els are so high that many peo­ple will be hand­ing their tax cuts straight to the bank.