Talk on Debt and Financial Instability

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I’m cur­rent­ly in Nor­way, and was invit­ed to talk on the glob­al debt cri­sis to a local dis­cus­sion group. They video­taped the talk, and put it up on Google Video. The link is:

There is also a copy on my site–with the open­ing triv­ia about how I met my Nor­we­gian host and fel­low researcher Trond Andresen delet­ed:

I give an overview of the debt sit­u­a­tion, using the graphs that I cus­tom­ar­i­ly put into the Debt­watch Report, as well as explain­ing Hyman Min­sky’s “Finan­cial Insta­bil­i­ty Hypoth­e­sis”, which I regard as the only eco­nom­ic the­o­ry that can explain the cur­rent state of finan­cial mar­kets and the glob­al econ­o­my.

Soros’s Excellent Commentary on the crisis

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I’ve been research­ing in Europe and too busy to main­tain the blog for a while, for which I apol­o­gise. Hope­ful­ly I’ll get back to it when I return to Syd­ney next week. In the mean­time, I had the fol­low­ing Soros arti­cle rec­om­mend­ed to me, and it’s an excel­lent com­men­tary on the cred­it cri­sis:

Soros on “The worst mar­ket cri­sis in 60 years

Debtwatch Podcast Now Up and Running

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The Debt­watch Pod­cast is now oper­a­tional. To hear the first inter­view, down­load it, and/or sub­scribe to the month­ly feed via Itunes or sim­i­lar soft­ware, please click on the link below:

Debt­Watch Pod­cast

To sub­scribe direct­ly, sim­ply copy and paste the link below into your pod­cast soft­ware:

Thanks again to Cameron Media Tech­nol­o­gy for pro­vid­ing this ser­vice.

Debtwatch Goes Podcast

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By the kind aus­pices of Stu­art Cameron of Cameron Media Tech­nol­o­gy Pty Ltd, Debt­watch is now going “pod”. Each mon­th’s report will be accom­pa­nied by an inter­view, which will be avail­able for down­load and sub­scrip­tion via Itunes (etc.).

 The first pod­cast, which dis­cuss­es the “Expe­ri­ence can be mis­lead­ing” elec­tion spe­cial report, can be accessed here. Short­ly we’ll also have the XML link to enable sub­scrip­tion to the pod­cast via Itunes and the like.

Thanks again to Stu­art for pro­vid­ing his pro­fes­sion­al skills to make this pod­cast pos­si­ble.

Experience can be misleading

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A major issue in this elec­tion cam­paign has been expe­ri­ence. Both par­ties accept that expe­ri­ence as an eco­nom­ic man­ag­er mat­ters, and Howard and Costel­lo regard it as their one trump card.But expe­ri­ence can be mis­lead­ing if it teach­es a rote set of behav­iours, and then cir­cum­stances sud­den­ly change. The coloni­sa­tion of Aus­tralia almost failed because farm­ers used their expe­ri­ence in Eng­land and Ire­land to guide their farm­ing prac­tices in Syd­ney. The colony only sur­vived because ulti­mate­ly it adapt­ed its farm­ing prac­tices to this new land (and because it received some help from Indone­sia) .

Both Are a Plague on Our Houses

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Today’s blog was pub­lished as a fea­ture “A lose-lose elec­tion for home buy­ers” by The Age Busi­ness. Click here to down­load this post as a PDF file (with charts).

Both Lib­er­al and Labor hous­ing poli­cies will make Aus­trali­a’s debt and hous­ing afford­abil­i­ty crises worse. The only dif­fer­ence between the two is how much dam­age they will do.Both par­ties have promised tax-advan­taged sav­ings sys­tems that will enable First Home Buy­ers to accu­mu­late larg­er deposits. This will undoubt­ed­ly help them com­pete with oth­er buy­ers in the hous­ing mar­ket, but a lack of com­pe­ti­tion amongst buy­ers isn’t the prob­lem.

Deflated changes in Wages and Debt: 7.30 Report Data

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Tables like the ones below take my breath away when I see them for the first time–because the sto­ry they tell is worse than any I would have dared make up. As I not­ed in the inter­view with Ker­ry O’Brien on the 7.30 Report, real wages have increased since 1990, and since Aus­trali­a’s last elec­tion in late 2004. How­ev­er, mort­gage debt has increased by far more.

Data for 7.30 Report Interview coming soon…

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I pro­vid­ed a num­ber of com­par­isons of real wages, mort­gage pay­ments, inter­est rates and the like in my inter­view on the 7.30 Report this evening. I’ll post a table con­tain­ing those data by tomor­row morn­ing.

If you’re a new vis­i­tor and would like to receive my Debt­watch Report, which Ker­ry men­tioned in tonight’s inter­view, please click here to send me an email about it. Or you could sign up for the blog, after which I will add you to the sub­scribers list (there have been some has­sles report­ed by some users on this front by the way, so if that hap­pens to you, please fol­low the First Rule of computers–“If at first you don’t suc­ceed, give up”–and send me an email instead).

Paul Woolley Financial Market Dysfunctionality Conference

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I’m one of the pre­sen­ters at this con­fer­ence at UTS today. The con­fer­ence web­site has a link to all the papers (includ­ing mine). As usu­al, I’ve done an “all singing, all danc­ing” Pow­er­point pre­sen­ta­tion that has a few addi­tion­al details to it.

The Paul Wool­ley Cen­tre is a very use­ful devel­op­ment, giv­en the bias in aca­d­e­m­ic finance towards the propo­si­tion that finance mar­kets are actu­al­ly hyper-func­tion­al (“effi­cient” in the jar­gon, defined in a way that cor­re­ponds to “prophet­ic” in ordi­nary Eng­lish).

Paul Wool­ley is giv­ing a pub­lic lec­ture tonight “Is the Finan­cial Sec­tor Dys­func­tion­al”, at 6.15pm in Uni­ver­si­ty Hall at UTS–in the Sci­ence Build­ing, 745 Har­ris Street Ulti­mo (diag­o­nal­ly oppo­site the ABC build­ing). All are wel­come.

The Political Debt Cycle

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Both par­ties will make much of their eco­nom­ic man­age­ment cre­den­tials in this elec­tion cam­paign.

Many Aus­tralians, on the oth­er hand, seem con­vinced that the econ­o­my would do as well regard­less of which par­ty were in pow­er.

The aver­age punter has it right: luck, rather than skill, has deter­mined which gov­ern­ments in ret­ro­spect came up smelling like ros­es in the eco­nom­ic man­age­ment stakes, and which instead smelt like manure.

By far the biggest deter­mi­nant of polit­i­cal luck is what was hap­pen­ing to pri­vate debt while any giv­en gov­ern­ment was in pow­er. If debt was ris­ing, then the gov­ern­ment looked good; if it was falling, then the gov­ern­ment looked bad.