Dusting off the Cobweb Cycle

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As recent­ly as May 2011, the Aus­tralian Bud­get State­ment fore­cast only a grad­ual decline in iron ore prices. “The terms of trade are fore­cast to increase 19¼ per cent in 2010-11, under­pinned by strong increas­es in the prices of Australia’s key non-rur­al com­mod­i­ty exports, before declin­ing grad­u­al­ly over 2011-12 and 2012–13 as increas­ing glob­al com­mod­i­ty sup­ply starts to match growth in demand,” it said.

As is not news to any­one today, the decline in Australia’s terms of trade in the first three months of finan­cial year 2012–13 has been any­thing but grad­ual: it has fall­en five times as much in three months as Trea­sury expect­ed to hap­pen over the entire year.

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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.