Author Archives: Steve Keen

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.

3 new podcast entries–and SBS Insight tomorrow

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Well Stu Cameron has been on the ball, but clear­ly I’ve stuffed up link­ing the files on my site! Sev­er­al read­ers have told me that the pod­casts 3–6 can’t be accessed.

At some stage they will be avail­able, but I have a rush of work on right now so please wait until I put up a new post with prop­er­ly test­ed links. My apolo­gies for the con­fu­sion in the mean­time.

http://www.debtdeflation.com/podcast/debtwatch.xml

And you can also access the audio files from:

http://www.debtdeflation.com/podcast/

The top­ics of these three pod­casts (Num­bers 4, 5 and 6) are:


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DebtWatch No 26 September 2008: Losing control of the margin?

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Late last year on SBS News, when Stan Grant asked me which way the RBA would move rates in 2008, I replied “Up, and then down”, Stan quipped “Spo­ken like a true economist–an even hand­ed answer!”–to which I replied “More down than up”.

I expect­ed the intial rate ris­es because of the RBA’s focus on the rate of infla­tion, and a sub­se­quent fall, not because infla­tion would be head­ing down, but because the econ­o­my would be–and the RBA rate would be forced to fol­low it


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Debtwatch No. 25: How much worse can “It” get?

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Last month closed with some far from com­fort­ing news about the state of the US hous­ing mar­ket (sales and prices still falling), US finan­cial insti­tu­tions (Fan­nie Mae and Fred­die Mac in need of res­cue), Aus­tralian banks (NAB’s 90% write-down of its US CDO port­fo­lio). Then ABS fig­ures showed that retail sales had fall­en “unex­pect­ed­ly” by one per­cent in June. The recent ral­ly in stock mar­kets came to a sud­den end, and after a brief peri­od of renewed con­fi­dence, the ques­tion “how much worse can “It” get?” is once again doing the rounds.

My answer is: a lot worse. The empir­i­cal grounds for this assess­ment are:


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Debtwatch No. 24 July 2008

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My Comment on the Green Paper

Sen­a­tor Nick Sher­ry, as Min­is­ter for Super­an­nu­a­tion and Cor­po­rate Law, has released a Green Paper Finan­cial Ser­vices and Cred­it Reform: Improv­ing, Sim­pli­fy­ing and Stan­dar­d­is­ing Finan­cial Ser­vices and Cred­it Reg­u­la­tion (June 2008)

This is a very apt time for such an enquiry. It is now over a decade since the Wal­lis Com­mit­tee sup­port­ed fur­ther dereg­u­la­tion of the finan­cial sys­tem, and the con­se­quences of that dereg­u­la­tion are now evi­dent.  I doubt that a com­plete rever­sal of pol­i­cy is polit­i­cal­ly fea­si­ble now, but this inquiry may set the high water mark in the belief that the less reg­u­lat­ed finan­cial mar­kets are, the bet­ter.


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My submission to… the Wallis Committee

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I recent­ly made a sub­mis­sion to the Sen­ate Eco­nom­ics Com­mit­tee on the RBA (Enhanced Inde­pen­dence) Bill, where I argued against the Bill–as did all four pub­lic sub­mis­sions.

After mak­ing that sub­mis­sion (which I’ll post here short­ly) I thought I’d check out my sub­mis­sion to the Wal­lis Committee–since I argued that the RBA and the reg­u­la­to­ry author­i­ties in gen­er­al, while they may appear to have suc­ceed­ed in con­trol­ling infla­tion, have presided over the biggest spec­u­la­tive bub­ble in world his­to­ry.

The secu­ri­ti­sa­tion of loans was a major part of this bub­ble, which of course, no-one could have fore­seen… or at least that’s the line from con­ven­tion­al econ­o­mists.


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Stiglitz Trashes Inflation Targetting

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As a 65 year old win­ner of the Nobel Prize in Eco­nom­ics, Joseph Stiglitz is not some­one that main­stream econ­o­mists can dis­miss as either a crank or senile–the usu­al reac­tions to any­one who oppos­es con­ven­tion­al thought in eco­nom­ic the­o­ry or pol­i­cy.

So when he comes out and says that infla­tion tar­get­ting is fool­ish and dan­ger­ous, his views are worth tak­ing note of. Here is Stiglitz’s com­men­tary on infla­tion tar­get­ting, pub­lished ear­li­er this month.

Per­ma­nent link to this post (74 words, esti­mat­ed 18 secs read­ing time)

Debt is the Financial system’s Carbon Dioxide

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Steve Keen’s DebtWatch No 23 June 2008

RBA Assis­tant Gov­er­nor Guy Debelle and I spoke at a con­fer­ence on Sub­primes in Ade­laide last month. One aspect of my analy­sis that Guy queried was my empha­sis upon the Debt to GDP ratio. He not­ed that this appeared sus­pect, because it was com­par­ing a stock (the out­stand­ing lev­el of debt) to a flow (annu­al GDP).

It’s a valid point to make. The engi­neer-turned-econ­o­mist Mick­al Kalec­ki once caus­ti­cal­ly observed that “eco­nom­ics is the sci­ence of con­fus­ing stocks with flows”, and I’m a stick­ler myself for not mak­ing that mis­take. So mak­ing a song and dance about a stock to flow com­par­i­son like debt to GDP has to be jus­ti­fied by a sound argu­ment.


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A new Nouriel Roubini Blog

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Nouriel Roubi­ni is one of the world’s fore­most experts on the finan­cial sys­tem, and like me, was warn­ing of poten­tial crises while most oth­er com­men­ta­tors could only see ros­es bloom­ing. He is Pro­fes­sor of Eco­nom­ics at New York Uni­ver­si­ty’s Stern School of Busi­ness, and found­ed the RGE Mon­i­tor, a high­ly suc­cess­ful com­mer­cial intel­li­gence web­site. He has recent­ly estab­lished a new blog with a focus on Asia, and has kind­ly asked me to be one of the con­trib­u­tors.

Nor­mal­ly I will sim­ply cross-post my Debt­watch blog, but on occa­sions I’ll write spe­cial pur­pose entries there. Nouriel has also assem­bled an inter­est­ing team of non-ortho­dox com­men­ta­tors from the aca­d­e­m­ic and busi­ness sec­tors.


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Defer the RBA “Enhanced Independence” Act

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Steve Keen’s DebtWatch No 22 May 2008

The Reserve Bank Amend­ment (Enhanced Inde­pen­dence) Bill 2008, which was tabled in Par­lia­ment in March, aims to give the RBA Gov­er­nor and Deputy Gov­er­nor “the same lev­el of statu­to­ry inde­pen­dence as the Com­mis­sion­er of Tax­a­tion and the Aus­tralian Sta­tis­ti­cian” (Wayne Swann, Hansard, Thurs­day, 20 March 2008, p. 2381).

Under the cur­rent Reserve Bank Act, the Gov­er­nor and Deputy are appoint­ed by the Trea­sur­er, and the Trea­sur­er must remove them from their posi­tions if either of them:


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My submission to the 2020 Summit

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Sec­tion One on ” The future of the Aus­tralian econ­o­my” starts with the fol­low­ing pre­am­ble:

“The Aus­tralian Gov­ern­ment is com­mit­ted to mod­ernising our econ­o­my so that we can com­pete with the lead­ing nations in a world econ­o­my that is being trans­formed by glob­al­i­sa­tion, new tech­nolo­gies, and the rise of Chi­na and India. While we take full advan­tage of the min­ing boom, we must also build long term com­pet­i­tive strengths in the glob­al indus­tries of tomor­row — indus­tries that will pro­vide the high-pay­ing jobs of the future.

The Aus­tralia 2020 Sum­mit will exam­ine:


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