Author Archives: Steve Keen

Mar­ket econ­o­mists have spent the past few months search­ing each major data release for con­fir­ma­tion of their hope that the econ­o­my is return­ing to growth and that a ‘sus­tain­able recov­ery’ is under­way.

Most cur­rent­ly argue that the fun­da­men­tals in Aus­tralia are good – low unem­ploy­ment, a strong recov­ery in equi­ty mar­kets (notwith­stand­ing the 14 per cent sell-off in the past month), a sig­nif­i­cant num­ber of com­pa­nies’ results beat­ing expec­ta­tions and so on.

A month ago some extra­or­di­nary head­lines appeared in the Fair­fax new­pa­pers. The Syd­ney Morn­ing Her­ald ran with: “House prices to plateau as buy­ers flee in droves”.

Alan Kohler wrote at the time in Busi­ness Spec­ta­tor that ‘flee’ was too strong a word for what was hap­pen­ing – hous­ing lend­ing was con­tin­u­ing to fall in both num­ber and val­ue terms, but investors were con­tin­u­ing to bor­row strong­ly and prop up the mar­ket. How­ev­er, he did sug­gest that a price plateau in hous­ing looked like­ly.

As we head towards the fed­er­al elec­tion, the term ‘hous­ing short­age’ will be trot­ted out again and again by politi­cians. Their rhetoric will rely on the deeply ingrained received wis­dom that Aus­tralia has a ‘hous­ing short­age’, and no politi­cian will want to do the hard work of dif­fer­en­ti­at­ing between a gen­uine short­age in hous­ing stock (which we don’t have) and a short­age of ‘afford­able hous­ing’ which we do have.

And why won’t they acknowl­edge this dis­tinc­tion? Sim­ply, because admit­ting that it is only the prices of hous­es that are dys­func­tion­al, and not sim­ply the sup­ply, would be too much even for their loy­al vot­ers.

Debt­Watch No. 44 April 2010

House Prices Are Not Nor­mal

“I think it is a mis­take to assume that a risk­less, easy, guar­an­teed way to pros­per­i­ty is to be lever­aged into prop­er­ty. It isn’t going to be that easy.” (RBA Gov­er­nor Glenn Stevens, Sun­rise Pro­gram March 29 2010)

I gave the fol­low­ing pre­sen­ta­tion at the 4th Dijon Mon­ey con­fer­ence (Decem­ber 10–12 2009):

| Open Play­er in New Win­dow

Thanks to all those Debt­watch read­ers who made dona­tions to assist with the costs of bring­ing Michael to Aus­tralia for this speak­ing tour. Rough­ly A$800 has been raised–I’ve allowed $10 for every dona­tion made since I put that mes­sage up to go to Michael’s expens­es, and there have been 81 dona­tions (many of more than $10, some of less) since then.

I’ll be speak­ing at the Aus­tralian Muse­um’s reg­u­lar month­ly talk this com­ing Tues­day evening on the top­ic of “The Next Great Depres­sion?”. In a nut­shell, the details are:

Title: Muse­um Aus­tralia Month­ly Talk
Loca­tion: Aus­tralian Muse­um (entry via William Street)
Start Time: 18:30
Date: 2009-08-25
End Time: 20:00

Book­ings and pre­pay­ment are essen­tial: call 02 9320 6225 to book.

The cost is $20 for mem­bers  of the Aus­tralian Muse­um and $30 for non-mem­bers. The event begins with light refresh­ments, fol­lowed by a one-hour talk, and then an open ques­tion time.

I’m speak­ing at the Aus­tralian Share­hold­ers Asso­ci­a­tion Investor Hour next Tues­day (August 18) at 12pm with the top­ic “The Mar­ket Crash: Ori­gins and Prospects”.

I’ll take a long view of the finan­cial data–going back to 1890–and explain the booms and crash­es of stock mar­kets as symp­toms of debt bub­bles and their burst­ing. From that point of view, this is the largest asset-price bub­ble in the last 120 years–and prob­a­bly in all of his­to­ry. The prog­no­sis for the mar­ket is there­fore grim, despite the cur­rent ral­ly.

The Whit­lam Insti­tute is con­duct­ing a series of talks on the finan­cial cri­sis. The third of these will be held this com­ing Thurs­day (July 23rd) at the River­side The­atre com­plex in Par­ra­mat­ta (on the cor­ner of Church and Mar­ket Streets). The keynote paper is being giv­en by Pro­fes­sor John Quig­gin, with myself and Guy Debelle, the Assis­tant Gov­er­nor (Finan­cial Mar­kets) of the RBA as dis­cus­sants.

Pro­fes­sor Quig­gin will present his paper “After the Cri­sis” for about 30–40 min­utes, after which there will be a 20 minute ques­tion and answer ses­sion with the audi­ence.

STEVE KEEN and EVAN JONES in conversation with FRANK STILWELL

In this event to cel­e­brate the pub­li­ca­tion of Polit­i­cal Econ­o­my Now!–the his­to­ry of the Polit­i­cal Econ­o­my strug­gle at Syd­ney University–Evan Jones, Frank Stil­well and Steve Keen will dis­cuss the strug­gles inside the uni­ver­si­ty eco­nom­ics depart­ments and their sig­nif­i­cance, not only for teach­ing, but for the world econ­o­my itself.

Polit­i­cal Econ­o­my Now! by Gavan But­ler, Evan Jones and Frank Stil­well is the sto­ry of one of the most sub­stan­tial and endur­ing con­flicts in the his­to­ry of Aus­tralian uni­ver­si­ties. Begin­ning in the late 1960s, it pit­ted those com­mit­ted to the teach­ing of main­stream eco­nom­ics at the Uni­ver­si­ty of Syd­ney against the pro­po­nents of an alter­na­tive pro­gram in polit­i­cal econ­o­my. It explores issues such as