Category Archives: Debtwatch

Gary Karz of Investor Home has put togeth­er an anno­tat­ed com­pi­la­tion of com­men­taries on the report of the FCIC, almost all of which dis­miss as I did here. The report itself is waf­fle, and not worth the effort of read­ing it, but some of the com­men­taries (includ­ing those by my col­leagues Yves Smith in sev­er­al posts [A, B & C] and Bill Black) will be worth tak­ing for a spin.

I’ve just wast­ed a per­fect­ly good day read­ing the report of the Finan­cial Cri­sis Inquiry Com­mis­sion–the body appoint­ed by Con­gress alleged­ly to inquire into what caused the Finan­cial Cri­sis.

What it has deliv­ered reads more like an unedit­ed the­sis by a jour­nal­ism stu­dent (who is about to receive a “C” grade). There are plen­ty of quotes, lots of detail, some nice sec­tion head­ings and a few pret­ty graphs, but absolute­ly no analy­sis wor­thy of the name.

My com­rade-in-out­rage Mish Shed­lock has also tak­en a swipe at the World Eco­nom­ic Forum report More Cred­it with Few­er Crises, and point­ed out a key weak­ness that I omit­ted ref­er­ence to: their inabil­i­ty to under­stand expo­nen­tial growth.

Mish’s post is here:

World Economic Forum Endorses Fraud; Steve Keen Mocks the WEF Report, So Do I; The Purported “Need to Double Credit in 10 Years”

Mish attacks the report on many fronts, but the one that I’ll high­light here is the fol­low­ing: its state­ment that:

The 7th ANNUAL DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY SURVEY (data 3rd Qtr 2010) has just been pub­lished and is down­load­able from this link

http://www.demographia.com/dhi.pdf

I repro­duce below Demographi­a’s press release, which lays the blame for hous­ing unaf­ford­abil­i­ty on land use reg­u­la­tions. As reg­u­lar read­ers of this site know, I see finance as the core prob­lem in house price bub­bles rather than land use reg­u­la­tions, but every Ponzi Scheme needs a plau­si­ble sto­ry, and land use reg­u­la­tions pro­vides one (which has been used to great effect in Aus­tralia) while the absence of reg­u­la­tions takes the wind out of a Ponzi yarn.

Click here for this post in PDF

Hav­ing just read the World Eco­nom­ic Forum’s Report on sus­tain­able cred­it, I now realise that I was wrong to wor­ry about the growth in debt. After all, since 1932, the US’s debt to GDP ratio has actu­al­ly fall­en at a rate of 0.2% per year!

How could I ever have thought that the growth of cred­it could have caused the Great Reces­sion, when in fact the growth rate of debt has been neg­a­tive?

I am also chas­tened to realise that cred­it is only used for good pur­pos­es. As the report notes:

I had a cou­ple of impromp­tu inter­views with over­seas inter­net media groups this week–Dominic Fris­by inter­viewed me on my expec­ta­tions for 2011 on his “Fris­by’s Bulls and Bears” pro­gram, and Michael Surkan inter­viewed me for the inter­net radio/podcast progam The Opti­mistic Bear. I’ve excerpt­ed the intro­duc­tions from the two web­sites below; to hear the inter­views them­selves, click on the main links below.

The Frisby interview

In part VIII of our of shows look­ing at 2011, Dominic Fris­by talks to Aus­tralian econ­o­mist Steve Keen of Debtdeflation.com.

As not­ed in the last post, I’m rush­ing to get a sec­ond edi­tion of Debunk­ing Eco­nom­ics pub­lished this year, so I’m try­ing to fin­ish the man­u­script by the end of this month. As a result I’ll be cir­cum­spect on posts for the next few weeks, but there are a few I have to put up–including the ses­sions at the AEA.

My own ses­sion was orga­nized by Fred Mose­ley and (click on the names to down­load the papers) had David Colan­der, Paul David­son, myself and Ami­ta­va Dutt as speak­ers, with Ben­jamin Fried­man, Robert Gor­don and Kevin Hoover as dis­cus­sants.

My good mate Max Keis­er tracked me down in Den­ver last week, where I’d just attend­ed the 2011 Amer­i­can Eco­nom­ic Asso­ci­a­tion Annu­al Con­fer­ence. The inter­view starts 13 min­utes into the video embed­ded below, but as always Max and Sta­cy Her­bert are high­ly infor­ma­tive and enter­tain­ing in the pre­vi­ous 13 min­utes, so I do rec­om­mend watch­ing the entire pro­gram.

I’m cur­rent­ly work­ing on a sec­ond edi­tion of Debunk­ing Eco­nom­ics–which is why I’ve been mak­ing so few posts of late–but I will also short­ly post some video and audio from some of the ses­sions I attend­ed at the AEA.

I’ve just been alert­ed by Bank­ing Day (a sub­scriber-only ser­vice) that West­pac–via its sub­sidiary St George–is now allow­ing poten­tial bor­row­ers to treat their rental pay­ments as “evi­dence of gen­uine sav­ings” when apply­ing for a home loan.

This is of course por­trayed as  good thing in the press release that announced the development–issued by the bro­ker Loan Mar­ket (see the press release at the end of this post). It will, they state, enable Aus­tralians who cur­rent­ly can’t afford to buy a home–because they can’t save a deposit–to do so. All good news.

The RBA and most con­ven­tion­al mar­ket econ­o­mists see 2011 as the year in which our biggest chal­lenge will be “man­ag­ing pros­per­i­ty”. The min­ing boom will keep the mon­ey flow­ing, and the econ­o­my will just have to cope with the struc­tur­al change that results.

There’s no doubt that Chi­na’s demand for our min­er­als has gen­er­at­ed enor­mous rev­enue for the coun­try, by giv­ing us the best terms of trade in the last half cen­tu­ry, and turn­ing our trade bal­ance into sur­plus.