Category Archives: Debtwatch

Things are look­ing grim indeed for the US econ­o­my. Unem­ploy­ment is out of con­trol—espe­cial­ly if you con­sid­er the U‑6 (16.7%, up 0.2% in the last month) and Shad­ow­stats (22%, up 0.3%) mea­sures, which are far more real­is­tic than the effec­tive­ly pub­lic rela­tions U‑3 num­ber that pass­es for the “offi­cial” unem­ploy­ment rate (9.6%, up 0.1%).

The US is in a Depres­sion, and the soon­er it acknowl­edges that—rather than con­tin­u­ing to pre­tend otherwise—the bet­ter. Gov­ern­ment action has atten­u­at­ed the rate of decline, but not reversed it: a huge fis­cal and mon­e­tary stim­u­lus has put the econ­o­my in lim­bo rather than restart­ing growth, and the Fed’s con­ven­tion­al mon­e­tary pol­i­cy arse­nal is all but deplet­ed.

The webi­nar organ­ised by Phil Dob­bie for BTNet went over very well this morn­ing, with about 80 atten­dees and a live­ly dis­cus­sion medi­at­ed by Phil. Unfor­tu­nate­ly a pow­er out­age meant that GoToMeet­ing’s record­ing of the pre­sen­ta­tion only com­menced half way through, so to make amends Phil and I re-record­ed it this after­noon. We lost some of the inter­ac­tiv­i­ty, but the infor­ma­tion comes through very well in this for­mat.

To see this re-record­ing, please click on either of the fol­low­ing links:

Phil Dob­bie’s BTNet page “Aussie Rules”; or

A direct link to GoToMeet­ing.

Bernanke’s recent Jack­son Hole speech did­n’t con­tain one ref­er­ence to the key force dri­ving the Amer­i­can econ­o­my right now: pri­vate sec­tor delever­ag­ing (here’s the pre­vi­ous year’s speech for com­par­ison’s sake). The rea­son the US econ­o­my is not recov­er­ing from this cri­sis is because all sec­tors of Amer­i­can soci­ety took on too much debt dur­ing the false boom of the last two decades, and they are now busi­ly get­ting them­selves out of debt any way they can.

Broad­cast­er and pod­cast­er Phil Dob­bie, who amongst oth­er roles con­ducts the pod­casts for BNET.com, is launch­ing a Webi­nar sem­i­nar series with a talk by me on the Aus­tralian econ­o­my.

A webi­nar is an online ver­sion of a sem­i­nar at which the speak­er can give a lec­ture (com­plete with slides, sim­u­la­tions, etc.) that up to 1,000 peo­ple can attend, and atten­dees can ask ques­tions dur­ing the talk.

This first webi­nar is enti­tled “The Aussie Econ­o­my – Good Times or Stormy Waters? “, and it will take place at 11am (Aus­tralian East­ern Stan­dard Time) on Fri­day Sep­tem­ber 3rd 2010.

Peter Mar­tin reports in The Age today that Pro­fes­sor Ron Bird of UTS has weighed into the debate over the Rudd stim­u­lus pack­age. Pro­fes­sor Bird claimed that the stim­u­lus was far less impor­tant than our strong econ­o­my pri­or to the cri­sis, and the sec­ondary effect on our exports of stim­u­lus pack­ages under­tak­en else­where.

”The posi­tion we find our­selves in today is more due to our strong eco­nom­ic posi­tion going into the cri­sis and the mas­sive stim­u­lus pack­ages under­tak­en by our trad­ing part­ners,” Pro­fes­sor Bird says. ”The gov­ern­ment can take lit­tle or no cred­it for either of these, a point it (and our learned aca­d­e­mics) con­ve­nient­ly for­get.” (Peter Mar­tin, “Reserve Bank back­ing for stim­u­lus”, The Age August 18 2010)

The record $6 bil­lion prof­it that the Com­mon­wealth Bank is expect­ed to announce today is a sign of an econ­o­my that has been tak­en over by Ponzi finance. Fun­da­men­tal­ly, banks make mon­ey by cre­at­ing debt, and the amount of debt we’ve been enticed into tak­ing on is the sign of a sick econ­o­my rather than a healthy one. The lev­el of pri­vate debt that is actu­al­ly need­ed to sup­port busi­ness and main­tain home own­er­ship at his­toric lev­els (own­er­ship lev­els have fall­en over recent years!) is pos­si­bly as lit­tle as one sixth the cur­rent lev­el.

I’m tak­ing part in an Intel­li­gence Squared debate on Tues­day next week–August 10 2010–on the top­ic:

“That only capitalism can save the planet”

I’m on the Oppo­si­tion side, along with the poet and nov­el­ist Kate Jen­nings, and for­mer Exec­u­tive Direc­tor of Green­peace Inter­na­tion­al Paul Gild­ing. The Gov­ern­ment side is Eco­nom­ics Edi­tor of The Syd­ney Morn­ing Her­ald Ross Git­tins,  busi­ness­woman and com­pa­ny direc­tor Lucy Turn­bull, and busi­ness­man, activist and writer Geof­frey Cousins.

The full descrip­tion of the debate can be found here on the IQ Squared web­site.

We’ll be rang­ing across quite a few top­ics with­in that “That only cap­i­tal­ism can save the plan­et” rubric. To quote the IQ Squared head­er:

Chris Joye com­ments in his release of the recent RP Data-Ris­mark index that the news of a 0.7% fall in one month will be “man­na from heav­en for the hous­ing mar­ket bears”. Far be it from me to dis­ap­point him, so thanks for the man­na. But what adds spice to the man­na is the way that Chris has attempt­ed to ratio­nal­ize the out­come:

It’s sober­ing to remem­ber here that we have had 17 con­sec­u­tive month­ly increas­es in Aus­tralian cap­i­tal city home val­ues. If the share­mar­ket rose for 17 months straight and then tapered, peo­ple would not think twice about. It might be wise to apply the same log­ic to our hous­ing mar­ket.

The RPDa­ta-Ris­mark index has just been released, and it has fall­en 0.7% in the month of June 2010.

I’ll have more to say on this short­ly, but for now I can do no bet­ter than to direct you to the Busi­ness Spec­ta­tor news report of the fall:

House prices fall 0.7% in June, flat in quar­ter

and Christo­pher Joye’s press release on this top­ic:

House prices on ice – for now

I also rec­om­mend Rob Burgess’s elec­tion blog per­spec­tive here:

POLL POSITION: Will Labor fall with house prices?

The Amer­i­can Mon­e­tary Insti­tute has  invit­ed me to speak at their 2010 Mon­e­tary Reform Con­fer­ence, at the Uni­ver­si­ty Cen­ter in down­town Chica­go, between  Sep­tem­ber 30th and Octo­ber 3rd. I have agreed, though since this is in the mid­dle of a teach­ing peri­od for me it will be a “light­ning trip” to the USA–leaving Syd­ney on Wednes­day 29th and leav­ing Chica­go on Mon­day 4th.

I’ll give a pre­sen­ta­tion cov­er­ing the sta­tis­tics on the debt-dri­ven process that led to the eco­nom­ic cri­sis, an expla­na­tion of how mon­ey is cre­at­ed in a pure cred­it econ­o­my (based on my “Rov­ing Cav­a­liers of Cred­it” post on this blog), and a mod­el of debt-defla­tion as cov­ered in my recent talk in New York.