Well there’s a rose in the fist­ed glove
And eagle flies with the dove
And if you can’t be with the one you love hon­ey
Love the one you’re with
(Stephen Stills 1970)

As I not­ed in the pre­vi­ous post, I’m work­ing with the Governor’s Woods Foun­da­tion to pro­duce a com­pre­hen­sive data set on pri­vate debt for its Debt-Eco­nom­ics project (see www.debt-economics.org). As part of that, last week I real­ized that the Flow of Funds data on finan­cial sec­tor debt wasn’t what I had hoped it was, and I had to revise down my esti­mates of the US pri­vate debt to GDP ratio from 1952 till today. That revi­sion implied that today’s “Peak Debt” lev­el was low­er than that of the Great Depres­sion.

My pre­sen­ta­tion at the Rosa Lux­em­bourg Foun­da­tion in Berlin today on how Neo­clas­si­cal eco­nom­ics mis­un­der­stands the role of pri­vate debt in a cap­i­tal­ist econ­o­my. I show how to use my Min­sky pro­gram to mod­el both the Neo­clas­si­cal “Loan­able Funds” vision of lend­ing and the empir­i­cal­ly-informed Post Key­ne­sian “Endoge­nous Mon­ey” mod­el.

I’m also about to start a Kick­starter cam­paign to raise addi­tion­al funds to devel­op Min­sky. Please “watch this space” and be ready to help pro­mote this cam­paign and help fund it. Min­sky as it stands has been writ­ten by one pro­gram­mer in about 800 hours. I want to be able to hire 3 pro­gram­mers for a min­i­mum of 2 years to ful­ly devel­op the pro­gram.

By David Law­son

Click here for this data in Excel: Debt­watch; CfE­SI

An issue that is often over looked here in Aus­tralia is the ris­ing cost of edu­ca­tion. Uni­ver­si­ty stu­dents are lib­er­at­ed from the up-front cost of edu­ca­tion through the Aus­tralian Gov­ern­ments High­er Edu­ca­tion Loan Pro­gram (HELP). While in oth­er coun­tries like the Unit­ed States the stu­dent loans mar­ket is pri­va­tised, which has con­tributed to their high­ly priced ter­tiary edu­ca­tion sys­tem. Though, after look­ing over the num­bers here in Aus­tralia it seems that the pub­lic cred­it fund­ing through HELP could be hav­ing the same infla­tion­ary effect on edu­ca­tion.

Below is the talk I gave to the Cana­di­an Cen­tre for Pol­i­cy Alter­na­tives on the Debt Bub­ble and its impli­ca­tions for Cana­da. I cov­er my Min­skian analy­sis of the Depres­sion in gen­er­al, and con­clude with data on the Cana­di­an econ­o­my. The mort­gage accel­er­a­tion data in par­tic­u­lar implies that the Cana­di­an house price bubble–which is not as big as those in Aus­tralia, the USA or the UK–is close to being over.

This is the screen record­ing of the talk–better for read­ing the slides them­selves.

I’ll edit the post tomor­rrow to add links to the Pow­er­point slides and an audio recording–I can’t access the servers right now to upload them.

I’m being inter­viewed by Paul Mason for the BBC Radio 4 pro­gram Analy­sis on April 3^rd, in front of an audi­ence at the Lon­don School of Eco­nom­ics from 6.30–8pm. If you’d like to attend, you can book a place via this link (“Banks vs the Econ­o­my”). Book­ings are free but essen­tial, and will open on Mon­day March 26^th at 10pm. More details are avail­able for the pub­lic from events@lse.ac.uk; email pressoffice@lse.ac.uk for media enquiries.

The LSE asked me to write this entry for their blog British Pol­i­tics and Pol­i­cy at LSE. It’s repro­duced here (along with the data) for Debt­watch read­ers.

Come­di­an-activist Mark Thomas hosts The Man­i­festo on BBC Radio 4, in which he and his stu­dio audi­ence con­sid­er pro­pos­als for a Peo­ple’s Man­i­festo on top­ics rang­ing from the sub­lime to the ridicu­lous. Some­where in the mid­dle, there’s seri­ous stuff with a comedic twist, and in the lat­est pro­gram, my “Mod­ern Debt Jubilee” got a guernsey.

It did­n’t win the Shout, so a pro­pos­al to elim­i­nate tax avoid­ance got up instead, but it’s nice to see that the idea is get­ting into the pub­lic domain.

You can lis­ten to the whole show here (though the link will expire in 5 days), or click on the movie below.

Debt­watch began in March 2007 as a way of dis­trib­ut­ing my month­ly newslet­ter on the eco­nom­ic cri­sis I expect­ed to soon erupt, and about which I had been warn­ing in media inter­views since Decem­ber 2005.

Click here for this post in PDF

Fig­ure 1: Excerpt from the 1st Debt­watch Report in Novem­ber 2006

From hum­ble begin­nings, the blog has grown like Top­sy to have over 12,500 sub­scribers, about 60,000 unique vis­i­tors, amost one mil­lion page views and six mil­lion hits per month.

Fig­ure 2: Debt­watch read­er­ship stats for 2011

Preamble

Click here for this post in PDF

The fun­da­men­tal cause of the eco­nom­ic and finan­cial cri­sis that began in late 2007 was lend­ing by the finance sec­tor that pri­mar­i­ly financed spec­u­la­tion rather than invest­ment. The pri­vate debt bub­ble this caused is unprece­dent­ed, prob­a­bly in human his­to­ry and cer­tain­ly in the last cen­tu­ry (see Fig­ure 1). Its unwind­ing now is the pri­ma­ry cause of the sus­tained slump in eco­nom­ic growth. The recent growth in sov­er­eign debt is a symp­tom of this under­ly­ing cri­sis, not the cause, and the cur­rent polit­i­cal obses­sion with reduc­ing sov­er­eign debt will exac­er­bate the root prob­lem of pri­vate sec­tor delever­ag­ing.

PDF For­mat: Debt­watch Sub­scribers; CfE­SI Sub­scribers

Data: Debt­watch Sub­scribers; CfE­SI Sub­scribers

As much as I crit­i­cize the US of A for its eco­nom­ic man­age­ment, I can’t fault its sta­tis­ti­cal agen­cies on the col­lec­tion and dis­sem­i­na­tion of data: data is read­i­ly avail­able and almost always in an eas­i­ly acces­si­ble for­mat. That, and the fact that it’s the world’s biggest econ­o­my, is why most of my analy­sis is of the US. Aus­trali­a’s ABS deserves sim­i­lar acco­lades for mak­ing data read­i­ly acces­si­ble and rel­a­tive­ly easy to locate.

It’s always a plea­sure to talk with Max, and in this inter­view he drops a bomb­shell that I still have a hard time even con­tem­plat­ing: the claim that the UK’s pri­vate debt to GDP ratio is 950%, and the finance sec­tor alone has a debt ratio of 600% of GDP. Our dis­cus­sion starts at the 14 minute mark.

I still have to see the data for myself, and until then I’ll remain skep­ti­cal, but here’s a chart alleged­ly sourced from Mor­gan Stan­ley that makes that claim.