Steve Keen's Debtwatch

There is no end of com­men­tary about China’s real estate bub­ble, with an even split between those who believe it may pop at any moment, and oth­ers who argue it nev­er will.

The alter­na­tive ploy — that it doesn’t exist — doesn’t get same air­ing that it did in the US before the sub­prime crash. Instead, the “it’s a bub­ble, but it won’t burst” case is that the bub­ble is too impor­tant to China’s con­tin­ued growth to be allowed to burst, and — unlike the US — Chi­na has the where­with­al to keep it going, at least for a while. (See There will be no Min­sky moment for Chi­na, March 25; Chi­na Can’t Afford to Let Its Hous­ing Bub­ble Pop, Jan­u­ary 30;Tem­ple­ton Brav­ing China’s Hous­ing Bub­ble, Feb­ru­ary 28; Chi­nese Prop­er­ty Sec­tor Will Not Implode Like Amer­i­ca’s Sub­prime Mar­ket, March 11.)

Back in the Olde Days, before the glob­al finan­cial cri­sis, when I was one of a hand­ful rais­ing the alarm, some of the most stri­dent oppo­si­tion to my opin­ion about what this might mean for hous­ing in Aus­tralia came from Christo­pher Joye (who was then a Direc­tor at Ris­mark). We went head to head on many occa­sions, with me argu­ing that our prices were a debt-fuelled bub­ble, and Joye argu­ing that ris­ing house prices sim­ply reflect­ed ris­ing house­hold incomes.

There are very few peo­ple who qual­i­fy as unfor­get­table in your life, and Ted Wilshire was one of those for me. A larg­er than life char­ac­ter in every sense of the word, Ted was best known as the Research Offi­cer for the Aus­tralian Met­al Work­ers Union (AMWU) who penned the then-influ­en­tial pam­phlets Aus­tralia Ripped Off and Aus­tralia Uproot­ed in the days pri­or to The Accord under the Hawke and Keat­ing Gov­ern­ments.

A cri­tique of a yet-to-be-pub­lished paper of mine (“Loan­able Funds, Endoge­nous Mon­ey and Aggre­gate Demand”, forth­com­ing in the Review of Key­ne­sian Eco­nom­ics lat­er this year; the link is to a par­tial blog post of that paper) by non-main­stream econ­o­mist Tom Pal­ley reminds me of one of my favourite ripostes by a politi­cian, back in the days before spin doc­tors stopped them say­ing any­thing offen­sive — or indeed any­thing inter­est­ing.

As Sir Robert Men­zies, for­mer Aus­tralian prime min­is­ter and leader of the con­ser­v­a­tive Lib­er­al Par­ty, was giv­ing a cam­paign speech in 1954, a heck­ler called out “Mr Men­zies, I would­n’t vote for you if you were the Archangel Gabriel”. Men­zies shot back: “Madam, if I were the Archangel Gabriel, you would not be in my con­stituen­cy.”

My call a few weeks ago that the glob­al finan­cial cri­sis is over was very much an Anglo-cen­tric one, and a US-cen­tric one in par­tic­u­lar (Clos­ing the door on the GFC, March 10).

Europe’s con­tin­u­ing own goal from the euro and aus­ter­i­ty, and cred­it excess­es in emerg­ing economies, could still derail a glob­al recov­ery. But the epi­cen­tre of the cri­sis was the US, and the indi­ca­tions are sol­id there that this par­tic­u­lar ‘Min­sky moment’ is behind it.

What a dif­fer­ence three decades makes: my vis­it in 1981–82 coin­cid­ed with the tri­al of the Gang of Four; now many sub-25 Chi­nese think that must be the name of a new boy band they yet haven’t heard of.

A cou­ple of weeks ago I took a swipe at Bank of Eng­land over a speech by its Gov­er­nor Mark Car­ney that was unre­al­is­tic about the dan­gers of a bloat­ed finan­cial sec­tor (Godzil­la is good for you? March 3). Today I’m doing the oppo­site: I’m doff­ing my cap to the researchers at Thread­nee­dle Street for a new paper “Mon­ey cre­ation in the mod­ern econ­o­my,” which gives a tru­ly real­is­tic expla­na­tion of how mon­ey is cre­at­ed, why this real­ly mat­ters, and why vir­tu­al­ly every­thing that eco­nom­ic text­books say about mon­ey is wrong.

(At least for the Anglo zone; more on Europe and Emerg­ing Mar­kets in com­ing weeks).

One of the ironies of the eco­nom­ic cri­sis that began in late 2007 is that the best acronym for it — the “GFC” for “glob­al finan­cial cri­sis” — was coined in the one coun­try that suf­fered the least from it, Aus­tralia. The year 2014 is the sev­enth of the “GFC” (the pan­ic began on August 9, 2007, when BNP Paribas shut down three of its sub­prime-based funds), but at last the major­i­ty of eco­nom­ic reports are of sus­tained if anaemic growth, rather than of bank fail­ures and reces­sion. Australia’s report­ed growth rate for 2013 of 2.8 per cent fol­lows the UK report­ing 1.9 per cent and the US 2.4 per cent; even the EU, where sev­er­al coun­tries are still mired in out­right Depres­sions, record­ed an over­all growth rate of 0.1 per cent for 2013.

The big­ger the finan­cial sec­tor gets, the more it can destroy. And Bank of Eng­land Gov­er­nor Mark Car­ney’s vision of British banks nine times the size of GDP is pos­i­tive­ly ter­ri­fy­ing…

Fans of Japan­ese schlock fic­tion will be pleased to know that that old mega-favourite Godzil­la is return­ing in 2014, to stomp on sim­u­lat­ed cities in a cin­e­ma near you. And of course, he’s big­ger and bet­ter: the orig­i­nal Japan­ese movie had him at about 50–100 metres and weigh­ing 20–60,000 tons; I’d guess he was about twice that size in the 1998 US remake; and by the looks of the trail­er for the 2014 movie, he’s now a cou­ple of kilo­me­tres tall and prob­a­bly weighs in the mil­lions.

The penul­ti­mate Win­dows ver­sion of Min­sky (released a few days ago) inad­ver­tent­ly installed an old ker­nel with a very low exe­cu­tion speed. This has been fixed in the lat­est ver­sion. If you down­loaded a few days ago and now find that mod­els run very slow­ly, please down­load the lat­est ver­sion today (it has the same name: Minsky.1.D32). If you down­loaded before then, the exe­cu­tion speed will be fine, but a few bugs have also been fixed in this release: see Tick­ets for the details (from my per­spec­tive, the main bug was a fail­ure to pass LaTeX for­mat­ting codes between God­ley Tables).