Steve Keen's Debtwatch

The Mot­ley Fool’s inter­na­tion­al invest­ing team will be vis­it­ing Aus­tralia for a week start­ing on Feb­ru­ary 15th, meet­ing with more than a dozen domes­tic com­pa­nies to get a feel for what the Aus­tralian stock mar­ket has to offer. If you’d like to get their impres­sions, sign up for their free dis­patch­es here. Their overview piece on the trip itself is enti­tled “One Last Giant Prop­er­ty Bub­ble”.

I’m one of the peo­ple they’ll be inter­view­ing, and as a pre­lude they posed 3 ques­tions to me:

• Is Aus­trali­a’s hous­ing bub­ble big­ger than the one in the US?

Busi­ness Today will broad­cast an 11-minute inter­view by Whit­ney Fitzsim­mons about house prices with myself and Chris Joye of Ris­mark at 9.30am this Fri­day Feb­ru­ary 11 at 9.30am.

Though we dif­fered on many points–especially the indus­try-stan­dard propo­si­tion that pop­u­la­tion pres­sure was the main dri­ver of house prices–there was more com­mon ground than I had expect­ed, which is why I’m describ­ing it as a dis­cus­sion rather than a debate.

If you’d like to watch the inter­view and you’re not in Aus­tralia, Busi­ness Today is an ABC Aus­tralia Net­work pro­gram and it’s web-acces­si­ble as well as being broad­cast on a mul­ti­tude of chan­nels in Asia.

As reg­u­lar read­ers of this site would appre­ci­ate, some of the lyrics of Frank Sina­tra’s I did it my way apply to me in spades:

Yes, there were times, I’m sure you knew,
When I bit off more than I could chew…

That has become chron­ic, now that I am try­ing to fin­ish the sec­ond edi­tion of Debunk­ing Eco­nom­ics by the mid­dle of Feb­ru­ary (to be pub­lished hope­ful­ly in Sep­tem­ber by Zed Books). Once I’ve sent the draft off to Zed, I plan to start work on my “mag­num opus” Finance and Eco­nom­ic Break­down for Edward Elgar Pub­lish­ers–a task that will take at least a year, if not two.

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.