Steve Keen's Debtwatch

ABC Radio’s pre­miere cur­rent affairs pro­gram PM asked me to debate the caus­es and impli­ca­tions of last week’s mar­ket sell-off with Chris Caton, from BT Aus­tralia. Click below to hear the debate.

Steve Keen’s Debt­watch Pod­cast

The tran­script is below  (and here on the ABC site). As is usu­al with such things, the tran­script is wild­ly ungram­mat­i­cal at times.

MARK COLVIN: The under­ly­ing fact about the glob­al econ­o­my is that there’s still a huge dis­crep­an­cy between what the eco­nom­ic his­to­ri­an, Niall Fer­gu­son, calls Plan­et Finance and Plan­et Earth.

My pre­vi­ous blog post on the RBA not­ed their ten­den­cy to fol­low a Tay­lor Rule pri­or to the GFC. A col­league points out anoth­er sta­tis­ti­cal reg­u­lar­i­ty that holds either side of the GFC, and right back to 1990: the RBA’s deci­sions fol­low the 90-day bank bill. Below are Phil Williams’ obser­va­tions on this issue.

In the days run­ning up to the first Tues­day of each month, the Aus­tralian pop­u­lace is sub­ject­ed to the excru­ci­at­ing pageantry of whether the RBA Board will increase or decrease inter­est rates, or whether they will keep them on hold for anoth­er month.

Today’s 4.78% fall on the S&P could eas­i­ly be reversed tomor­row if the BLS unem­ploy­ment num­ber is bet­ter than expect­ed; equal­ly today’s fall could turn out to be just the starters if it is worse. But beyond the volatil­i­ty of the stock mar­ket, it is becom­ing obvi­ous to every­one now that the cri­sis that began in 2007 is still with us.

I’ve just received the fol­low­ing request for assis­tance from Chris Vede­la­go, the Prop­er­ty Reporter for The Sun­day Age :

I lec­ture on Behav­ioral Finance at the Uni­ver­si­ty of West­ern Syd­ney this semes­ter, and will record all my lec­tures and post them on my YouTube Chan­nel Prof­Steve­Keen. In this first lec­ture (after the usu­al pre­lim­i­nar­ies of explain­ing assess­ment and the like to my 85 third year stu­dents), I cov­er the Neo­clas­si­cal the­o­ry of con­sumer behav­ior.

As I note to my stu­dents, the con­cept I teach here–Revealed Preference–was taught in 1st year 40 years ago, when I was an fresh­er under­grad­u­ate. But the tuition of Neo­clas­si­cal eco­nom­ics has been so dumb­ed down over the years that my 3rd year stu­dents had­n’t heard of it before. I expect it’s reserved as pun­ish­ment for those who under­take an Hon­ors degree these days!

In a Nutshell: I have a hunch that the RBA will follow its conventional “neoclassical” models and raise rates tomorrow, even though the economy is locked in “two speed” mode, and the global economy is racked by uncertainty. This would be a mistake: given unprecedented private debt levels and deleveraging by households and businesses, a rate rise would accelerate the economy’s decline into recession.

Click here for this post in PDF

(My apolo­gies for the pre­vi­ous post–I did­n’t check the YouTube link**, which was to an ear­li­er video.)

I gave the pre­sen­ta­tion below to a Grif­fith Uni­ver­si­ty sym­po­sium on Finance the­o­ry “after” the GFC/Great Reces­sion.

Speak­ers only had 20 min­utes, and if you think I nor­mal­ly speak fast, brace your­self for the speed of this pre­sen­ta­tion. I sug­gest you keep the mouse near the “pause” but­ton in case you want to spend more time read­ing some of the text–which is also here of course in the Pow­er­point File.

I’m tak­ing part in an Intel­li­gence Squared Aus­tralia debate on pop­u­la­tion enti­tled “If we keep pop­u­lat­ing we will per­ish” on Tues­day July 26th at the City Recital Hall in Angel Place, Syd­ney.

The speak­ers are, on the affir­ma­tive, myself, Dick Smith, and Sen­a­tor Laris­sa Waters (Greens, QLD). The neg­a­tive case will be put by Tan­veer Ahmed, Frank Bren­nan and Wayne Goss.

If you’d like to take part, tick­ets are $32 per per­son or $22 per stu­dent or pen­sion­er, and can be pur­chased from this link.

I’ve done numer­ous inter­views on Al Jazeera’s news and busi­ness pro­grams over the last 5 years; this is the first one I’ve been sent a clip of–and I’ll try to keep get­ting them now that the Prof­Steve­Keen YouTube Chan­nel is up and run­ning.

The top­ic was the role of the Cred­it Rat­ing Agen­cies and their role in the cri­sis. Though the inter­views are short new pieces and don’t leave time to get into top­ics in any great detail, the fact that Al Jazeera cov­ers top­ics like this in some crit­i­cal detail puts it sev­er­al steps ahead of the media pack, espe­cial­ly in the US and Aus­tralia.

That tran­scen­den­tal truth occurred to me while writ­ing the sec­ond edi­tion of Debunk­ing Economics–which will be pub­lished in Sep­tem­ber. In this video, I point out the most egre­gious instance of this, the “Son­nen­schein-Man­tel-Debreu” (SMD) con­di­tions. This refers to research by lead­ing neo­clas­si­cal econ­o­mists on whether the so-called “Law of Demand” that can be proven for an indi­vid­u­al’s demand curve applies to a mar­ket demand curve.

The “Law of Demand” is the propo­si­tion that, if a com­mod­i­ty’s price falls, the demand for it will rise. That sounds like a rea­son­able state­ment at first glance–and it will often be true in the real world. But it is an arti­cle of faith for econ­o­mists that this is always true.