Steve Keen's Debtwatch

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Before the US house price bub­ble burst, its banks and reg­u­la­tors claimed (a) that there was­n’t a bub­ble and (b) that, if house prices did fall, it would­n’t affect the sol­ven­cy of the banks.

The same claims are now being made about Aus­tralian house prices and Aus­tralian banks. On the for­mer point, Glenn Stevens recent­ly remarked that:

“There is quite often quot­ed very high ratios of price to income for Aus­tralia, but I think if you get the broad­est mea­sures coun­try-wide prices and coun­try-wide mea­sure of income, the ratio is about four and half and it has not moved much either way for ten years.

Reg­u­lar read­ers of this blog would know that I am a staunch crit­ic of what I pre­fer to call the “First Home Ven­dors Grant”, which is why I quick­ly sup­port­ed the pro­pos­al on GetUp’s sug­ges­tion box for a boy­cott cam­paign by first home buy­ers.

That sug­ges­tion has become a suc­cess in its own right even before Get­Up decides whether to pur­sue it or not, with the cam­paign being report­ed in the Fair­fax media: see Online cam­paign tar­gets high cost of hous­ing. Chris Zap­pone’s arti­cle head­lines The Age and the Syd­ney Morn­ing Her­ald’s home pages, and it had 364 com­ments as of 3.30pm today–a remark­able num­ber for a sin­gle sto­ry in less than six hours.

In just a few days, Pros­per Aus­tralia’s pro­pos­al that Get­Up should cam­paign for a First Home Buy­ers Strike has gone from last posi­tion in Getup’s sug­ges­tion box to first. At 7.15AM this morn­ing, it had 3,113 votes–almost 500 ahead of the next-ranked pro­pos­al.

In its essence, this pro­pos­al is aimed at remov­ing gov­ern­ment inter­fer­ence in the prop­er­ty mar­ket which pur­port­ed to improve home own­er­ship, but which in essence has made it worse by feed­ing the prop­er­ty price bub­ble.

The cam­paign group Get­Up has a “sug­ges­tion box” in which new cam­paign ideas can be sug­gest­ed, debat­ed, and if they receive suf­fi­cient votes, adopt­ed.

Pros­per Aus­tralia recent­ly sug­gest­ed a First Home Prop­er­ty Buy­ers Strike (click here for the Pros­per Aus­tralia press release), and after a week or so it is the 9th ranked cam­paign idea with 1700 votes.

I just logged on and vot­ed for it, with the fol­low­ing com­ment:

You will notice a strange lit­tle icon at the bot­tom of all my posts now:

This is just an image–the actu­al Flat­tr but­ton is at the end of the post

This is a link to a new web sys­tem called Flat­tr. It’s a way of enabling micro­pay­ments to be made via the web.

One of the great strengths of the web is the great abun­dance of free material—and this site is part of that. How­ev­er it’s also one of its great weak­ness­es, since it’s not free for web authors like myself to pro­vide this infor­ma­tion.

I was inter­viewed on the peren­ni­al top­ic of Aus­tralian house prices by Aus­tralian Bro­ker News. The seg­ment, “The Big Sto­ry: Is the bub­ble set to burst?”, includes two indus­try rep­re­sen­ta­tives as well as me. I enjoyed how the 5 minute sto­ry was put togeth­er, and I think you will too. Click below to watch the Aus­tralian Bro­ker News item.

As seen on Brokernews.com.au

I spoke at a MFAA Pro­fes­sion­al Devel­op­ment Day, fol­low­ing a speak­er who point­ed out that most deci­sions are made by the emo­tion­al com­po­nents of our brains–hence some of my ref­er­ences to using the CEO seg­ment of your brain instead.

| Open Play­er in New Win­dow

Guest post by Geoff Davies

Many peo­ple, includ­ing many het­ero­dox econ­o­mists, under­stand that the neo­clas­si­cal equi­lib­ri­um approach to under­stand­ing economies is futile and mis­lead­ing [1], because mod­ern economies are far from equi­lib­ri­um. The neo­clas­si­cal pre­dic­tion of equi­lib­ri­um or near equi­lib­ri­um requires a string of patent­ly absurd assump­tions. How­ev­er the devel­op­ment of bet­ter the­o­ries seems to be sig­nif­i­cant­ly hin­dered by a feel­ing that any super­sed­ing the­o­ry has to be thor­ough­ly quan­ti­fied before it can be use­ful, and a feel­ing that the neo­clas­si­cal the­o­ry has set a bench­mark for sophis­ti­cat­ed math­e­mat­ics that must be matched before anoth­er the­o­ry can be respectable. Less fun­da­men­tal­ly there seems to be a com­mon per­cep­tion that empir­i­cal insights can only be gained through elab­o­rate sta­tis­ti­cal treat­ments of obser­va­tions.

A blog par­tic­i­pant (Lyon­wiss) recent­ly made a com­ment about the gen­er­al state of aca­d­e­m­ic eco­nom­ics that was so “spot on” I want­ed to share it more wide­ly. I have of course fol­lowed the exact oppo­site of the con­ven­tion­al route to pub­lish­ing suc­cess that Lyon­wiss out­lines here–and I’ve encoun­tered the neg­a­tive con­se­quences he notes, of rejec­tion by neo­clas­si­cal ref­er­ees and edi­tors.

Here is Lyon­wis­s’s fool­proof for­mu­la for pub­lish­ing suc­cess in aca­d­e­m­ic eco­nom­ics:

Aca­d­e­mics wants to write research papers and have them pub­lished. Uni­ver­si­ty bureau­cra­cies are not only bean coun­ters, they are also paper coun­ters. Pro­mo­tion depends on the num­ber of papers pub­lished. Pub­lish­ing papers is not the same thing as actu­al­ly doing research.

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I recent­ly fired a stray shot at Paul Krug­man over his joke paper “The The­o­ry of Inter­stel­lar Trade” (Krug­man 2010), for which I have duly apol­o­gized. How­ev­er in that apol­o­gy I not­ed that Krug­man has also recent­ly pub­lished a draft aca­d­e­m­ic paper pre­sent­ing a New Key­ne­sian mod­el of debt defla­tion, “Debt, Delever­ag­ing, and the Liq­uid­i­ty Trap: A Fish­er-Min­sky-Koo approach” (Eggerts­son and Krug­man 2010), and I observed that I wish this paper was in fact a joke. Here’s why (this is a mod­i­fied extract from my forth­com­ing sec­ond edi­tion of Debunk­ing Eco­nom­ics, which will be pub­lished by Zed Books in about Sep­tem­ber or Octo­ber this year).