Steve Keen's Debtwatch

I delayed pub­lish­ing this on the blog because I thought it was worth sub­mit­ting it to a news­pa­per for first pub­li­ca­tion on the anniver­sary of the Lehman Broth­ers col­lapse. That has occurred: a slight­ly edit­ed ver­sion of this post (for rea­sons only of length, I has­ten to add!) is in today’s Syd­ney Morn­ing Her­ald (page 4 of the print ver­sion), WA Today, and prob­a­bly sev­er­al oth­er news­pa­pers in the Fair­fax chain.

You have just come from your annu­al med­ical check­up, where your doc­tor assures you that you are in robust health.

Michael’s vis­it is being organ­ised by Pros­per Aus­tralia, and they have asked me to link to their page detail­ing the tour and his speak­ing engage­ments while in Aus­tralia. It’s quite a good page, with some well cho­sen links to some of Michael’s research:

Pros­per Aus­tralia: Pro­fes­sor Michael Hud­son Tour­ing Octo­ber

The fund-rais­ing wid­get has so far raised A$305, which is pret­ty good–thanks to all those who have donat­ed so far. More dona­tions of course are wel­come: it would be good to hit the A$1,000 mark if at all pos­si­ble, which will fund Michael’s hotel accom­mo­da­tion while in Syd­ney and make a con­tri­bu­tion to the air­fares for him­self and his wife.

“Green shoots” are appear­ing everywhere—just read the news­pa­pers, and you can be assured that we’ve turned the cor­ner. Bar the lat­est rise in US unemployment—up 0.3% to 9.7%, after falling 0.1% the pre­vi­ous month—there’s noth­ing but good news as far as the eye can see.

Unless, that is, you take a look at a wider range of data, as eco­nom­ic his­to­ri­ans Bar­ry Eichen­green and Kevin O’Rourke have been doing in their series  “A Tale of Two Depres­sions”.

“The Marx­i­an view is that cap­i­tal­is­tic economies are inher­ent­ly unsta­ble and that exces­sive accu­mu­la­tion of cap­i­tal will lead to increas­ing­ly severe eco­nom­ic crises. Growth the­o­ry, which has proved to be empir­i­cal­ly suc­cess­ful, says this is not true.

The cap­i­tal­is­tic econ­o­my is sta­ble, and absent some change in tech­nol­o­gy or the rules of the eco­nom­ic game, the econ­o­my con­verges to a con­stant growth path with the stan­dard of liv­ing dou­bling every 40 years.

In the 1930s, there was an impor­tant change in the rules of the eco­nom­ic game. This change low­ered the steady-state mar­ket hours. The Key­ne­sians had it all wrong.

One of the rea­sons I’m still a bear on the econ­o­my is because the econ­o­mists in the opti­mists camp are rely­ing upon very bad eco­nom­ic the­o­ry. If that the­o­ry is telling them good times are ahead, that’s one of the best pre­dic­tors of bad times you could have.

This isn’t because the opti­mists are bad econ­o­mists, bad peo­ple, or any oth­er per­mu­ta­tion: most econ­o­mists I know are good at what they do, and are very well inten­tioned too.

It’s just that they were taught a crock of non­sense at uni­ver­si­ty, and they now build mod­els based on a crock of non­sense that they erro­neous­ly believe to be accu­rate descrip­tions of the real world.

I’m hap­py to admit that it’s very hard to hold a bear per­spec­tive, when all about there appear to be “green shoots”, yet accord­ing to my body clock it’s still hiber­na­tion time.

There are, how­ev­er, four fac­tors that keep me in my lair:

1. Good His­to­ry;
2. Bad Eco­nom­ic The­o­ry;
3. Good Eco­nom­ic His­to­ry; and
4. Good Eco­nom­ic The­o­ry

I’ll be speak­ing at the Aus­tralian Muse­um’s reg­u­lar month­ly talk this com­ing Tues­day evening on the top­ic of “The Next Great Depres­sion?”. In a nut­shell, the details are:

Title: Muse­um Aus­tralia Month­ly Talk
Loca­tion: Aus­tralian Muse­um (entry via William Street)
Start Time: 18:30
Date: 2009-08-25
End Time: 20:00

Book­ings and pre­pay­ment are essen­tial: call 02 9320 6225 to book.

The cost is $20 for mem­bers  of the Aus­tralian Muse­um and $30 for non-mem­bers. The event begins with light refresh­ments, fol­lowed by a one-hour talk, and then an open ques­tion time.

As not­ed ear­li­er, I’m giv­ing a brand new set of lec­tures on Behav­iour­al Finance at UWS. I am tak­ing a non-stan­dard approach (sur­prise sur­prise) because I am dis­sat­is­fied with the texts in this area–even though it is gen­er­al­ly a non-neo­clas­si­cal realm.

The rea­son is that most Behav­iour­al Finance texts  give too much cre­dence to the neo­clas­si­cal def­i­n­i­tion of rationality–when that def­i­n­i­tion has as much to do with ratio­nal behav­iour as walk­ing on water has to do with mass trans­porta­tion. I also want to include mate­r­i­al from chaos the­o­ry and econo­physics analy­ses of finance, which most texts haven’t incor­po­rat­ed; and I’m con­sid­er­ing micro, macro and finance togeth­er since all three are inte­grat­ed when one aban­dons the neo­clas­si­cal fan­tasies about “ratio­nal” agents who can accu­rate­ly fore­see the future.

Last month I spoke at a sem­i­nar on the finan­cial cri­sis organ­ised by The Whit­lam Insti­tute, in reply to a speech by Pro­fes­sor John Quig­gin. Guy Debelle, the Assis­tant Gov­er­nor (for Finan­cial Mar­kets) of the Reserve Bank of Aus­tralia, was the oth­er dis­cus­sant.

The Insti­tute has put togeth­er a very pro­fes­sion­al video of the dis­cus­sion, which has been picked up by SlowTV, a free inter­net TV chan­nel run by The Month­ly, an Aus­tralian mag­a­zine of com­ment and analy­sis which, amongst many oth­er things, pub­lished Aus­tralian Prime Min­is­ter Kevin Rud­d’s lengthy essay on the Glob­al Finan­cial Cri­sis in which he explic­it­ly cri­tiqued neolib­er­al­ism.