Steve Keen's Debtwatch

Why Now?

       There has been no short­age of com­men­ta­tors and play­ers will­ing to vouch that this is the worst finan­cial cri­sis they have ever seen. Equal­ly, there has been no short­age of bailout moves by the Fed­er­al Reserve–remedies that put “the Greenspan Put” to shame in their mag­ni­tude.
       And yet the mar­ket melt­down con­tin­ues, and the casu­al­ties con­tin­ue to mount, with Bear Stearns the latest–and sure­ly not the last.
       In all this, no one yet seems to have posed the ques­tion of “why now?”. Why is the cri­sis clear­ly more severe this time than ever before, and why are reme­dies that worked rel­a­tive­ly quick­ly in the past (remem­ber the fast turn­around of the mar­ket after Octo­ber 1987, and the rapid recov­ery from the res­cue of Long Term Cap­i­tal Man­age­ment?) failling today?
       The answer is, sim­ply, that the world has nev­er in its his­to­ry car­ried the lev­el of debt that it is car­ry­ing today. The reme­dies that worked when Amer­i­ca’s pri­vate debt to GDP ratio was a mere 150 per­cent (see Fig­ure 1) are inad­e­quate when that ratio is 275 per­cent.

The Can­ber­ra talk will now start at 7.30pm. The venue remains the same: ANU Emer­i­tus Fac­ul­ty Fel­lows Lane Cot­tage; build­ing 3T.

For more infor­ma­tion, con­tact the Nature and Soci­ety Forum at office@natsoc.org.au.

There has been a change of venue for the Per Capi­ta lunch talk. The details now are:

• 12pm-2pm, Fri­day March 14 Deep­er in Debt Talk, over Lunch host­ed by Per Capi­ta
• Reser­va­tions: info@percapita.org.au — $50 per per­son ($35 con­ces­sion).
  • Loca­tion: Board­room of Boston Con­sult­ing Group
  • Lev­el 52, 101 Collins Street.

A speak­ing tour of Mel­bourne, Ade­laide and Can­ber­ra has been arranged for me by a num­ber of groups. I’ll be speak­ing on Aus­tralia (and the OECD’s) debt bubble–the phe­nom­e­na, analy­sis of how they came about, and what we might expect when they burst.

The details are:

Melbourne

7pm, Thurs­day March 13th

• Deep­er in Debt Talk, and then a con­ver­sa­tion with Bri­an Cavanagh
• Lev­el 1, 27 Hard­ware Lane, Mel­bourne, free entry
• Drinks after­wards

12pm-2pm, Fri­day March 14

• Deep­er in Debt Talk, over Lunch host­ed by Per Capi­ta
• Reser­va­tions: info@percapita.org.au — $50 per per­son ($35 con­ces­sion).

The rev­e­la­tion in the min­utes of the RBA’s Feb­ru­ary meet­ing that debate focused, not on whether there should be a rise, but on whether it should be 0.25 or 0.5 per cent, shows that the RBA wagers that the threats to the Aus­tralian econ­o­my are upside ones–tighter labor mar­kets and high­er inflation–rather than down­side ones–a glob­al slow­down as asset mar­kets col­lapse dur­ing a cred­it crunch. The Feb­ru­ary min­utes implied that the RBA might real­ly throw its cards on the table at the March meet­ing, with a 0.5% rise being a dis­tinct pos­si­bil­i­ty.

On March 28, I’ll be launch­ing Eric Aaron’s lat­est book Mar­ket ver­sus Nature: The social phi­los­o­phy of Friedrich Hayek. The venue is:

Glee­books – 49 Glebe Point Road

Time: 6pm for drinks before a 6.30pm start; fin­ish by 8.30pm

Eric’s ear­li­er books include What’s Left–which is a mem­oir, an eval­u­a­tion of the fail­ure of com­mu­nism, and an attempt to dis­cern what remains of mer­it in social­ist thought after the col­lapse of com­mu­nism in the 1990s–and What’s Right–which blend­ed insights from polit­i­cal phi­los­o­phy, eco­nom­ics and biol­o­gy to put the case for a more eth­i­cal approach to the future of human­i­ty.

Stu­art Cameron’s new com­pa­ny Rife Media has start­ed a Debt­watch Pod­cast page:

Rife Medi­a’s Debt­watch Page

The Pod­cast will still be host­ed here as well, but it will prob­a­bly appear first on Rife Medi­a’s page as Stu does the pro­duc­tion.

Stu also pro­duced a Pod­cast from the Fabi­an Soci­ety sem­i­nar on “Eco­nom­ic Chal­lenges Fac­ing the Rudd Gov­ern­ment”, at which Saul Eslake, John Edwards and I spoke. All the speech­es, Geoff Gal­lop’s intro­duc­tion, and the Q&A ses­sion after­wards, are all cap­tured there with quite high sound qual­i­ty.

The Fabi­an Soci­ety has organ­ised a talk on the above top­ic for this Wednes­day at Glee­books:

When:       6.00 for 6.30pm, Wednes­day 20 Feb­ru­ary 2007.

Where:      Glee­books, 49 Glebe Point Road, Glebe.

Cost:         Non-Fabi­ans $10/$7. Mem­bers are free — please show your mem­ber­ship card to obtain free entry.

Con­tact:   Book­ings essen­tial – Glee­books web­site – Book online at http://www.gleebooks.com.au or on 9660 2333.

Media Queries:   Please con­tact Simon O’Hara, Sec­re­tary, NSW Fabi­ans -nsw@fabian.org.au

Note to Sub­scribers: I have been on study leave in Europe for the last month, and get back to Syd­ney late on Mon­day Feb­ru­ary 4th. I will be avail­able for com­ment from the morn­ing of Tues­day Feb­ru­ary 5th.

Chart of the Month: Who’s hav­ing a hous­ing bub­ble then?

A SMH arti­cle claimed that 17 out of 19 econ­o­mists sur­veyed expect­ed the RBA to increase rates in response to the Jan­u­ary CPI fig­ure:

Dol­lar inch­es towards US90 cents on rates expec­ta­tion