Steve Keen's Debtwatch

Aus­tralian read­ers may have seen the crit­i­cisms I made of the Aus­tralian Research Council’s (ARC’s) fund­ing process  in Eri­ca Cervini’s arti­cle “Show us the Mon­ey”, pub­lished in The Age and the Syd­ney Morn­ing Her­ald in the last week. The basic propo­si­tion was that the sys­tem is like­ly to sup­port research in an exist­ing par­a­digm, and reject explo­ration of alter­na­tives to that par­a­digm:

If Albert Ein­stein had applied for an Aus­tralian research grant, he may nev­er have devel­oped his the­o­ry of rel­a­tiv­i­ty. Those sup­port­ing the old style of physics would have stopped him obtain­ing fund­ing, says an asso­ciate pro­fes­sor in eco­nom­ics and finance at the Uni­ver­si­ty of West­ern Syd­ney, Steve Keen.

I don’t have time to write a full post on Joe Hock­ey’s call for Aus­trali­a’s banks to be brought to heel, so I’m sim­ply going to link here to David Llewellyn-Smith’s blog “Go Joe”, with which I large­ly agree. Hock­ey copped a rol­lick­ing lev­el of abuse from the stan­dard com­men­ta­tors for his call, which is one of the best indi­ca­tors that he was on to some­thing sen­si­ble.

Below are some excerpts from David’s arti­cle on Hock­ey; for the full sto­ry, please click on the link.

Much opti­mism flowed from last week’s dec­la­ra­tion by the Nation­al Bureau of Eco­nom­ic Research that the US reces­sion offi­cial­ly end­ed in June 2009. How nice of them to let us know.

Mar­kets react­ed warm­ly and the 8 per cent ral­ly in US stocks through Sep­tem­ber seemed more impor­tant than the rev­e­la­tion that the US Fed is wor­ried enough about defla­tion to be plan­ning anoth­er round of quan­ti­ta­tive eas­ing — dubbed ‘QE 2’.

I made the mis­take of post­ing the talks from the AMI con­fer­ence in SWF rather than Flash Video for­mat; I’ll amend that post short­ly, but in the mean­time here are the talk by myself and Michael Hud­son, and the pan­el dis­cus­sion.

Keen Talk: Why Credit Money Crashes

| Open Play­er in New Win­dow

Hudson Talk

| Open Play­er in New Win­dow

Hudson Discussion

| Open Play­er in New Win­dow

AMI Panel Discussion

| Open Play­er in New Win­dow

Stephen Zarlen­ga of the Amer­i­can Mon­e­tary Insti­tute invit­ed me to speak at the 2010 con­fer­ence in Chica­go, which I did on the top­ic of “why a cred­it mon­ey sys­tem does­n’t have to crash, and why it always does”. My speech, the dis­cus­sion, the speech­es of Michael Hud­son and Kaoru Yam­aguchi, and a pan­el dis­cus­sion, are linked at the end of this post. I rec­om­mend watch­ing them all if you can spare the time.

I was pleased to be invit­ed, since this indi­cat­ed a very open-mind­ed approach by the AMI: they are cam­paign­ing to have the Amer­i­can Mon­e­tary Act passed to estab­lish a 100% reserve mon­e­tary sys­tem, which is a pro­pos­al that I have expressed ambiva­lence about in the past.

I’m pre­sent­ing this talk to the Aus­tralian Con­fer­ence of Econ­o­mists this morn­ing (at 11 am). If you’d like to see the slideshow, right click on the link to save it to your PC (a sim­ple click may bring it up in Google Docs where you lose the ani­ma­tions and some of the for­mat­ting).

The lat­est Flow of Funds release by the US Fed­er­al Reserve shows that the pri­vate sec­tor is con­tin­u­ing to delever. How­ev­er there are nuances in this process that to some extent explain why a recov­ery appeared fea­si­ble for a while.

The aggre­gate data is unam­bigu­ous: the US econ­o­my is delev­er­ing in a way that it has­n’t done since the Great Depres­sion, from debt lev­els that are the high­est in its his­to­ry. The aggre­gate pri­vate debt to GDP ratio is now 267%,  ver­sus the peak lev­el of 298% achieved back in Feb­ru­ary 2009–an absolute fall of 31 points and a per­cent­age fall of 10.3% from the peak.

I took part in this debate host­ed by Intel­li­gence Squared Aus­tralia (an ini­tia­tive of the St James Ethics Cen­tre) last month. I was on the oppo­si­tion side, along with Paul Gild­ing and Kate Jen­nings; the gov­ern­ment posi­tion was put by Lucy Turn­bull, Ross Git­tins and Geof­frey Cousins. Details on all the speak­ers are avail­able here, as is a video of the entire debate from begin­ning to end. In this post I’m repro­duc­ing this video in bite-sized chunks–9 min­utes for each of the speak­ers (plus a 2 minute sum­ming-up peri­od), plus the audi­ence dis­cus­sion that includ­ed a cou­ple of Debt­watch stal­warts.

My last post on the Com­mon­wealth Bank’s “there’s no hous­ing bub­ble in Aus­tralia” doc­u­ment focused sim­ply on the use of two dif­fer­ent data sources for the House Price to Income ratio; I left the argu­ments the bank made untouched.

Not so David Llewellyn-Smith, who ran a logi­cian’s eye over the bank’s doc­u­ment and found “log­ic” of Mon­ty Python “if she weighs more than a duck, she’s a witch” cal­i­ble. David pub­lished this post in the Hen­ry Thorn­ton blog, and he has kind­ly con­sent­ed to me repro­duc­ing it here.

On Thurs­day Sep­tem­ber 9th 2010, the Com­mon­wealth Bank released a doc­u­ment on the Aus­tralian hous­ing mar­ket, to sup­port a tour that its senior exec­u­tives are mak­ing to meet over­seas investors.  The press release for the doc­u­ment was as fol­lows:

Aus­tralian Res­i­den­tial Hous­ing

Syd­ney, 9 Sep­tem­ber 2010: Senior exec­u­tives from the Com­mon­wealth Bank of Aus­tralia (“the Group”) will soon be trav­el­ling over­seas to meet with some of the Group’s off­shore share­hold­ers and oth­er investors inter­est­ed in Aus­tralia and the Aus­tralian bank­ing sec­tor.