Top StoriesMay’s sharp fall in jobless numbers added to the greenness of the ‘recovery’ (or less bad) thesis; overnight June’s unemployment figures were so awful that they could have stunted at least, the wavering shoots.
Steve Keen: An invitation to Gerard Henderson
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Gerard Henderson’s diatribe in today’s SMH argues that the media has done a “soft” job on my views, which have only gained notoriety because of the extreme predictions I have made about the forthcoming economic downturn qualifying as not merely a recession, but a Depression. It seems I’ve only got attention because of my extreme views, while the media has let the side down by doing a “tabloid” job only, and not subjecting my views to scrutiny. In fact, as many in the media know, I have gained attention because of my Debtwatch Report, which will be two years old as of the next issue (No. 28, to be published in November the day before the RBA meeting). The journalists who have reported my views — including of course Kerry O’Brien, who gets special attention from Gerard in his mockumentary — have read my analysis for two years now. Yet I saw no sign of any attention to the analysis behind my predictions in Henderson’s piece, apart from possibly a “just in case” concession towards the end where he noted that “[Keen’s] predictions of a debt-induced decade-long depression … may be correct.” In that case, the commentator who deserves the approbrium for “tabloid” journalism is Henderson himself, and not the ABC nor the Daily Telegraph, nor Sixty Minutes. They, after all, read my research, have quizzed me extensively about it, and made the decision based on investigative journalism that my views deserved coverage. For this, I applaud them. I applaud them for standing up for the principles of the Fourth Estate. Standard economic commentary has been dominated by the cheerleaders for the policies which have led to this crisis, while the authorities themselves and the academic profession of economics itself have turned a blind eye to any arguments that questioned the mantra in favour of deregulated finance. I know this from extensive experience. I have made five applications for ARC funding to investigate the dynamics of debt-deflations and Depressions in the last ten years; all have been unsuccessful (including one time when I topped UWS researchers on the ARC’s then published referees’ point scores, after which seven UWS researchers received funding — but I was not one of them). I made a submission to the Wallis Committee in July 1996, in which I warned that securitisation of loans could lead to a crisis exactly like the Subprime crisis that has now unfolded, and of course my comments were ignored. I wrote to the RBA in June 1998 offering to hold a seminar on the “Financial Instability Hypothesis”, which is the foundation of my argument that we are likely to experience a Great Depression. The offer was declined. As has often been said, official channels are clogged to make sure information and criticism doesn’t get listened to. So when I saw the debt that Australia’s speculative bubble in real estate and belatedly shares had got us into, I turned to the journalistic profession to raise the alarm. To its credit, since I made a good case and the empirical evidence was compelling, journalists listened to me. So Gerard, maybe you should do some investigative journalism now too. Go to my website www.debtdeflation.com, where you will find Debtwatch Reports going back to November 2006, and academic papers on debt deflation published as long ago as 1995 (maybe even read Debunking Economics; certainly check out its website). And if you’d like to take a real risk and play the ball rather than the man, I’m more than willing to give a seminar on debt deflation at your Sydney Institute. Over to you. |
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21 Comments
The worst part of the article was probably not even Gerard’s fault. Subbies tagged Associate Professor Keen as a “leading doom-celeb”. If even economics academics are “celebs” these days, this is more of a comment on the SMH and the rest of the now completely asinine mainstream media than anything else. One a fortnight I visit the SMH website, just to feel better about the price of my Crikey subscription. Always works.
Professor Keen (and Crikey subs) it’s opprobrium
Dude, you’re right, and I love your work but did nobody warn you?
Don’t feed the Troll…
Do you not know what you’ve let yourself in for? (Hint - check the SI Quarterly, for the latest installment on Gerard’s “Email war against everybody” - he invented the name “Media Watch”, don’t you know?)
I wish you luck. Fixing the Great Depression itself will be as nothing compared to facing the wrath of The Bearded Pedant.
Henderson is an irrelevant knob, really, but I think his article does have contain some grains of truth. Ignoring the personal attacks I think he is right to suggest that the media were slack in chasing this one up. Keen may well be right, or wrong for that matter, but the reader/viewer is rarely given that impression. There’s no analysis in the Herald, or 60minutes, just a presentation and dramatisation of ‘facts’.
Ever since the 1975 records show that it was not Gough Whitlam in the PM’ship when Indonesia invaded East Timor and that it was Andrew Peacock and Malcolm Fraser in 1976 who made the decision to accept the invasion in toto because it would piss off Indonesia if they didn’t, poor Gerard has had no-one left to distribute his tirades against.
So now he just rabbits on about nothing much. I don’t know why anyone bothers to answer him.
I do not agree with Keen though that there will be a 10 year depression - this aint the 1930’s in a world recovering from a mammoth world war.
Steve - please ignore Henderson like the rest of us. Don’t read his biased, illogical, error ridden drivel and the various papers that he sponges off will get the message and get rid of him.
Gerard is a failed young Lib who had neither the courage or brains to get preselection. He is not worthy of further thought.
GH is a right doodle, there is no doubt. Like all the conservative ranters, the times has passed them by. The little man has left the Lodge - not that he lived there - and unregulated capitalism has proved to be a disaster.
There is one question I have for Mr.Keen though. Why did he let his apartment be passed in and not sell if he predicts house prices are going to fall so much?
Henderson’s tirade is a disgrace. He should know better than to attack the man and completely ignore the substantive arguments that Steve K has put forward.
Steve Keen talks a bloody good game. “That reminds me of the time I wrote the Bible, but it was rejected because that damned establishment didnt like my politics.” Yawn. He lost me the second he described the Daily Tele and Sixty Minutes as “investigative journalism.”
Steve mate, just laugh at this buffoon. You and Roubini have been right for the last 2 years and thanks to your timely warnings before this meltdown really got started, I’m set to weather the coming 10 year depression. Perhaps Henderson’s yapping has something to do with the state of his master’s debt-laden business, as reported by Crikey:
http://www.crikey.com.au/Media-Arts-and-Sports/20081016-Can-the-Murdoch-and-Fairfax-families-support-their-debt-laden-public-empires.html
LOL
Gerard H’s article is a well reasoned one, whereas Steve Keen’s response is an over-reaction. On the other hand, Steve’s prediction of a Depression could well be right, but for the wrong reason. If the Rudd Government goes ahead with the implementation of carbon taxes, the impact on the economy will be catastrophic — given that there is no substantiated scientific evidence that global warming is man-caused. It is certain that the scale of carbon taxing foreshadowed would result in a severe fall in the standard of living, widespread unemployment and reduced property values.
Steven Keen is not the first to raise this argument. I vividly remember attending a debate about foreign debt and investment at Sydney University in 1994 starring none other than one John Winston Howard, then shadow minister for something not particularly high on the meatiness scale. Howard argued that we were addicted to foreign debt and investment as we continued to live beyond our means. Servicing these obligations (interest and dividends) required us to either accept a lower standard of living or to attract even more foreign capital. This cycle could only continue so far, at which point the economy becomes overwhelmed by its external obligations, be they private or public sector debts. In order to prevent this (now referred to as the ‘Iceland scenario’) from occurring, Howard insisted that Australia’s primary focus should be to adopt policies to encourage the establishment of a sufficient base of capital from which domestic loans could be drawn, thus diminishing the need for our banks to source capital from offshore.
I was so relieved and impressed to hear this from him that I voted for the man in 96 and 98, and again grudgingly in 01. Instead he introduced policies encouraging further indebtedness, discouraging saving, and oversaw the ballooning of Australia’s trade and current account deficits and net foreign debt. He squandered the great opportunity presented by our best terms of trade in a generation resulting from the mining boom, and left us in a far worse position to deal with a global shock.
The new government cannot be held responsible for the current mess, but if they see fit to borrow and squander billions on pokies and plasmas just to lift retail spending a few percentage points and stave off a technical recession, it will only make the inevitable future downturn far far worse. Likewise if the US manages to ride this particular crisis out with a 13% of GDP budget deficit for 08, the next shock will be absolutely catastrophic for all of us.
Crankynick has Gerard grown a beard? You’re not confusing him with Mr Germaine Greer himself, Paddy McGuinness, are you?
I’ve been known to have the odd crack at Henderson myself but I thought he was dead right today.
I endured the 1980s obsession with foreign debt once and I’m not copping it again. Debt is not some sort of proxy indicator of poor economic health regardless of how much the likes of Keen harp on about it. It’s that sort of thinking that has given NSW run down infrastructure.
Bernard, your NSW analogy is dead on. Debt is never bad when it’s acquired to build infrastructure which either directly or indirectly results in increased production capacity and revenue with which to service and hopefully pay off the debt entirely. Business loans are a great example. Debt funded (suitable) public infrastructure projects are another.
Australia’s obsession with debt is bad because the bulk of our debt has been acquired for all the wrong reasons. Inflating domestic asset prices (we’re not building that many new homes, we’re just speculating on the value of existing ones), and buying consumer goods. Home loans are not bad as long as paying them down is the number one priority, and the debtor doesn’t see fit to redraw to go on holiday or have a splurge on a fancy entertainment system.
The previous government’s claim that, since public debt was zero, our foreign debt didn’t matter because it was private sector debt, was utter garbage. Private debt can be worse than public when the bulk of it is accrued for the wrong reasons. When asset prices pop the debt remains. After the pop the economy slows and revenue declines, but the debt remains. If the debt can’t be met the indebted institutions fail. If a few too many fail, then the domino effect kicks in, confidence evaporates and the whole economy goes splat.
That’s the problem with excessive debt. It makes no difference if the government assumes the debt (as Iceland did) or not. The damage to the economy is a given in either case.
Debt, Infrastructure, etc are meaningful words at times and sticks for poking people to react at other times. Bernard Keane has a helpful contribution here in that ‘thinking’ is the difference (quality thinking). Steven Keen has guts and an academic argument. Many commentators react to guts as to an ideology, automatically without due reason and careful thinking (analysis) as if on a mission to stop it breathing incase it reproduces.
Gerard Henderson has little to say but a lot of space to say it in. In his lumpier dreams he probably thinks he’s as important as the title he gives himself makes him sound. I enjoy guessing what he will write about each week, just as I used to with Paddy McGuinness. It was more challenging with Paddy, though, - at least he’d been around a bit.
Paul, Howard changed when he started sucking on that special Bush dible and became obsessed with getting his jollies off behind a Bush.
Sex is the beating heart of most human psychology whatever branch of the tree of status you’ve climb onto - especially power psychology.
(Bush can be (and even Howard) sexy).
Steve, my guess is that your worst crime, and I’m so sorry to have to remind you again about this within 24 hours, is that you hail from what Gerard was compelled to call a “suburban” university. I’m sure you know your way to the Sydney Institute if Gerard were to invite you if he hankered for a night of economics rough trade. But Gerard would need a GPS to find his way out to UWS and a nice hot bath afterwards. What grain-fed buffoonery it was.
Thanks to Prof Keen for drawing so many graphs that have no end in sight that I was able to resist the massive cultural pressure to take on a mortgage which would, by my numbers, have me about $100K underwater over the past three years compared to renting/saving. The pity is that argument about the downside of debt has, until recently, been sidelined in the media by people selling, building or advertising property and, in this case, devoted to an government whose main aim was to make people feel relaxed and comfortable. The lack of information available to those of us who are not economists ,unless we have taken the time to find dissenting views , has made this situation much worse and will have real, not merely ideological, impacts of peoples wellbeing.
I agree with Paul.
Bernard, Steve Keen is talking mainly about household debt, used to finance consumption, not production. Infrastructure goes towards future economic production. Plasma TVs and renovated kitchens do not.
As old JWH said, we essentially need to increase our debt each year to maintain the same lifestyle.
Congratulations on Professor Keen for telling it like it is.
Does anyone (apart from their own inner sanctum of poison pen writers) still take the likes of Gerard Henderson, Piers Ackerman, Janet Albrechtsen, Miranda Devine or Keith Windschuttle seriously anymore? These nodding dog mouthpieces of the extreme right view which wants us all to leave markets completely unregulated to be crashed by the visible hand of greed and scams, whilst they attack every expert or academi or public servant under the sun for being “left wing” are what they appear to be - stupid and greedy fools themselves. I note Albrechsten is giving the academics another serve today encouraging students to “name and shame academics who arent objective” in the Australian page 22. hello? We all know who isnt objective here and it isnt the academics - it is they. I also note Albrechtsen comments that her political writing mate “Windschuttle” is no fan of government intervention yet both Albrechtsen and Windschuttle are more than happy to put their hands out for taxpayers money which pays their salaries as members of the ABC board.
They lie, they change their politics to suit their paypacket desires, and they deride genuine academics that want to propose good initiatives for regulatory control of the greed and scams.
Its pathetic that the media even bother to pay these people.
Oh and I note Albrechtsen remains climate change denier as well.
Tiresome Professor Keen arent they? They maintain market economics is the dominant theory. Its a shame Keynesian intervention is what applies in response to the global financial crisis outside their constructed play model of the real world.