|
Yes, Associate Professor Steven Keen, they are all out to get you. The apparent conspiracy you referred to in Crikey on Tuesday is real — a concerted effort to deny the easily frightened public the benefit of your visions. And Gerry Henderson is the least of your worries.
In the past couple of days no less than three prominent economists have publicly knifed you — heavens knows how many hundreds or thousands have been doing it in private.
Macquarie Bank’s Rory Robertson used some subtlety:
High-profile Professor Steve Keen is forecasting Australian home-price falls of maybe 40% over the next few years. His credentials as a property forecaster would be stronger if he had chosen to auction his apartment a year ago, rather than this month.
Robertson’s letter to clients then went into economic talk about the impact of falling interest rates on households. It seems lower mortgage payments will ease some of the pressure on household income and therefore on the housing market. Who’d have thunk it?
Then TD Securities’ Steven Koukoulas weighed in under the header “Australian interest rates to fall to zero? What utter rubbish” and made Henderson look like a fence sitter:
The global credit crunch, risk of recession, stock market vacillations, banking failures and aggressive interest rate cuts have provided a difficult backdrop for forecasters. It has also seen some whacky claims dressed up as forecasts gain prominence.
One of the doozies that takes the cake for misguided headline grabbing junk is a claim by Associate Professor from the University of Western Sydney, Steve Keen, that Australian interest rates “will probably be zero by 2010”. He suggests that Australia is (not maybe) heading for a depression, the slump will last “for 10 years if we’re lucky”, that house prices will fall 40% and unemployment will rise to 10 or 15% and could go to 20%.
This is certainly a fantastic way to grad headlines, attention and standing. A cynic may go a step further and make a forecast that:
- There is a risk that house prices will fall 90%, the unemployment rate will rise to 80% and the Australian dollar will fall to US$0.10.
I would not do that, but you can see the absurdity of making outrageous claims that are so fanciful to be worthless. Keen’s claims cannot go without some comment as, unfortunately, they are starting to be read by some money managers offshore who do not know Steve Keen from a bar of soap. There is a perception that he has some credibility within the financial markets in Australia.
And then Koukoulas resorted to economic arguments to debunk your claims. What a dirty trick.
Access Economics’ Chris Richardson was crueller for two reasons. First, his comments received a broader audience as they were reported in The Age by Mark Hawthorne. Second, he didn’t use your name, just referring to “that guy from the University of Western Sydney”.
How cruel.
| 
9 Comments
Houses are now like computers were. Your choice is to buy now or buy cheaper. The only reason you can’t buy cheaper now is the Mexican stand-off between vendors and purchasers. Rising unemployment and forced sales will fix that in favour of purchasers. Prices have fallen where sales have occurred but if there is no liquidity (activity) in a market, you just can’t tell.
Well Mr Pascoe?……are you going to answer Old Skeptic’s challenge?
You could at least attempt to dismantle his propositions…..
Excellent to see all but one comment coming out in support of Keen.
Why has the author of this article chosen to take such a childish tone? What is the purpose of this article? If the author had simply stated that various economists disagree with Keen and why they disagree with him then so be it. But why all the childish rancour? Why so one-sided? Surely it needs to be stated that so far everything that Keen has been warning about has started to happen. His predictions may deviate from this point on but that’s a different story.
This really is one of the most fatuous and pointless articles that I’ve had the misfortune to read on Crikey. If I wanted to read this rubbish then I would read The Daily Telegraph.
I’ll offer Steve Keen a tulip for his house. That’s how much I think it is worth.
It’s a pity no one’s taking you to task over this article, Michael:
http://www.crikey.com.au/Business/20070316-A-super-sub-prime-beat-up.html
They mocked and ignored Taleb, Faber and Roubini as well. Peter Schiff was scorned in America for years, but he was right. Keen’s just following the theories derived by Hyman Minsky and Irving Fischer. Not the mindless public shills that are Richardson, Koukoulas, and of course, Pascoe.
Michael, if you had taken the time to go and read Steve’s Blog you would see where these estimates come from. They are based on solid empirical data.
(1) Boom property and share prices come back to the long term trend line after a credit crunch, regression to the mean you might say. In property the peak was about 40% higher than the long term trend line.
The empirical evidence for this comes from Depression, the Japanese crash and now the US, UK, Irish and Spanish property crashes.
(2) The estimate of unemployment rates come from the impact from the rate of increase in debt stopping, which gives a sharp drop in GDP and consumer spending.
This comes from 1st principles and the Australian GDP data from the ABS, look it up it is actually quite interesting.
Steve is one of the World’s experts on Minsky Instability Theory, which predicts and describes the current world wide state of play.
I suggest, reading Steve’s Blog, his acedemic website and buy his book “Debunking Economics”. You will receive a wonderful education on economic history and theory.
Some is a bit technical, but you can just skip the hard mathematics, as a lot of it very clear and easy for the layman to understand.
Maybe Steve Keen’s predictions will turn out to be wrong in which case we’ll all be better off and Steve will have egg on his face. However, Michael Pascoe’s piece is once again poor quality, relying on sneering and gloating to make a point . What do we know about Koukoulas’s and Richardson’s performance in economic forecasting? Who checks their predictions against actual economic outcomes? I think most people would know them only through the occasional short grab on TV or radio. At least Steve Keen has the courage to publicly put his reputation on the line.
MIchael, Keen has used these headline grabbing claims to illustrate a valid point about our obsession with debt for consumption. I hope it gets through our collective national skull.
Debt incurred for consumption and speculation distorts the economy. Runaway asset prices can only result in one of two outcomes: Asset price falls (deflation), or a fall in the value of money, against which those assets’ values are measured (inflation). Whilst we appeared to be heading for the latter, most, including the RBA, have quite clearly concluded that we’re now hurtling towards the former.
Actually Michael, I’ll up the stakes a bit. I will debate with you on the forum of your choice, with 2 weeks notice. On the table: the past and current position. Your record of predicton and analysis. SK’s record.
Theory and reality.
Pick your venue.