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.

Peter Fray

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