Mar 1, 2018

Your ABC platform for doomsayers

The ABC continues to provide a platform for people with poor prediction records to warn of imminent economic doom.

Bernard Keane and Glenn Dyer

Politics editor / Crikey business and media commentator

While the ABC continues to tear itself into pieces trying to deal with Emma Alberici’s pieces on company tax, other material slips through on the ABC site that is, even compared to the worst accusations levelled at the ABC’s chief economics correspondent, more reckless.

This morning, a piece labelled “Analysis” and based on the Stan Grant program Matter of Fact, inquired “Does Australia have a ‘zombie economy’ that is at risk of a crash?” The piece was about 800 words, most of which were devoted to giving economist Steve Keen a platform to spruik his argument that the Australian economy is about to crash because of household debt.

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11 thoughts on “Your ABC platform for doomsayers

  1. Evil Garry

    Keen has locked himself into his doomsday scenario for so long, and been humiliated by his prognostical failures so often, that he probably thinks he has no choice but to keep on serving up the same old festering garbage rather than admit his incompetence, because at some point in the future he will be proved right (sort of).

    Normal economic theory of the kind that Keen specialises in overlooking tells us that once interest rates start to rise beyond about 75 basis points, there will be somewhere between a medium-sized slowdown in property price rises, and some level of contraction, with the actual level depending mostly on the size of those interst rate increases. End of story, and it’ll only become a ‘Keensian’ horror story if we’re talking 400 basis points in a fairly short time, which is very hard to see at the moment.

  2. Don Willoughby

    Let’s see. Minimal or zero wages growth and inevitable rising interest rates will, just as it did in 2007 lead to mortgage stress, defaults and foreclosed properties. Nah! That could never happen could it? Thanks Bernard and Glenn for your expert advice.

  3. AR

    One day the stopped Keen clock will be correct but until then self satisfied patronising like “another conspiracy theory about how the financial sector will ruin us all” demonstrates the authors’ slips are showing.
    When money itself become a commodity, unmoored from its purpose – an agreed value as ratio of exchange there is a tectonic plate shift in the basis of the Dismal ‘science’.
    Whether it is Keen, Keane or zombie disciples of Greenspan, this laissez-faire wet dream expired long ago but the malady lingers on.
    As with climate change or gender politics, those who benefitted from the old abuses will not be to the fore in seeking change.

  4. klewso

    The funniest thing about that “debate” was Grant introducing it by telling us that “none of us saw the GFC coming”, then introduced two “experts” who did?
    The problem was that there were those that saw it coming, but the media, rather than split from the herd, didn’t want to leave their “safety in numbers” herd mentality, to go out on a limb to report such “minority reports”?
    So when Grant and other media denizens use the term “none of us saw” they mean “Bugger all of the media would do their job for fear of being wrong; that could hide in their safety in numbers to abrogate responsibility when such things went as a few were prediciting without being passed on to the general public”?

  5. [email protected]

    No one will date mention that immigration is a cause of increasing labor supply and depressing wages.

  6. Mark out West

    Well Bernard answer me this where in the paper from the from Michele Bullock does it address the issue of the writing of home loan mortgages on the back of home loan mortgages with falsified documents, where does it address the lack of accountability from the oversight bodies and where does it account for the fact that Australia has the largest debt to GDP in the world and we are running a deficit????

    You can spruik on about the the broken clock scenario but the world has 5 times more debt than it’s GDP, how is that going to be resolved????
    Please enlighten us Bernard.

  7. Geoff Davies

    Bernard instead of sniping away at Keen’s alleged failures (once right, once wrong on timing), you could look at the substance of the arguments. They are not hard. What was the proximate trigger for the GFC? Sub-prime mortgages: household debt. High levels of debt are dangerous, something mainstream theorists are largely blind to (including your RB gurus) because they exclude debt and money from their models, otherwise they don’t predict equilibrium (!). That’s why they did miss the GFC. Do we have high levels of debt? Yes. Private debt. Household debt. Is it dangerous? Yes. Will it crash tomorrow? I don’t know, but I’d like to see a serious effort to bring the level down relative to wages and GDP.
    We might keep teetering along for some time yet, as we have done since 2009, but Trump, Kim and China might not cooperate with our risky game.

    1. Evil Garry

      GD – The ENTIRE problem with Keens ‘prophecies’ is timing, in that he’s missed every one of his timings for most of the last decade. He couldn’t have been any more useless if he’d tried.

      Suggesting a correlation between the sub-prime mortgage scenarios of the USA in the mid noughties to the lending practices in operation in Australia for the last 8 years shows either a lack of knowledge about how sub-prime actually worked, or a woeful disregard for the truth. A typical sub-prime mortgage was issued at around 2% for the first 12 months or so, and then ballooned up to maybe 12%, for people who never had a prayer of being able to service half of that. That debt, amongst other toxic debt, was then scooped up into CDOs which were sold off to poor unsuspecting investors. Nothing even remotely close to that has occurred here. Typically a local bank would have a 1% introductory rate discount for the first year or two, and then the reversion rate would be easily manageable for almost all customers.

      A bit of rational analysis of debt and the ability to service it is always a good idea, but the ravings of the local Lyndon LaRouche devotees and their happy campers at the CEC have little place in a quality forum like this.

      1. Mark out West

        Yeah Gary your right, we have housing property values in Australia that dwarf America where they have one of the most diversified economies in the world. But we are different here cause our bacon was saved by an infrastructure spend by China that dwarfed anything that has been seen in the world before.
        Every projection from the reserve bank has been wrong for the last 12 tears and we have saddled our children with the highest wage to house prices in history with no chance of any real chance of wage inflation on the horizon. We are the most indebted people of the planet relying on China and IO, what could go wrong.

      2. Geoff Davies

        EG – This is your idea of quality discussion is it?: ‘the ravings of the local Lyndon LaRouche devotees and their happy campers’; ‘a woeful disregard for the truth’.

        Subprimes on their own would have caused a local slump, like the earlier S&L scandals, if they didn’t come on top of an enormous debt house of cards. CDOs were terribly clever, but debt is debt, it is only a promise, and the world doesn’t always work out the way we would like. Poof – all your grand schemes gone. After several hundred years of financial booms and crashes driven by excessive debt you’d think more people might pay attention.

  8. [email protected]

    Household debt, mortgage debt, credit card debt, government debt….don’t stop here in Oz.
    This article may as well be wearing blinkers. Our “strong and well capitalised” banks and corporations have big chunks of them owned by foreign banks and corporations which are mostly insolvent and highly susceptible to any butterfly flapping its wings in Frankfurt or New York. Call them doomsayers or soothsayers…after it happens their predictions will be hindsight.

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