Wikinvest Wire

Steve Keen and the price of fame

Thursday, February 18, 2010

After becoming a celebrity economist down under as a result of being one of the few dismal scientists to see the global financial market meltdown coming a few years back, Steve Keen has learned to take the good with the bad, that is, unless it crosses some sort of line, which, according to this entry at his blog, Jessica Irvine at the Sydney Morning Herald just did.

I normally don’t comment on articles about me, since I am aware that now that my views are part of the public debate, I have to take the good with the bad in coverage. I wouldn’t have written this either, were it not for the line “If only his predictions were so reliable” in Jessica Irvine’s piece in today’s SMH “Walking on a wire stretched between stimulus and debt“.

In a newspaper that sees itself as a paper of record, I would have expected a bit of context here–some acknowledgment of the fact that I was calling a serious financial crisis from December 2005, whereas conventional economic forecasters were predicting falling unemployment and rising inflation–rather than a throwaway line like that.

Here's the offending piece from today's paper:
You've got to hand it to Steve Keen, the mild-mannered house price Cassandra of Sydney's western suburbs: he knows how to get a headline and he sticks to his guns. If only his predictions were so reliable.

The 57-year-old academic will embark on a 224-kilometre hike from Canberra to the top of Mount Kosciuszko in April, wearing a T-shirt reading ''I was hopelessly wrong on house prices. Ask me how!'' He lost a bet against a Macquarie Bank economist, Rory Robertson, that house prices would fall.
In fairness to Keen (and while acknowledging that I'm far from an expert on the local economy), conditions in Australia would undoubtedly be much different if not for the fact that they are a natural resource rich country located close to China where stockpiling commodities financed through one of the most rapid expansions of bank credit in history appears to be a national obsession.

Bookmark and Share


Dan said...

Doesn't Australia have a first time home buyers credit of $44K? That could help put a temporary floor in their housing market.

Anonymous said...

Makes you wonder how many domestic citizens were lured into borrowing too much by the home tax credit. So what happens when the tax credit is no longer extant here, and interest rates start to go up?

Loan standards are still so far out of step with the rest of the world that the taxpayer is being forced to guarantee mortgages just to keep borrowing going. This is a silly situation. The bank wants domestic citizens to save nothing, which forces all borrowing to come from overseas. Then loan standards are set so low that high defaults occur.

Overseas savers have no interest in high default products. On top of this interest rates so low that they don't even cover inflation, let alone the default rate. The taxpayer is doomed under this scenario. Is the central bank deliberately trying to bankrupt the country, or is this just another unintended side effect that the bank doesn't care about?

Let home prices attenuate to where the median person can afford them without expensive taxpayer subsidies already.

Anonymous said...

Oz has the highest home prices in the world, but just like in CA, rent prices are much more reasonable. It took 5 years for the CA home bubble to pop, maybe Oz can go a bit longer on the China story, but it can't go on forever.


barnaby33 said...

Having lived in Oz for a couple of months at the end of 08 (Bondi Beach), it was refreshing to see denial is even thicker there than in the US.

House prices in Sydney were retardedly out of whack with incomes. Taxes are higher, which means effective salaries are lower. Oz is a one trick economy, resources! Oh and all the loans are recourse and 5 years ARMS at best! All I can say is, we're all subprime now.

Tim said...

What I liked best about Jessica's story was the use of the phrase "house price Cassandra" in the lead paragraph, words that brought back memories of the U.S. housing bubble when it was fully inflated about five years ago.

Except for the Chinese and the Aussies, "we're all Cassandras now".

  © Blogger template Newspaper by 2008

Back to TOP