Abbott’s not-so-golden years | Steve Keen | Commentary | Business Spectator

Abbott’s not-so-golden years

via Abbott’s not-so-golden years | Steve Keen | Commentary | Business Spectator.



As figure one shows, that’s true – but it’s not the whole story. Yes, public debt did fall under Howard — but the fall actually began in 1994, during the last two years of the Keating government. However this is not a plug for Paul Keating, because the periods of falling government debt under both Keating and Howard had something else in common: a growth in private debt that dwarfed the fall in government debt. While Howard and Peter Costello kept the public eye focused on the $20 billion reduction in public debt they achieved over their term, private debt increased by $1.3trillion.

GDP during the Howard Golden Age increased too, but by only $600 billion, less than half as much as the increase in private debt.

Again, this is not to praise Labor, since Keating held the reins in 1993 when the private debt bubble took off. But Howard had them in 1999 when Australia’s private debt exceeded its GDP for the first time in its history.

Can we keep it up, and borrow enough to make Tony Abbott into the Liberal Party’s Golden Boy Mark III (let’s not forget John Howard’s hero Sir Robert Menzies)? To paraphrase Tony, “if you want John Howard’s economic performance, you have to have John Howard’s private debt performance”: to sustain Howard-like growth in aggregate demand, we’d need to emulate the rate of growth of private debt that occurred on his watch.

Overview: The Bubble and Beyond: | Michael Hudson

From Overview: The Bubble and Beyond: | Michael Hudson.

The question today is whether a new wave of reform will arise to restore and indeed complete the vision of classical political economy that seemed to be shaping evolution a century ago on the eve of World War I, or whether the epoch of industrial capitalism will be rolled back toward a neofeudal reaction defending rentier interests against reform. What is up for grabs is how society will resolve the legacy of debts that can’t be paid. Will it let the financial sector foreclose, and even force governments to privatize the public domain under distress conditions? Or will debts be written down to what can be paid without polarizing wealth and income, dismantling government, and turning tax policy over to financial lobbyists pretending to be objective technocrats?

What has gone relatively unremarked by economists is how financialization of the economy has transformed the idea of saving. In times past, saving was non-spending on goods and services – in the form of liquid assets. Typically on a national scale, between one-sixth and one-fifth of income would be saved – and invested in capital on the other side of the balance sheet. But since the 1980s, as banks loosened lending standards on real estate and made and the financial sector in general turned increasingly to financing corporate raiders, mergers and acquisitions, the way to create future wealth was not to save, but was to go into debt. The aim was capital gains more than current income. Indeed, after 2001 many families “made more” on the rising market price of their homes than they made in salary (not to speak of being able to save out of their salary).

Under financialization, the strategy was to seek capital gains, riding the wave of asset-price inflation being fueled by Alan Greenspan at the Federal Reserve Board. Investment performance was measured in terms of “total returns,” defined as income yield plus capital gains. And the way to maximize these gains was to borrow at a relatively low interest rate, to buy assets whose price was rising at a higher rate. For the first time in recorded history, large numbers of people went into debt not out of need, not involuntarily and as a result of running arrears as a result of inability to pay, but voluntarily, believing that debt leveraging was the quickest and easiest way to get rich!

The national income accounts were not designed to trace this process. Using debt leveraging to obtain capital gains meant that bank loans found their counterpart in debt on the other side of the balance sheet, not new tangible investment. The result was a wash. So the nominal savings rate declined – to zero by 2008. Yet people thought of themselves as saving, as long as their net worth was rising. That is supposed to be the aim of saving, after all: to increase one’s net worth. The result was a financial “balance sheet boom,” not the kind of expansion or business cycle that industrial capitalism generated.

As this process unfolded “on the way up,” financial lobbyists applauded the asset-price inflation for real estate, stocks and bonds as “wealth creation”. But it was making the economy less competitive, as seen most clearly in the de-industrialization of the United States. Debt-leveraged real estate required families to pay higher prices for housing – in the form of mortgage interest – and pension funds to pay higher prices for the stocks and bonds they buy to pay retirement incomes. That is the problem with the Bubble Economy. It is debt-driven. This debt is the “product” of the banking and financial sector.

When asset prices finally collapse to reflect the debtor’s ability to pay (and the falling market price of collateral bought on credit), these debts remain in place. The “final stage” of the Bubble Economy occurs when foreclosure time arrives and debt-ridden economies shrink into Negative Equity. That is the stage in which the U.S. and European economies are mired today. Economic jargon has called it a “balance sheet recession” – the counterpart to the “balance sheet boom” that was the essence of the preceding Bubble Economy.

At best, the world will return to the debates that marked economic discussion a century ago on the eve of World War I. At issue is whether the financial sector will translate its recent gains into the political power to take debt and financial policy out of the hands of elected government representatives and agencies and shift economic planning and tax policy into the hands of a super-national central bank authority controlled by bank lobbyists.

The lesson of history is that this would be a disaster of historic proportions, because the financial time frame is short-term and its business strategy is extractive, not productive. I hope the papers in this volume will serve as an antidote to the head start that financial lobbyists have achieved in sacrificing economies to austerity in what must be a vain attempt to pay debts under adverse financial conditions that make them less and less payable. By distinguishing tangible wealth creation from debt overhead and other rentier overhead – the task of classical political economy, after all – the policy debate can be cast in a manner that reverses the financial sector’s attempt to replace realistic analysis with euphemistic lobbying efforts and what best can be characterized as junk economics rather than empirical science.

The decline effect and the scientific method : The New Yorker

Read this briefly today:

In a forthcoming paper, Schooler recommends the establishment of an open-source database, in which researchers are required to outline their planned investigations and document all their results. “I think this would provide a huge increase in access to scientific work and give us a much better way to judge the quality of an experiment,” Schooler says. “It would help us finally deal with all these issues that the decline effect is exposing.”

via The decline effect and the scientific method : The New Yorker.

I want to re-read / re-listen to this when I get a chance as well (after exams).  Is there a connection? Can’t remember.

The Debtwatch Manifesto | Steve Keen’s Debtwatch

via The Debtwatch Manifesto | Steve Keen’s Debtwatch.

The fundamental cause of the economic and financial crisis that began in late 2007 was lending by the finance sector that primarily financed speculation rather than investment. The private debt bubble this caused is unprecedented, probably in human history and certainly in the last century (see Figure 1). Its unwinding now is the primary cause of the sustained slump in economic growth. The recent growth in sovereign debt is a symptom of this underlying crisis, not the cause, and the current political obsession with reducing sovereign debt will exacerbate the root problem of private sector deleveraging.

Figure 1

US private debt clearly rose faster than GDP from the end of World War II (when the debt to GDP ratio was 43%) until 2009 (when it peaked at 303%), but there is no intrinsic reason why it (or the public sector debt to GDP ratio) has to rise over time. I give a theoretical explanation elsewhere (Keen 2010), but an empirical comparison will suffice here: 1945 till 1965 were the best years of the Australian economy—with unemployment averaging 2 percent—and during that time the private debt ratio remained relatively constant at 25% of GDP (see Figure 2).

Figure 2

America’s minimum private debt ratio in 1945 may have been artificially low in the aftermath of both the Great Depression and World War II (and there are good reasons why the US economy should have a higher sustainable debt ratio than does Australia), but at some time between 1945 and America’s first post-WWII financial crisis in 1966 (Minsky 1982, p. xiii), it passed this level.

The explosion in speculative debt drove asset prices to all-time highs—relative to consumer prices—from which they are now inexorably collapsing (see Figure 3 and Figure 4).

Figure 3

Figure 4

The debt and asset price bubbles were ignored by conventional “Neoclassical” economists on the basis of a set of a priori beliefs about the nature of a market economy that are spurious, but deeply entrenched. Understanding how this crisis came about will require a new, dynamic, monetary approach to economic theory that contradicts the neat, plausible and false Neoclassical model that currently dominates academic economics and popular political debate.

Escaping from the debt trap we are now in will require either a “Lost Generation”, or policies that run counter to conventional economic thought and the short-term interests of the financial sector.

Preventing a future crisis will require a redefinition of financial claims upon the real economy which eliminates the appeal of leveraged speculation.

These three observations lead to the three primary objectives of Debtwatch:

To develop a realistic, empirically based, dynamic monetary approach to economic theory and policy;

To develop and promote a “modern Jubilee” by which private debt can be reduced while doing the minimum possible harm to aggregate demand and social equity; and

To develop and promote new definitions of shares and property ownership that will minimize the destructive instabilities of capitalism and promote its creative instabilities.

Read the rest here:  The Debtwatch Manifesto | Steve Keen’s Debtwatch.

Doc Searls Weblog · Holes in The Cloud


via Doc Searls Weblog · Holes in The Cloud.

… meanwhile “The Cloud’s” promise and reality are way out of sync. Since most of The Market outside our homes is comprised of pay services over wi-fi and cellular data systems are sure to suffer traffic jams as more of our lives require tethering to data banks and services in clouds, I’m not holding my breath for ease in the short run.

Remember “the information superhighway”? Would be nice to have that now.

Hackers plan space satellites to combat censorship

BBC News – Hackers plan space satellites to combat censorship.


Computer hackers plan to take the internet beyond the reach of censors by putting their own communication satellites into orbit.

The scheme was outlined at the Chaos Communication Congress in Berlin.

The project’s organisers said the Hackerspace Global Grid will also involve developing a grid of ground stations to track and communicate with the satellites.

Longer term they hope to help put an amateur astronaut on the moon.

No Tech Magazine: The Sustainable Urban Dwelling Unit SUDU

via No Tech Magazine: The Sustainable Urban Dwelling Unit SUDU.

The Sustainable Urban Dwelling Unit SUDUSUDU 3The ‘Sustainable Urban Dwelling Unit’ SUDU in Ethiopia demonstrates that it is possible to construct multi-story buildings using only soil and stone. By combining timbrel vaults and compressed earth blocks, there is no need for steel, reinforced concrete or even wood to support floors, ceilings and roofs. The SUDU could be a game-changer for African cities, where population grows fast and building materials are scarce.

Test link

Tickle and Hide: A Christmas Detour.

via Tickle and Hide: A Christmas Detour..

We decorated our tree just after Evie’s birthday. The lovely Rossi took photos. And then it was an epic mission getting them off her camera. In fact, we’ve had a bit of a technological meltdown at our house really. Our camera, laptop and my phone have all folded under the Christmas pressure.

And so I wrote this poem. For me, for Sharon, for anyone who has heard horrible news, or been taken on a detour, or had their laptop die at an inopportune time. I truly hope the simplicity and hope of Christmas touches your heart this weekend and that we are reminded to let go and just be and see what happens. Love, Jodi. xxx

Did you wonder at the detour?
Me? A child? Now?
Unmarried. Inexperienced.
Unexpected. Expecting. 
An invasion, an interruption.
A thing too awful and too wonderful.
Did you have your life planned out? 
Or even just your day?

Did you wonder at His timing?
A call to be counted.
All that way?
This far along? 
(On a donkey?!)
A plan too big and adventurous.

Did you wonder at His provision?
Door after door and shaking head.
Sorry Folks, we’re all full up!
Full of expectation
and hope and pain.
It’s so close. Surely God..
For the King
For the Mother of the King!
A welcome so humble.

Did you wonder at His presence?
We have a shed…
a barn, a stable.
You met your King in cries of pain 
and the bleating of sheep.

Did you wonder at His leading?
First kings as guests and then a king as hunter.
Leave now, far from family
and comfort
and peace.
Did you think, ‘If only!’
If only they hadn’t spoken!
Did your heart long for home?

Did you wonder each day onward
at this little invasion?
A child King
befriending the lonely, forgotten
Who fled adoring crowds
told the healed to tell no one
with no sword or gallant horse
and thorns for his crown.
An invasion so daring, so unexpected.


Yes tickets, concerts and tour dates. Official Ticketmaster site.

Yes Tickets

Rock and Pop

Yes Tickets


Yes Tickets
Rock and Pop

Yes Tickets

via Yes tickets, concerts and tour dates. Official Ticketmaster site..