Yes, Steve Keen has finally thrown in the towel, and admitted he will be walking up Kosciuszko...
http://www.debtdeflation.com/blogs/2009/08/30/debtwatch-no-38-the-gfc—pothole-or-mountain/
Thanks Shadow,
It is good that there is still someone who has time to read all this delirium. He admitted he will be walking/running but he still has stopped short of throwing the towel. This is amasing - looking at all the right data Mr Keen still manages to come to wrong conclusions.
Just one example. Yes, debt grown to 170% of GDP. (I would not mention that most of that growth occured under Coalition Government - this fact seems to be conveniently forgotten by the author who blames current Government in all the sins.)
For some obscure reason Keen thinks that this is a problem of those who borrow. Noop. It is a creditors' problem, and it is not at all bad thing. If you wish I will touch on that later.
What I actually wanted to tell is that property market wise increased ratio of debt is highly beneficial. That simply means that RBA with their monetary tools has become a toothless tiger. In simplified terms, every percentage point of IR increase now takes out of economy 4 times more money than it did say during 80s. Which simply means that even if RBA would want to switch to the tightening bias, the most of the rate hike they can do is 2%. Any more than that - economy will cave in.
It is obvious that all past property downturns were induced by RBA hiking rates above the appropriate level. If was not for that, we would have smooth steady price growth. Worth noting that for the last time in 2007-2008 the only thing that allowed to hike rates was a resource bubble.
I see very well where Steve Keen's fundamental mistake is. He simply fails to recognise that property (land) is fundamentally different from other commodity classes. Land supply is limited, and in Australian capitals it has virtually come to an end. But for some obscure reason he thinks of property as of something with unlimited supply.
