Prof Steve Keen finally gets put in his place! SMH

Doomsayer gets instant fame


Sydney Morning Herald - Gerard Henderson
October 21, 2008



It had to happen. In the international financial crisis, it was always likely the cult of celebrity would merge with that of economic doomsayer. In Australia the leading doom-celeb is none other than Steve Keen, the associate professor of economics and finance at the University of Western Sydney.

What a month it has been for Professor Keen. In late September he was photographed in The Daily Telegraph along with his partner, Melina Forrest. He, looking at the camera, clad in a white T-shirt with a blue patch on which was printed a quote from the economist John Maynard Keynes. She, standing close and looking admiringly into his eyes.

It's not often that a middle-aged academic from a suburban university receives such coverage in the popular press. How did he get there? By predicting another Great Depression, like the one that devastated the Western world in the 1930s, that's how.

The immediate justification for the story was the announcement Keen had decided to sell his apartment in inner-city Sydney. There was even a touch of lament as the associate professor explained his reasoning to the avid reporter: "It breaks my heart. But I don't want to live my old age in poverty and there's no point in paying a mortgage on an asset that is going to fall by 40 per cent or so in the next few years."

You wonder precisely why this doom-celeb believes it is a good idea to advise potential buyers of his abode that any such purchase will decline in value by 40 per cent in but a few years. Perhaps he is not such a fatalist, after all.

Or, perhaps, he likes the media attention which he would not have received if he had predicted a recession (rather than a depression) with housing prices declining by, say, only 20 per cent. To receive maximum coverage, doom-celebs need to err on the side of hyperbole.

On Sunday night I learnt of Keen's forthcoming appearance on 60 Minutes by a Channel Nine promo which announced his prediction of a depression accompanied by "at least a 10 to 15 per cent level of unemployment".

The program titled "The Big Bust" certainly lived up to its heading. Presenter Liz Hayes referred to the current looming economic downturn as "the worst financial crisis the world has seen". It seems that she overlooked the Great Depression when, in Australia, unemployment rose to 30 per cent of the essentially male workforce.

Soon the sage shifted to Keen's domestic arrangements. Hayes reported that "he hasn't found a buyer yet" for his home but she seemed impressed he had put his property where his mouth was, so to speak. So much so that the presenter saw a lesson in such behaviour for 60 Minutes viewers, commenting: "It says a lot when you, the economist, decides that you have got to sell." Hayes then asked: "Is that something we should all be doing?" The answer was broadly in the affirmative.

Hayes' reference to Keen as "the economist" was revealing. It is true that he was the only economist heard in that part of the program which covered the Australian economy. However, many economists would take a less alarmist view of the Australian - and even the American - economy. For example, on 60 Minutes, Keen prophesised a depression lasting "about 10 years". Whereas the American economist Jason Weisberg predicted a world recession (not depression) and maintained that it would be "not long-lived".

In between his Daily Telegraph star coverage and his star billing on 60 Minutes, Keen was interviewed by the 7.30 Report's Kerry O'Brien on ABC 1. A Google search reveals Keen invariably receives soft interviews on the ABC and is rarely, if ever, subjected to a debate where another qualified economist can test his seeming hyperbole. Keen ran his familiar lines to O'Brien, except that he notched up his estimate of looming unemployment to 20 per cent. In Keen-speak that's not adding hyperbole, just rounding up.

The following evening, O'Brien interviewed Kevin Rudd. Instead of positing his own questions, the 7.30 Report presenter asked the Prime Minister to respond to Keen's views. It was as if Australia's leading doom-celeb is the only economist worth hearing.

On no fewer than three occasions, O'Brien asked Rudd about Keen's predictions that there will be a marked fall in property values. Not unexpectedly, the Prime Minister made it known that he was not in the business of providing predictions "about where house prices are going".

Put simply, Keen does not approve of debt. His predictions of a debt-induced decade-long depression, with home prices reduced by 40 per cent and unemployment rising to up to 20 per cent, may be correct.

But this doom-celeb's soothsaying may prove to be wrong. In which case The Daily Telegraph, 60 Minutes and The 7.30 Report will have run Keen's views virtually without challenge.

Keen has been able to get away with the view that there is something inevitable about the coming of a 1930s-style Great Depression. This overlooks the fact that governments can take decisions which may alleviate increases in unemployment or falls in property prices. Despite Keen's economic determinism, there is little that is inevitable about economics. The Australian media would be well advised to be more sceptical about economists with messages on their (fashionable) T-shirts.

Gerard Henderson is Executive Director of The Sydney Institute.
 
Keen ran his familiar lines to O'Brien, except that he notched up his estimate of looming unemployment to 20 per cent. In Keen-speak that's not adding hyperbole, just rounding up.

I am not jumping to Keen's defense here, I personally do not believe anyone can predict what will happen in the future at the best of times, currently it is plainly beyond human ability. However the extreme views of both sides of the crystal ball gazers and the associated media feeding frenzy does provide some laughable moments, this typical "West" distortion of the facts is one of the least notable.

Keen did not notch up his estimate to 20%, he gave a very broad ranging prediction as quoted.

ABC 7:30 Report said:
"KERRY O'BRIEN: Very briefly your best case scenario for Australia out of this; your worst case scenario?

PROFESSOR STEVEN KEEN: Best case scenario is a recession more severe than 1990 and lasting one and a half times as long.

Worst case is something up to the level of the Great Depression which was 20 per cent unemployment and lasting up to a decade."

A transcript of his interview is available here for those who are so upset by this theorist, and could be sufficiently bothered to pick apart his views. The rest of us will just get on with dealing with the real world.

Cheers,
Beef
 
Dear All,

1. When interviewed, Steven Keen was reportedly seen to have projected that the unemployment rate in Australia, would increase to 10%-15% over the next few years, instead of the 5% employment rate at the end of 2009, as previously projected by the RBA.

http://www.theaustralian.news.com.a...tPagePicks&vxClipId=1094_400298&vxBitrate=300

2. Personally, I will not agree with Steven Keen's projection, at this point in time.

3. For your further comments and discussion, please.

4. Thank you.

regards,
Kenneth KOH
 
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The reply from keen

Play the ball and not the manPublished in October 21st, 2008 Posted by Steve Keen in UncategorizedThe import of Gerard Henderson’s diatribe in today’s SMH is that the media has done a “soft” job on my views, which have only gained notoriety because of the extreme prediction I have made—about the forthcoming economic downturn qualifying as not merely a recession, but a Depression. It seems I’ve only got attention because of my extreme views, while the media has let the side down by doing a “tabloid” job only and not subjecting my views to scrutiny.

In fact, as many in the media know, I have gained attention because of my Debtwatch Report, which will be two years old as of the next issue (No. 28, to be published in November the day before the RBA meeting). The journalists who have reported my views—including of course Kerry O’Brien, who gets special attention from Gerard in his mockumentary—have read my analysis for two years now. I saw no sign of any attention to the analysis behind my predictions in Henderson’s piece—apart from possibly a “just in case” concession towards the end where he noted that “His predictions of a debt-induced decade-long depression … may be correct.”

In that case, the commentator who deserves the approbrium for “tabloid” journalism is Henderson himself, and not the ABC nor the Daily Telegraph, nor Sixty Minutes. They, after all, read my research, have quizzed me extensively about it, and made the decision based on investigative journalism that my views deserved coverage.

For this, I applaud them—for standing up for the principles of the Fourth Estate. Standard economic commentary has been dominated by the cheerleaders for the policies which have led to this crisis, while the authorities themselves and the academic profession of economics itself have turned a blind eye to any arguments that questioned the mantra in favour of deregulated finance.

I know this from extensive experience. I have made five applications for ARC funding to investigate the dynamics of debt-deflations and Depressions in the last ten years; all have been unsuccessful (including one time when I topped UWS researchers on the ARC’s then published referees’ point scores, after which seven UWS researchers received funding—but I was not one of them).

I made a submission to the Wallis Committee in July 1996, in which I warned that securitisation of loans could lead to a crisis exactly like the Subprime crisis that has now unfolded—and of course my comments were ignored.

I wrote to the RBA in June 1998 offering to hold a seminar on the “Financial Instability Hypothesis”, which is the foundation of my argument that we are likely to experience a Great Depression. The offer was declined.

As has often been said, official channels are often clogged to make sure information and criticism doesn’t get listened to. When I saw the debt that Australia’s speculative bubble in real estate (and belatedly shares) had got us into, I decided to turn to the journalistic profession to raise the alarm. To their credit, since I made a good case and the empirical evidence was compelling, journalists listened to me.

So Gerard, maybe you should do some investigative journalism now too. Go to my blog www.debtdeflation.com/blogs, where you will find Debtwatch Reports going back to November 2006, and academic papers on debt deflation published as long ago as 1995 (maybe even read Debunking Economics). And if you’d like to take a real risk and play the ball rather than the man, I’m more than willing to give a seminar on debt deflation at your Sydney Institute.

Over to you.
 
Gerard Henderson really isn't qualified to comment. Especially since the run up of debt is something that exploded under his mate Howard. I'm sure there are vested political interests there. I haven't seen many serious economists take Keen to task on his prognostications in the manner that Henderson does, and until that happens, I think we can write this article off.

That said, Keen is certainly putting his balls on the line with all these appearances.
 
If you make enough prediction one of them has to come good, then just keep telling everyone that you were right. I'm sure Keen will get there one if he just keeps making predictions.

Regards
Graeme
 
hello,

and for 2 yrs or more Keen has had a mortgage, yes a mortgage yet still promoting Debtwatch,

you cant have it both ways, complaining about debt and then being a willing participant of it

thanks
myla
 
If you make enough prediction one of them has to come good, then just keep telling everyone that you were right. I'm sure Keen will get there one if he just keeps making predictions.

If his predictions of a 0% home loan are correct then a lot of Derivex believers are going to feel vindicated.
 
wonder if anyone will remember steven who? in 5 years time ... fame is so fickle.
****************
Hi Lizzie,

1. I know that many of us find Associate Professor Steven Keen's assessment for future Australia, to be "radically pessimistic", to the extent of being "unbelieveable" to a large extent, at this point in time.

2. Whether Steven Keen is truly indeed going after for cheap publicity and fame, to satisfy his own ego and vanity, with his radically negative projection for the Australian Economy, TIME will eventually tell, in due course.

3. I have no doubt if Steven Keen's present bleak assessment for the Australian Economy were to eventually proven true over time, he is likely to be well-remembered by many journalists and the forumites in Australia, even well after the next 5 years.

4. However, if his present assessment is indeed subsequently proven to be totally "un-true" and being "alarmist" over time, in due course, then he will conveniently be forgotten by most of us eventually.

5. I find it interesting that here is an academic, who is willing to boldly and firmly stood by his own personal convictions and assessment regarding his own assessment about the future of Australia, even though it involves teling some very disturbing but "inconvenient" "truth?" about the future of
Australia, which may be hard for many Australians to agree and to accept, at this point in time.

6. Like Steven Keen, I personally do not rule out the possibility of the Australian Economy falling into a deep Recession in the near future, after its prolonged continued economic prosperity over the last 16 years.

7. Like Steven Keen, I do not rule out the possibility that the next Recession that Australia may soon need to have, may eventually be far worse off and deeper and which is likely to prolong over a longer period of time, than what was previously experienced during the last 1991 Recession.

8. For your further comments and discussion, please.

9. Thank you.

regards,
Kenneth KOH
 
Enough with the Keen threads - post in one of the existing threads instead. Closing this one.
 
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