Steve Keen at it again

[Francesco]

Anyone forecasting Australian housing without cognisance of the historical practices of government policies and economics is chasing media exposure and hype in preference to academic integrity. Surely if there is analytical nous the imagination would have figured in government intervention to prevent a 40% collapse in housing prices (with correlated huge impacts on many other sectors of the economy) given the fiscal capacity of the government? Excuses are delusional to put it mildly.

 

[truong]

I kind of feel sorry for him. Here we have an academic and an economist descending into the realms of activitists, preachers and other spruikers. People in this kind of business try to attract the biggest following that they can get, and it’s usually thru the behaviour of their followers that one can see thru them.

Keen’s followers are a rather fanatical mob, fixed in their views. They relish every piece of bad news and dismiss every piece of good news. It’s as though they just wish the economy would fall into a big hole so they can claim victory against the heretics. To prove their point they pray for disaster to strike, but when these prayers go unanswered they tell us “just wait”. In every debate they must have the last word.

I’ve thought that only politics and religion can produce this type of behaviour but it looks like everything nowadays can be a matter for partisanship. Sigh.

However even the most flawed theories can have an element of truth, so I read Keen’s theories with interest. I surely don’t laugh at him and don’t dismiss everything he writes. To do so would be akin to being partisan but in the opposite direction.

 

[Thesnowyforest]

Im with you EVAND.

All comes down to Supply and demand. If there is too much supply.. the force is with the sellers.. which will drive prices lower. and vice versa.

Im in the process of offloading my IP, lockin in my profit, and see far far greater opportunities in the stock market. long/short.


You can hedge your stocks... you cant hedge your properties value.

 

[Belbo]

I kind of feel sorry for him. Here we have an academic and an economist descending into the realms of activitists, preachers and other spruikers. People in this kind of business try to attract the biggest following that they can get, and it’s usually thru the behaviour of their followers that one can see thru them.

Keen’s followers are a rather fanatical mob, fixed in their views. They relish every piece of bad news and dismiss every piece of good news. It’s as though they just wish the economy would fall into a big hole so they can claim victory against the heretics. To prove their point they pray for disaster to strike, but when these prayers go unanswered they tell us “just wait”. In every debate they must have the last word.

Nicely nailed. Precision punched. No further comment required from me.

 

[Rolf Latham]

fixed in their views.

Like 80 % ? of the population

ta
rolf

 

[jackbak]

I think house prices would have followed the original downward trend of that graph if the govt stimulus wasn't implemented. You can clearly see the kick up in prices coinciding with the stimulus.

And people on here continue to bag it, the huge results if it can still be seen in that graph. And in the economy now, and in our lifestyles etc.

My feeling is Keen would have been close to being right if that stimulus wasn't so powerful. But it's all yet to play out, he might be right yet.

Thats a lot of ifs buts and maybes.

The fact is he predicted something......... and he got it wrong, and not just a little bit off - miles off. The amount of excuses him and his supporters have come up with is staggering.

 

[evand]

No, there's only one 'would have'. If it wasnt for the stimulus he would have been correct in my opinion. Or close to it.

The economy and property market were heading south big time.

Thats a lot of ifs buts and maybes.

The fact is he predicted something......... and he got it wrong, and not just a little bit off - miles off. The amount of excuses him and his supporters have come up with is staggering.

 

[Fifth]

No, there's only one 'would have'. If it wasnt for the stimulus he would have been correct in my opinion. Or close to it.

The economy and property market were heading south big time.

Isn't that a bit like betting on a football game then crying 'they would've won if Bazza hadn't pulled his hamstring'? Possibly true, but doesn't change the fact they didn't win.

 

[cloudyday]

Every major country had a property collapse. There were only a handful that didn't and Australia was one of them, Keen made a prediction based on solid facts.

Keen is a man of science and maths. He cares about numbers only and that is where he had it wrong. Had he understood the effects of the stimulus and politics, he probably wouldn't of made that bet.

Isn't that a bit like betting on a football game then crying 'they would've won if Bazza hadn't pulled his hamstring'? Possibly true, but doesn't change the fact they didn't win.

Nope, because the stimulus measuresand bank bailouts put in place were unprecedented. If you had reworded it to this, it would of been more realistic:

Isn't that a bit like betting on a football game, losing $500k on that bet, rather than proceed to bankruptcy, the government steps in and gives your family $500k because you 'messed up'. Because you made a stupid call, the government now hands out $800 cheques to all your staff members, hoping they will spend it so all their property values don't fall, giving them the confidence to go out and spend that money so your business makes money again.

Sounds like a total fantasy, but that's basically what happened when banks were bailed out/debt guaranteed and the stimulus measures were introduced.

 

[Belbo]

Every major country had a property collapse. There were only a handful that didn't and Australia was one of them, Keen made a prediction based on solid facts.

Keen is a man of science and maths. He cares about numbers only and that is where he had it wrong. Had he understood the effects of the stimulus and politics, he probably wouldn't of made that bet.

He's an associate professor of economics. He understands stimulus and politics - plus maths and numbers - just fine. Don't you worry about that.

 

[turk]

No, there's only one 'would have'. If it wasnt for the stimulus he would have been correct in my opinion. Or close to it.

The economy and property market were heading south big time.

The stimulus package wasn't the only option.

Rates could have been cut further, or a smaller stimulus along with further smaller rate cuts, were 2 other options.


But as the stimulus worked this wasn't required.


Any economist that doesn't factor in Government intervention during an event such as the GFC is living in Cuckoo Land

 

[jacbmw]

Why is it even appropriate for Keen to participate in a public forum like he does, with such subjective (yes I will say it) propaganda??? Really blurring the line of between a academic (there to teach students and help them form an opinion from an unbiased standpoint) or spruiker.

I think this behaviour is shameful, and mere attempts at personal promotion or promotion of the condoning University.

If he would really like to pursue the social commentary position, then please don't teach economics from a jaded point of view at the same time.

 

[Belbo]

Why is it even appropriate for Keen to participate in a public forum like he does, with such subjective (yes I will say it) propaganda??? Really blurring the line of between a academic (there to teach students and help them form an opinion from an unbiased standpoint) or spruiker.

I think this behaviour is shameful, and mere attempts at personal promotion or promotion of the condoning University.

If he would really like to pursue the social commentary position, then please don't teach economics from a jaded point of view at the same time.

No, it's perfectly legitimate for academics to have an agenda. All of them do. Just as long as they do not use it as the standard for grading students, but rather grade students by their ability to critically analyse work deriving from competing agendas, that is fine. University is not kindergarten. Indeed, it's actually meant to be the nursery ground for new agendas.

 

[Aaron Sice]

No, there's only one 'would have'. If it wasnt for the stimulus he would have been correct in my opinion. Or close to it.

so as an economist he failed to predict govt stimulus to prop up failed private sectors in predonimantly keynesian world....and he was correct....how exactly?

 

[jackbak]

Keen is a man of science and maths. He cares about numbers only and that is where he had it wrong. Had he understood the effects of the stimulus and politics, he probably wouldn't of made that bet.

Pretty sure stimulus' have a fair bit to do with economics...

 

[jacbmw]

Yes Belbo - I agree in theory. But lots of uni students around when i studied commerce, just took the spoon fed crap from academics as gospel - just looking for the piece of paper.

It should be were agendas are critically analysed - but the actual teacher, should have no agenda whatsoever for it to work.

 

[jackbak]

No, there's only one 'would have'. If it wasnt for the stimulus he would have been correct in my opinion. Or close to it.

The economy and property market were heading south big time.

Pretty big 'would have' evand, I wouldn't think it would be that crazy for an economist to realise that governments occasionally step in to help economies that they think are 'heading south big time'...

It really doesn't bother me at all that Keen got his prediction wrong, we're all entitled to our opinion and opinions form both sides are extremely important, it was the way he said it with such certaintly, it was as if he was talking about the sun coming up tomorrow.

It doesnt matter to me who says it, but when either side say "House prices will definitely fall/rise xx% in the next 12 months" I switch off straight away.

 

[devo76]

"Hey guys. I bet i win lotto next week"

......One week passes........

" so did you win lotto?"


" no "
"but only because i picked the wrong numbers so the bet does not count"

 

[tab]

It's strange how people on both sides of the fence attack each other so vehemently.

One of Keen's main points seems to be our amount of debt - Ignoring all influences of rates, jobs, family size, workforce etc, it is clear he has a point.

He has been wrong with his predictions with 40% declines but this should only serve to let analytical people read and research where he is coming from. Everyone should at least be prepared for such a thing to happen even if it doesnt. Think of it as a trailing stop, a plan b. Means you won't be surprised and left standing still.

Is this price drop going to happen this time around?

Well the 2 rounds of QE in the US, stimulus here, LTRO x 2 in Europe and devaluation of most currencies has only succeeded in kicking the can down the road. With each further attempt at stimulating the effect or the kick has been smaller and gone further. And the systemic failures are still unrepaired.

So what happens from here on in? I have no idea. We could dive into depression with financial sector collapses and governments buckling under sovereignity crisis, or we could be hit with bouts of high inflation and little growth, or we could muddle along for a number of quarters and years. WHo knows, its just better to be aware of as many possibilites as possible and have a plan in place.

 

[Graemsay]

I agree with Tab: Keen's basic thesis is that there's been a massive growth in the amount of debt in the system, and that this has driven prices up.

What strikes me about the "are we or are we not in a bubble" debate is that there's never any certainty in the run-up. I saw this post at Reuters, which talks of the debate between Robert Shiller and Richard Peach, the vice president at the Federal Reserve Bank of New York about the US market in 2005. Shiller said that prices were getting very high, but Peach disagreed saying that fundamentals explained it. We all know how that turned out.

Some of the attacks on Keen feel a bit reflexive. Perhaps a better approach would be to view his comments, along with those made by Grantham and Demographia as warnings of potential risks, and structure your portfolio accordingly.

Propertunity often talks of markets within markets. Here in the UK the top end has weathered the downturn better, in fact super-prime London is up around 35% since 2008, though it's looking rather bubbly, and is being supported by inflows of foreign capital. In contrast, I believe that price falls have been concentrated in the most expensive Australian real estate.

So the question is what are likely to be the best defensive positions there.