The self fulfilling prophecy of Steve Keen

[Kennethkohsg]

Which part of this indicates that he "talks one thing and does another thing"?

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Hi Max,

1. Steven Keen believes that the various Australian housing markets are about to crash down by some 40% yet he and his partner choose to buy the apartment unit for A$480,000 in 2006.

2. By his own gloomy projections, Steven Keen would have previously presumed that the present housing price are way "over-valued" after the last post-2003 national housing boom;- yet he and his partner chose to invest into the overly-valued housing market in 2006.

3. Doesn't Steven Keen then says one things and does another thing, in this case/context, please?

4. For your further comments and discussion, please.

5. Thank you.

Cheers,
Kenneth KOH

 

[Max Carnage]

the fact he had a mortgage for the past 2 or more years,

And if he'd been a lifelong renter, would you respect his words more? Given the caustic response many such people receive here, I doubt it.

Face it, there is no possible scenario for which his critics would be not knocking him.

So... I'll ask again: who here is prepared to move beyond the soundbites and personal perspective and discuss Keen's theories?

 

[myla]

hello,

the thing is Max, truth and honesty is the most important things in life,

if ABS or APM or RPdata tell us down 40% in last Q then he is the colonel, if not he has got it wrong, wanna discuss that?

considering APM has already revealed part results life is great

thanks
myla

 

[Kennethkohsg]

So... I'll ask again: who here is prepared to move beyond the soundbites and personal perspective and discuss Keen's theories?

****************
Hi Max,

So, what are these Keen's "Theories" which you are actually referring that the members here in this forum have not objectively discussed yet??

Cheers,
Kenneth KOH

 

[Max Carnage]

if ABS or APM or RPdata tell us down 40% in last Q then he is the colonel, if not he has got it wrong, wanna discuss that?

What's this? He is wrong in his forecast that prices will drop by 40% over the coming 10 years because APM say they didn't drop 40% in the last quarter?



That's crazy talk!

Now - do you have any comments on the validity of his work? Any criticisms of his interpretation of Minsky? Any criticism of Minsky's work? This stuff seems to be the basis of his beliefs about our economic future...

 

[devo76]

People are focusing too much on this 40% figure.
The gloomers are loving it
The investors are scared of it.

All crap aside things are slowing down. no point having your head in the sand about it. But as for how much properties will slide. This is where it gets confusing.
Some will slide 40%
some will slide 60%
some will slide 2%
and some will not slide at all.

Markets that fall into the above brackets will all have reasons for why it happened. The higher falls will have reasons like overinflated prices purchased above market value.
Then the lower falls will be due to buying well to start with and other catalysts to help hold value.

The thing is the fundamentals have not changed for most. Infact many even during the boom talked about this period happening one day. But they were not saying we should be scared. It was more like these times will pass and look for oppertunity. This is still the case.

The market has only changed for those trying to make a quick buck. If you still plan long term than nothing has changed.

Think smart
Plan long term
Buy well
Buy when you can afford it
Have a buffer
Have a exit stratagey
Hold on If numbers still add up even in a down turn
Dont panic sell.

Follow these kinds of points and a mythical percentage figure should not keep you awake at night.
Life is still good so enjoy it

Steve

 

[andrew_de_a]

People are focusing too much on this 40% figure.
The gloomers are loving it
The investors are scared of it.

All crap aside things are slowing down. no point having your head in the sand about it. But as for how much properties will slide. This is where it gets confusing.
Some will slide 40%
some will slide 60%
some will slide 2%
and some will not slide at all.

Markets that fall into the above brackets will all have reasons for why it happened. The higher falls will have reasons like overinflated prices purchased above market value.
Then the lower falls will be due to buying well to start with and other catalysts to help hold value.

The thing is the fundamentals have not changed for most. Infact many even during the boom talked about this period happening one day. But they were not saying we should be scared. It was more like these times will pass and look for oppertunity. This is still the case.

The market has only changed for those trying to make a quick buck. If you still plan long term than nothing has changed.

Think smart
Plan long term
Buy well
Buy when you can afford it
Have a buffer
Have a exit stratagey
Hold on If numbers still add up even in a down turn
Dont panic sell.

Follow these kinds of points and a mythical percentage figure should not keep you awake at night.
Life is still good so enjoy it

Steve

good level headed post

 

[Max Carnage]

So, what are these Keen's "Theories" which you are actually referring that the members here in this forum have not objectively discussed yet??

Hello Kenneth,

For beginners, Keens special subject, if you like, is his stylised model of Hyman Minsky's financial instability hypothesis. You can read his paper on this topic here:
http://www.debtdeflation.com/blogs/wp-content/uploads/2007/04/JPKE1995PageImage9509152794.pdf

Even if the mathematics or econometrics are a bit complex, the text is worth reading.

Other wacky ideas he has include the endogeneity of the money supply here:
http://www.debtdeflation.com/blogs/wp-content/uploads/2007/03/KeenKeynesCircuit.pdf

You can read his blog here:
http://www.debtdeflation.com/blogs

 

[myla]

What's this? He is wrong in his forecast that prices will drop by 40% over the coming 10 years because APM say they didn't drop 40% in the last quarter?



That's crazy talk!

Now - do you have any comments on the validity of his work? Any criticisms of his interpretation of Minsky? Any criticism of Minsky's work? This stuff seems to be the basis of his beliefs about our economic future...

hello,

yeah thats right,

no comments on his "beliefs" and thanks for highlighting that point "beliefs", bit like religion, a belief system
thanks
myla

 

[Max Carnage]

hello,

yeah thats right,

Well that would be a problem with your comprehension or logic, would it not? There's nothing rational in declaring a 10 year projection invalid because it didn't happen in the last 3 months?

 

[ianvestor]

Sorry if this has been mentioned (I haven't suffered through this entire thread), but I was watching 60 minutes' mailbag on the weekend and someone wrote in regarding the 19th Oct Keen interview.

I don't remember the whole letter but it ended with:

God only gave us economists so that meteorologists would look good.

-Ian

 

[boomtown]

Hi Max

Cast your mind back to the not too distant past where there was a massive team of people devoted to calculating house prices using the best computers money could buy in an ivory tower known as Lehman Bros. But despite their clever use of words like econometrics and collateralised debt obligation cubed hidden deep down inside their massive statistical models was a hidden assumption. Maybe more than one. And that assumption was wrong and the great tower tumbled down in dust.

And ever since then I have been suspicious of people who use the word econometric. Even if he is a nice fellow from a prestigious Australian university and is probably quite handy with a pocket calculator.

Because I suspect that just maybe in trying to apply Minskiian (that's not a real word) theory to a modern day Australia even our mate Steve might have to make an assumption or two. And my mama always told me its your assumptions not your math that will do you in the end.

PS Minsky is the name of one of my friend ex girlfriends. She's about 5 foot 7, brunette and quite cute. Wonder if they are related. And it makes me wonder what a Minsky moment really means.....

 

[AUSPROP...]

no one knows. Anyone who is right, got lucky

 

[evand]

What do you do if you can always afford it? Buy a property per week?

Buy when you can afford it

 

[ianvestor]

What do you do if you can always afford it? Buy a property per week?

How about 2 per fortnight instead. Save fuel.

 

[asdf]

Even if he is a nice fellow from a prestigious Australian university and is probably quite handy with a pocket calculator.

Anyone checked the UAI required to do finance at UWS lately? vs say UNSW or Syd Uni. Lets just say theres not too many ex UWS alumnis on the Boards of ASX Top 100 companies compared to the latter unis. And no disrespect to Prof Keen, but did anyone notice where his apartment is? Down near Central/Redfern and in a high rise complex. I'm not sure if a seasoned Somersoftian would rank that category of IP in their Top 10 list. Ordinary mums and dad chasing the tax benefits however...

Lets just leave it at that. The poor guys been getting a belting in the media. But at least the RBA and govt is listening to all the bad news and doing something about it so as current IP owners, we shouldn't complain.

 

[WinstonWolfe]

Less people would be taking Steve Keen seriously if at least one UNSW or Syd Uni. grad predicted the credit crisis....

 

[urchin]

Anyone checked the UAI required to do finance at UWS lately? vs say UNSW or Syd Uni. Lets just say theres not too many ex UWS alumnis on the Boards of ASX Top 100 companies compared to the latter unis. And no disrespect to Prof Keen, but did anyone notice where his apartment is? Down near Central/Redfern and in a high rise complex. I'm not sure if a seasoned Somersoftian would rank that category of IP in their Top 10 list. Ordinary mums and dad chasing the tax benefits however...

Lets just leave it at that. The poor guys been getting a belting in the media. But at least the RBA and govt is listening to all the bad news and doing something about it so as current IP owners, we shouldn't complain.

come on, if you have problems with his theories, rebut his theories by all means--that is what this is all about. i have no problems at all with being wrong and if i am wrong i want to have my eyes opened as quickly as possible so as to save me from my own folly.

but all you are doing in the above posting is demonstrating your ignorance of academia.

i would rather be given prima donna status at a tier 2 uni than grunt status at a tier 1 uni (it all comes down to class loads & admin duties vs. research leave & funding). to mock an academic because he is not rich... well, thats like mocking the tallest guy in the world for losing a limbo contest. academics dont make money. academics dont go into academia to make money. either they already have money or they are used to being poor.

these silly, pointless attacks do nothing to prove your point and merely detract from important matters.

that is, as people who have real money on the line--unlike me, im just waiting on the sidelines now--you have a vested interest in learning the truth regardless of whether it is a warm fuzzy happy truth or the gaping maw of hell. to try to diminish a persons argument because of the uni they work at or the kind of apartment they own... its just silly.

 

[evand]

Did he graduate from UWS or is he a professor there?

His unit is in Surry Hills. one of the trendiest inner city suburbs in Sydney, full of professionals.

Anyone checked the UAI required to do finance at UWS lately? vs say UNSW or Syd Uni. Lets just say theres not too many ex UWS alumnis on the Boards of ASX Top 100 companies compared to the latter unis. And no disrespect to Prof Keen, but did anyone notice where his apartment is? Down near Central/Redfern and in a high rise complex. I'm not sure if a seasoned Somersoftian would rank that category of IP in their Top 10 list. Ordinary mums and dad chasing the tax benefits however...

Lets just leave it at that. The poor guys been getting a belting in the media. But at least the RBA and govt is listening to all the bad news and doing something about it so as current IP owners, we shouldn't complain.

 

[Max Carnage]

Cast your mind back to the not too distant past where there was a massive team of people devoted to calculating house prices using the best computers money could buy in an ivory tower known as Lehman Bros. But despite their clever use of words like econometrics and collateralised debt obligation cubed hidden deep down inside their massive statistical models was a hidden assumption. Maybe more than one. And that assumption was wrong and the great tower tumbled down in dust.

And ever since then I have been suspicious of people who use the word econometric. Even if he is a nice fellow from a prestigious Australian university and is probably quite handy with a pocket calculator.

So even though Keen was one of the few economists (I can name several others) speaking out against their flawed assumptions (there were more than one, including the doozy that house prices only ever go up) and the amount of debt that the system was allowing people to secure against inflated assets, you throw him into the same basket?

Okay. That doesn't make sense to me, but that's a personal thing I guess.

I'll continue to read the works and words of those who saw this coming, just as I did before it all blew up. I'll take it all in, then decide which bits are good/bad/irrelevant (and I reckon some of Keens stuff fits each of these categories). Then take action based on my own analysis, informed by all the information I have at hand. This strategy has served me well over the last 5 years.

Anybody fancy getting into a discussion about "loans create deposits" theory? Here's an easy read (it's simplified from the paper I posted earlier) from Keen that is the equivalent of putting on a pair of those spectacles that make the world go upside down. It's fun to challenge one's beliefs* about how the world works!

http://cpd.org.au/article/mysterious-money-machine

* Ah yes, belief. Myla, there is a difference between "belief" and "faith" that seems to have eluded you. Sure, they are often interchanged in text and speech, but that's where the similarity ends. If I jumped off a 100 storey building I believe I would plummet earthward with a rate of acceleration approximately 9.8m/s/s until I hit the ground and died. This is my belief and it is not based on tests or observed evidence. But that does not make me the equivalent of a free-fall religious zealot. My belief has a pretty solid base in scientific and mathematical theory. "Faith" is belief that does not.