I can’t say that I agree with everything that Steve Keen says but I sure enjoyed his talk entitled “Wowsernomics – the madness behind modern economics theory, policy and practice”. Here he attacks neoclassical economics and it’s idea of equilibrium. He likens modern economics to religion. I agree with Steve Keen on that score – economics is like religion or ideology. i.e. you have to “believe” in one view or another e.g. you are either a lefty or a righty.
I am not certain that a theory of economics can be completely addressed mathematically i.e. how the human response can be modelled accurately. Much of economic policy is driven by politics. Before listening to this lecture I had assumed that economists’ used uncertainty in their models but apparently not. It would be great to see a computer simulation of the economy to see if it supports the Austrian view (something like the flocking algorithms that games programmers sometimes use).
I still don’t know what the idea of economic equilibrium is. The Austrian’s don’t seem to talk about it. The Mises Institute recently produced a Stabilisation is Chaos T-Shirt. They seem to be believe that the market “chaos” is superior to government stabilisation.
It’s a shame that some of the audio is cut off at the end. Some audience questions are missing :(
A series of lectures given by former RBA governer Ian Macfarlane given back in November and December of 2006. If economics and monetary policy is your thing it will make for interesting listening.
The Golden Age
From Golden Age to Stagflation
Reform and Deregulation
The Recession of 1990 and it’s Legacy
The Long Expansion
Challenges for the Future
The credit crisis (which should be called a debt crisis) is hitting the news in a big way here in Australia again. People are tending to think that the crunch has “hit” already last week or perhaps that this is the “second hit”. However, I get the feeling that we are all on the beach watching the tide go way out. Perhaps we come across a few insolvent US investment banks in the wet sand. Don’t just sit there! Get off the beach and head inland at pace!
What does this mean for Brisbane property prices? I can only imagine that the recent news will at least give buyers pause. A sustained pause would be enough to melt away a few percentage points. I’ve seen recent commentary which puts the bottom of the market ahead in 2010. I figure that’s a little optimistic and that the property market slump will be somewhat more sustained than that – say bottom in 2012.
News.com.au reports that auction clearance rates have plummeted across the nation. Brisbane has fallen to 23% from 48% last year. The direction of auction clearance rates is a well-known leading indicator for property prices.
It’s unusual to hear gloomy news from domain.com.au but here it is: House prices set to slide in capital cities. Some highlights:
- Credit growth slows to 15 year low
- Michael McNamara of Australia Property Monitors predicts 10% fall in prices this year
Even the article Maybe not all doom and gloom (by McNamara) is certainly negative on the property market saying that you need a long term view as an investor and that short-term speculators don’t make much money using that strategy anyway.
In Up or down? Next three months are crucial, Tim Colebatch discusses the slowing economy and the possibility of cash rate cuts by December.
Lateline Business was certainly very negative on the economy. The RBA left the cash rate unchanged today and everyone seems very excited that the RBA governer, Glenn Stevens, said today that rates were likely to go down next. Well, that’s not quite what he said but it does seem a reasonable way to interpret his words: “with demand slowing, the board’s view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing”. I guess we must wait to be sure that inflation is under control after all CPI to June is running at 4.5%.
I was glad to see Steve Keen on Lateline Business last night who said “I don’t think there is any way of avoiding a recession” and it will not help even if the RBA were to reduce the cash rate. Steve mentioned that 40% of house prices were merely fueled by speculation and that “when this expectation goes, ultimately goodbye 40% of the current price of houses”.
See article on Bloomberg entitled Australia Facing `Once-in-100-Year’ Housing Slump.
The data from Residex showed that there were prices drops between 0.6% and 2.2% across Australian capital cities. The median Australian house dropped 3%. One analyst predicts 30% drops by 2010 and a spokesperson from the Salvation Army calls it a “debt tsunami”. The tide certainly does seem to be heading out a long way…
Note that the article does not mention which month the Residex data is for. i.e. May, June or July. I imagine it’s June.
The Guardian newspaper writes “Traders predict house prices will fall by 50% in 4 years“. This includes 8% drop over the last few months and is in real terms (using RPI of 4% for adjustment). Traders predict approximately 10% drop in prices year on year for 2008, 2009, 2010 and 2011 with rock bottom occurring in 2011.
The IMF has been stating in it’s World Economic Outlook that Australian property prices are the world’s 4th most overvalued just behind the UK. This should be taken as a strong indicator for those of us here in Australia.