at Canterbury University on Saturday evening.
I'm reasonably familiar with his work, and I still took six pages of notes.
Keen tried to present too much material (4+ hours worth) in an hour. Too
fast and too detailed for most people I guess.
Two speakers tried to get him to comment on situation in Christchurch.
Without much success, it's not an issue he's thought about.
However much of his general theory speaks directly to what's happening
in Christchurch.
Keen demonstrated that the trends in debt are very similar from country
to country in the OECD at least, differing only in intensity, not very
much in the general shape of events. This suggests the politicians in
whatever country, are powerless to influence events if they follow
mainstream economic advice. (Which they all do.) I call this
surrendering to the market, until the market destroys you.
I was interested to see what his analysis of New Zealand was. No
surprise really. Keen has been saying for years that Australia has a
private debt problem, with over investment in housing being a
significant factor. You won't be too surprised to hear that compared
with Australia, NZ's over investment in housing is greater.
Because of that Steve Keen is predicting that in NZ, unemployment will
rise, and that house prices will rise in the short term, but fall in the
long term because what we are doing here is unsustainable.
Keen spent a lot of time explaining why the forecasts of banks and
governments that economic recovery is just around the corner are wrong,
and why there can be no return, no return ever, to what we have thought
was a normal economic situation for the last 40 years.
So in brief; the economy has been out of equilibrium and growing
increasingly so for all of our lives. The best evidence for that in is
the constantly growing private debt, over a period of more than 40
years, until recently. This has caused both housing prices and share
prices to have unrealistic values, and as we are forced to deleverage
those prices will fall. Bad debts and under performing loans will be
exposed.
Because for all our lives, we've been living in this situation, we
assume that it's normal, we can't see that it's dangerous because it's
what we've become used to. Yet there is a recession (depression?) and
people know that, hence the large audience.
Steve Keen's general solution is to use government money creation to
cancel private debt. A modern debt jubilee.
* * * * * * * * *
Regarding the earthquakes and Christchurch.
The city has lost productive capacity.
The private sector will be seeking ways to make money in the rebuild.
It's unlikely that the rebuild will be successful without a significant
injection of government money.
I made the point that on the surface, take the insurance claims payable,
current land values, the funds private investors have, and the refusal
of the government to kick start the recovery, it's possible the rebuild
will not happen.
I asked if in this situation the creation of a supplementary currency
"recovery hours" or "civics" might be helpful.
Keen spoke about the success in the UK of this sort of approach. He
wasn't prepared and didn't have the knowledge I hoped to tap.
More about my views about that later, perhaps.