August 2009


Green Shoots and other Fairytales

A rather sober tale today.. just in case I need to say 'I told you so'. Here are links to a few posts that show where I think the world is at and where we're headed.

First, Steve Keen, an Australian un-conventional economist, is recognised in a research paper for being amongst a select few to anticipate this credit crisis:

July 2009: No One Saw This Coming? Balderdash!

The cornerstone of Steve Keen's argument is built around the above long-term chart. Credit as a proportion of GDP has rarely been stable - periods of credit (debt) expansion have been followed by deflationary 'busts' in the late 1800's and then more famously in the Great Depression. Increasing credit (debt) as a proportion of GDP is inherently unstable - we've simply been blowing one bubble after another for too long now. The problem is that conventional neo-classical economic theory does not recognise the role of private credit in the economy, but private debt has become so significant that it IS the economy.