Walk the talk with Steve Keen

Steve Keen is off to walk
On April 15th 2010, I will commence a walk from Australia’s Parliament House to Mount Kosciousko. Below I explain how this event came about. Though it has been triggered by me losing one part of a two-part bet on house prices, its genesis goes back much further–to when I, along with a handful of other non-orthodox economists, predicted that a serious financial crisis was just around the corner.

This is the classic “hair of the dog” cure for a hangover–avoid the consequences of drinking too much one night by getting drunk again the next morning. It worked in the 1970s and 1990s because debt levels were substantially lower than today (45% in the 1970s; 90% in the 1990s; over 150% today) and because there was another group to whom lending could occur. However, now both households and businesses are carrying record levels of debt, and businesses are still rapidly deleveraging while mortgages are the only source of rising debt. I don’t believe that the “hair of the dog” will work this third time: instead debt growth will falter once the impact of The Boost wears off, and Australia will feel the painful effects of debt-deleveraging. I expect this will renew the fall in Australian house prices that The Boost interrupted.

But that’s in the future. For the present, I will be walking to Kosciousko between April 15th and 23rd of this year.

I intend using this event as a way to highlight the absurdity of the economic situation Australia has locked itself into, where continued prosperity is dependent upon house prices forever rising faster than incomes–an outcome that is only possible if debt rises faster than both incomes and prices.

If you agree with me that this situation is absurd, then join me on the walk for an afternoon (or more).

Also consider donating to Swags for Homeless, to help make life slightly less difficult for the homeless. RP Data, who offered to give $1,000 to the charity chosen by whichever of us (myself or Rory) lost the bet, is the first corporate sponsor, and their donation will enable 16 homeless people to sleep more easily in future.

As Keen says, ' “The main bet, over whether house prices here would fall by about 40% over 10-15 years as they did in Japan, is still alive and well”, he noted. “Rory may yet have to follow in my footsteps.”