A chilling look at where our debt-addiction may be leading us;
Australian Steve Keen was one of only a handful of economists to predict the Global Financial Crisis.
His most recent book, Can We Avoid Another Financial Crisis? leaves readers in little doubt he believes we’re heading that way unless we adopt a fundamentally different approach to private debt.
He says it’s all about debt – specifically private debt.
“We’re focussing on the wrong topic. We’re so focussed on government debt, what actually caused the crisis was run away private debt.”
And he says there are a number of ‘debt zombies’ in the world economy – New Zealand among them.
He calls New Zealand ‘Schrodinger’s Zombie’.
The walking dead have already had a financial crisis, he says, and have been experiencing weak growth, while ‘zombie-to-be’ countries avoided the 2008/2009 crisis by borrowing their way through it.
Now they have a bigger debt burden to deal with when the next crisis hits, he says.
“New Zealand sits in both camps. It had 190 percent of debt to GDP back in 2009, it bottomed out at about 170 percent then went back up to 180 percent of GDP. Most of that’s in the household sector so that’s driven the housing bubble in New Zealand, which of course the authorities normally deny, but it’s clearly there although in my opinion starting to turn right now.
“So you guys have had two bites of the zombie cherry.”
He says there is no doubt the bubble will burst.