The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Saturday, December 24, 2011

Debunking Steve Keen's predictions

Folks like Chris Zappone at the SMH like to give Steve Keen's predictions enormous attention on the SMH's website. I don't have any issues with this--that is Chris's journalistic call. But a reader wrote to me the other day with an itemised list of Keen's forecasts, which is more thorough than I have ever seen before. He asked whether I could post it up, and today I have obliged.

Reader comments...
It is a revealing exercise writing down some of the claims Steve Keen has made:

1. In 2006, Keen said we may already be in a recession (we were not).

2. In 2006, Keen said the Australian Debt/GDP ratio would exceed 160% by 2007 (it did not).

3. In 2006, Keen said Australia will be in recession long before our Debt/GDP ratio falls (we did not go into recession).

4. In 2008, Keen said interest rates would be at 2% by 2009, and ZIRP by 2010 (the interest rate trough was 3%; today rates are at 4.25%).

5. In 2008, Keen said we would have double digit unemployment (up to 20%). Unemployment only rose to 5.8%, and is 5.3% today.

6. In 2008, Keen said we would have a severe recession, possibly a depression. We had neither.

7. In 2008, Keen said house prices would be down 40% within 'a few years'. They fell by about 3% in 2008 (less than one-tenth of what Keen predicted), rose strongly in 2009, rose again in 2010, and have fallen by 2.8% in 2011.

8. In 2008, Keen famously made a house price bet with Westpac's Rory Robertson, which he lost, forcing him to hike from Canberra to Mount Kosciuszko wearing a t-shirt exclaiming, "I was hopelessly wrong on house prices – ask me how."

9. In 2008, Keen sold his Sydney home at a cyclical low point, just before prices rose more than 10%.

10. In mid 2010, Keen predicted an "an accelerating rate of decline in [Australian] house prices now, as they did in the USA when “Flip That House” ceased being a winning trade." In Zappone's latest SMH profile of Keen, he makes exactly the same prediction again. Zappone writes that Keen expects an "accelerating slide in prices." In fact, Australian house price declines have not accelerated. They have depreciated slowly and consistently by a cumulative 2.8% in 2011. [CJ: Yes, there is leading indicator evidence to suggest that rate of price declines will soon slow to a halt.]

Every single one of these calls has been wrong.