The Speakers - Bios and Abstracts

Guy Debelle is the Assistant Governor (Financial Markets) at the Reserve Bank of Australia, a position he has held since March 2007. He joined the Reserve Bank in 1994 and prior to his current position, worked in the Economic Research and Economic Analysis Departments including as Head of that Department and as Head of International Department.  He has also worked at the International Monetary Fund, Bank for International Settlements, Australian Treasury and as a visiting professor in economics at the Massachusetts Institute of Technology. He graduated from the University of Adelaide with an honours degree in economics, and gained his PhD in economics at MIT. He is an associate editor of the International Journal of Central Banking and has published on a range of topics in the fields of labour and monetary economics.

A comparison of the US and Australian Mortgage Markets

This paper documents the developments in the sub-prime mortgage market in the United States in recent years and compares that market with its (very small) equivalent market in Australia. It also describes how the collapse of the sub-prime market in the US, and credit markets more generally, has affected Australian financial markets and the economy.

R. Taggart Murphy is Professor in the MBA Program in International Business, Graduate School of Business Sciences, at the University of Tsukuba's Tokyo Campus. A former investment banker, Murphy has also taught in the College of International Studies and the Graduate School of International Political Economy at Tsukuba University's main campus and was a Non-Resident Senior Visiting Fellow at the Brookings Institution. He is the author of The Weight of the Yen (W.W. Norton, 1996) named by Business Week as one of the ten best business books of 1996 and, with Akio Mikuni of Japan's Policy Trap (Brookings, 2002), voted the best professional and scholarly book of 2002 in the economics category by the American Association of Publishers. His articles have appeared in the Harvard Business Review, the New Left Review, the London Review of Books, the National Interest, and Fortune among others.

Japan’s Financial Trauma of the 1990s and Today’s Sub-Prime Mortgage Meltdown: Parallels, Differences, and Lessons

Much has been made of parallels between Japan's financial trauma of the 1990s and the Sub-Prime Mortgage meltdown. Those parallels certainly exist, most particularly in the common origins of the two upheavals in real estate manias, largely fruitless attempts by authorities in both the United States and Japan to treat them by flooding their economies with liquidity, and in the collapse of confidence in financial institutions. Parallels to Japan's deliberate efforts to socialise risk are also, paradoxically, to be found in the way developments in modern finance effectively socialised risk in the US financial system despite diametrically opposed ideological roots; i.e., a distrust vs an uncritical worship of market forces. Differences are as significant as parallels, however, most particularly in social buffers that insulate to some extent Japan's households from the full gale of financial trauma and in Japan's position as a net creditor nation. Both gave Japan's authorities the breathing space to guide the country out of the trauma while avoiding a full scale crisis.

Dr Steve Keen is Associate Professor of Economics and Finance at the University of Western Sydney. Steve is the author of the best-selling book Debunking Economics, and is unusual amongst critics of conventional economics by being highly mathematical in his own research. His main research interest is in developing mathematical models of Hyman Minsky's Financial Instability Hypothesis. A collection of his work can be found at www.debunkingeconomics.com and www.debtdeflation.com/blogs

A Primer on Sub-primes

How could anybody take seriously as transparent a scam as sub-primes, which in a sentence was “A scheme to make money by lending money to people who couldn't afford to repay it”? Because it was dressed up in fancy mathematics that made it possible to believe it was legitimate. This presentation illustrates the basic concepts behind sub-primes by applying it to readily available stock market data, and then seeing what goes wrong.

Stephen Bell is Professor of political economy at the School of Political Science and International Studies at the University of Queensland. He has held positions at Griffith University, the University of New England, the University of Tasmania, as well as visiting positions at the ANU and the Copenhagen Business School. He served as Head of the School of Government at the University of Tasmania and Head of School UQ from 2004 to 2007. His main teaching and research interests focus on questions of governance and institutional development – or more broadly ‘governing capacity’ – with special reference to the politics of economic policy and more recently the politics of water management. He is the author or editor of seven books and has published widely in national and international journals. His latest book deals with the politics of monetary policy and the institutional dynamics of the Reserve Bank of Australia: Australia’s Money Mandarins: the Reserve Bank and the Politics of Money, Cambridge University Press. He is currently engaged in a major ARC funded research project dealing with financial reform and the politics of central banking in China.

Asset Price Instability and Policy Responses: The Legacy of Liberalisation

The debate about the dynamics of, and potential policy responses to, asset price inflation has intensified in recent years. Some analysts, notably Borio and Lowe, have called for ‘subtle’ changes to existing monetary targeting frameworks to try to deal with the problems of asset price inflation and have attempted to develop indicators of financial vulnerability to aid this process. In contrast, this paper argues that the uncertainties involved in understanding financial market developments and their potential impact on the real economy are likely to remain too high to embolden policy makers. The political and institutional risks associated with policy errors are also significant. The fundamental premise that a liberalised financial system is based on ‘efficient’ market allocation is arguably misplaced, but monetary policy solutions within the current deregulated system are not an obvious answer either. The corollary is that any serious attempt to stabilise financial market outcomes must involve at least a partial reversal of deregulation.

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Richard Leaver is Reader in International Relations in the School of Political and International Studies at Flinders University. Prior to that, he was a Senior Research Fellow in the Department of International Relations at the Australian National University. His primary teaching and research interests relate to the economic aspects of International Relations (with particular reference to oil and energy); nuclear proliferation and non-proliferation, and Australian foreign and trade policies, especially in relation to all the above.

The International Sources of Debt Crises: A ‘Second Image Reversed’ Explanation

Most accounts of the systemic debt crises of recent decades fall into one of two camps: they emphasise either the particular domestic arrangements that lead to over-borrowing and the decline of prudential standards, or the excessive freedoms and structural power enjoyed by globally mobile finance. Attention to ‘the national’ and ‘the global’ has come, however, at the expense of ‘the international’. This presentation will emphasise the importance of US dollar exchange rate changes as a source of recent crises, and explore the implications of this account for the sub-prime meltdown. 

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	Associate Professor Noel Tracy lectures in the School of Political and International Studies at Flinders University.  His main areas of interest include the international political economy, China’s integration into the global economy and the political economy of Chinese business networks.  Noel’s publications include The Chinese Diaspora and Mainland China (Macmillan, 1996); China’s Export Miracle (Macmillan, 2000) and Chinese Business and the Asian Crisis (Gower, 2001).
A Minsky Moment
Hyman Minsky (1909-1996), Professor of Economics at Washington University, St.Louis, predicted increased instability and crisis in both domestic and international financial systems in the wake of the abandonment of the Bretton Woods System in 1971. Minsky located the origins of financial crises in the fragility of the credit system. Periods of economic growth require financing by a growth in credit. However, economic growth produces an even stronger growth in the price of assets, particularly property and stocks. Increasingly credit is used to finance the purchase of assets in the expectation of further increases in price, initially a self-fulfilling prophecy. The boom has now entered a “bubble stage”. A debt mountain builds as borrowers increasingly pledge existing assets to borrow more to purchase similar assets. When the “bubble” bursts everyone is in trouble. The sellers’ market has disappeared, prices of assets are falling and enforced sales force the market down further. Those left holding assets often cannot service their debt, others have negative equity, others still are faced with margin calls they cannot meet. Everyone is in trouble but none more so than the banks. Over-lending has now left them full of bad and doubtful debts. Banks that were flush with money are suddenly short of even the funds to finance their own liquidity. Credit dries up and the problems of the financial system will soon engulf the whole economy. The Minsky Moment has arrived. BACK

We regret that Herman Schwartz is unable to attend the symposium as expected. His flight to Australia has been cancelled due to mechanical problems.

Herman Schwartz is Professor and Director of Graduate Studies in the Politics Department at the University of Virginia. He is the author of In the Dominions of Debt; States versus Markets: The Emergence of Global Economy; and a forthcoming book on the subprime crisis tentatively entitled Global Arbitrage and American Growth.