Keen begins his 230 km trek
About now Steve Keen is beginning his 230 km (140 mile) nine day jog-and-walk from Australia’s Parliament House to Australia’s highest mountain peak. Renowned for his analysis and prediction of the Global Financial Collapse, Keen will be accompanied by 40 people, including journalists. He is making his walk because he lost a bet on another prediction he made that has not yet come true.
At the height of the global financial crisis in late 2008, Keen predicted house prices in Australia, like those in the United States and Britain, would fall as much as 40 percent. When a hedge fund economist, Rory Robertson, said the collapse would never happen, he and Keen in a public debate agreed that the one who was proven wrong would trek to the top of Mount Kosciuszko. Since then, Australian house prices have gone up, due in large part to the Australian government’s strenuous efforts to keep what Keen still maintains is a bubble inflated.
The New York Times yesterday reported:
Mr. Keen . . . is standing by his prediction that the country’s [Australia’s] love affair with real estate will end badly. He plans to use his walk to the mountain top to raise awareness about what he sees as the dangers of overborrowing.
“When people can no longer handle the debt, or when the debt stops growing, prices will come down, and we will face the same deleveraging crisis as in America,” said Mr. Keen. “But the last thing you can say in Australia is that house prices will fall. It’s like saying Jesus is Hindu.”
The Australian government doubled a generous grant to first-home buyers in response to the global financial crisis, while decade-low mortgage rates saw buyers flock to the housing sector in 2009.
Professor Keen says that government policy artificially boosts the market at great cost to taxpayers.
“House prices will be turning [downwards] this year, because the Government’s scaling back the vendors’ grants. People are just not going to take on the same level of debt.”
“It’s getting to the stage where the only people who can afford to buy are the property spruikers themselves.”
Keen plans to run 15km each morning and walk 15km in the afternoons, and arrive at the mountain’s summit next Friday.