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Steve Keen is professional economist. Steve predicted the Global Financial Crisis in December 2005, and predicted falls in house prices of up to 40%. Some believe he is a “doomsayer” while to many of us he is merely a realist.

Steve has recently written his latest edition of “Debtwatch”. Debtwatch No 41, December 2009: 4 Years of Calling the GFC looks at where Steve started his journey and began to realise the global and Australian economic situation.

“…debt had been growing faster than GDP–4.2% per annum faster in Australia’s case for over 40 years, and 2.7% faster for longer in the USA’s. An unsustainable trend in debt had been going on for almost half a century.

Staring at those graphs, I realised that these debt bubbles had to burst (and probably very soon), that a global financial crisis would erupt when they did, that someone had to raise the alarm, and that given my knowledge, that someone was me.

Less than 2 years later, the Global Financial Crisis erupted, and economists who didn’t see it coming, and who for decades had argued that government spending could only cause inflation, suddenly called for–and got–the biggest government stimulus packages in world history to prevent an economic Armageddon.”

Australia's Private Debt to GDP Ratio, 1945-2006

He covers topics such as debt servicing, deflation and depressions, bad theories, and his opinions on where we are headed.

“With such ignorance about the dynamics of debt, academic economists and Central Banks around the world are hoping that the crisis is behind them, even though the cause of it–excessive levels of private debt–has not been addressed. They are recommending winding back the government stimulus packages in the belief that the economy can now return to normal after the disturbance of the GFC.

In fact “normal” for the last half century has been an unsustainable growth in debt, which has finally reached an apogee from which it will fall. As it falls–by an unwillingness to lend by bankers and to borrow by businesses and households, by deliberate debt reductions, by default and bankruptcy–aggregate demand will be reduced well below aggregate supply. The economy will therefore falter–and only regular government stimuli will revive it.”

Steve’s predictions for the future?

“…I do not share the belief that the GFC is behind us: while the level of private debt remains as gargantuan as it is today, the global economy remains financially fragile, and a return to “growth as usual” is highly unlikely, since that growth will no longer be propelled by rising levels of private debt.”

If you have the time, this really is a worthwhile read. Steve Keen’s blog is at www.debtdeflation.com.

I’ve been reading “The 4-Hour Work Week: Escape 9-5, Live Anywhere, and Join the New Rich” by Tim Ferriss lately. It’s the first time that I have read a book that always says “you’re not going to believe this” or “you’re going to think I’m crazy for saying this”, and never actually thinking it. It’s as though my views and goals in life fall in line with everything that he is preaching. Ok so maybe not all of it – I do still have my own opinions and don’t agree with some here and there, but essentially I have the same goals:

• Don’t get tied to a physical location
• Work as little as you can
• Actually do what you want to do in life

This is all good and well, but you really need to financially support the lifestyle that you want. If you have read any of my other posts on this site, it’s probably obvious by now that I’m not a very materialistic person. I’m no Amish, but I’m not very driven to have a lot of “stuff” either.

By not having the need to own a lot of posessions, I personally have a huge advantage – I can get away with earning less in order to have the lifestyle that I want. Of course if you do have a lot of needs by way of posessions, it’s all possible, you just need to raise more income.

How do I plan on doing this? There are plenty of ways, but essentially I am working on projects that require little to no work from myself after the initial setup. I’m not quite at the “outsource everything” stage, so I’m doing a lot of work myself (since I actually enjoy it), but maybe one day.

For instance, I run a website called “Eco Update“. The idea of the site is to aggregate content – basically it pulls the relevant content from other sites and then displays it on mine. The aim is to collect content on a few related topics, making it a “hub” of eco friendly/green living news and information. From the income generating point of view, the site also features Google Adsense advertising, and generates a minor income stream for me which requires little to no effort after the initial setup.

It goes to show that while you can make smart investments to generate passive income, there are also other little projects that can do the same for next to no cost. Some people like me create websites and use affiliate programs and advertising banners to generate income while others will start a dropshipping business. There are plenty of options and you are only limited by your imagination.

Think about it, then do some planning, and make it happen. Start small if need be and aim for the stars.