Every bear has his day and this is Steve Keen's. The associate professor in economics and finance at the University of Western Sydney has been warning against the debt bubble for years, in print (with his book Debunking Economics) and with his Debtwatch Report podcast and Debunking Economics website.

At conferences and seminars here and overseas, he has pointed out that the ratio of private debt to GDP is now more than double the levels that triggered the Great Depression. "I thought, 'There has to be an enormous financial crisis and somebody has to raise the alarm,"' he says.

Keen's outspoken views have made him a controversial figure in a profession dominated by those who believe in the essential equilibrium of capitalism. So does he feel vindicated in witnessing the subprime disaster and its fallout? "It's nice to be right but when what you're right about is saying that there's going to be a serious catastrophe that will damage the lives of hundreds of millions of people, it's very hollow ... You don't want to win like this."

He thinks many in the industry, including reserve banks around the world, should have foreseen the crisis but chose not to.

Keen was born in 1953 - in a time of low debt, he points out, when the nation was bent on building up industries. His father was a bank manager whose only debt was a mortgage ("at 3 per cent") on the family home.

"There was economic prosperity. I had no idea where it came from but it was there," he says. "When I went to university in 1971, there was no prospect of not getting a job at the other side."

He began by studying economics but, despairing of the "fantasy" maths it was based on, "led a breakaway movement which led to the establishment of political economy at Sydney Uni". That, too, proved unsatisfactory. It was, Keen says, "non-analytic". He completed an arts-law degree, studying economics within that, and went on to work as a teacher, computer journalist and for an overseas aid organisation.

Working in a business-union consultation unit, as part of the accord structure, reignited his frustration with "the conventional economics crowd".

"I thought, 'I've got to go back to university and take them on there.' I went back and did a Masters at UNSW." There he read the "financial instability hypothesis" of economist Hyman Minsky, who believed that financial systems move from stability to crisis thanks largely to speculative borrowing in good times.

"It seemed to me to be the explanation of the financial system we're in," Keen says. "But it was a minority perspective and he'd never made it into a proper mathematical model. So I went off and did a mathematical model of it as my PhD."

Keen then went on to write Debunking Economics. Called as an expert witness in a court case involving multiple loans to a couple who could not afford the repayments, Keen made "a throwaway line" about how debt-to-GDP ratios in Australia were rising exponentially. Knowing he "could not rely on hyperbole as an expert", he examined the data more closely.

"My jaw just hit the floor," he says. "The ratio of private debt - like household and business debt - was about 145 per cent of GDP. That was in 2006. It's now 165 per cent."

Just before the Great Depression began in 1929, the ratio was 80 per cent. Today, he says, Australia's debt is about the fourth or fifth-worst in the world: "We're slightly below America, way below England, and the Netherlands is scary."

So how did we get into this position? Most economic theory, he says, is based on "bad mathematics" that should have been consigned to the scrap heap two centuries ago. And he thinks capitalism has become unhealthily focused on speculation and greed.

Keen makes a distinction between speculation and investment.

"Investment which involves a certain amount of a gamble is thinking, 'This might work as a product.' Speculation is thinking, 'The price of the company that makes this is going to go through the roof.' If you have too much of the latter driving the economy, then what will most certainly happen is leveraged speculation. The debt levels grow and you get to the stage where the financial burden on the economy becomes as it is now: unsustainable."

The big questions

Biggest break Choosing to read Hyman Minsky's book John Maynard Keynes in my Masters. That gave me a perfect explanation of the chaos we've got ourselves into.

Best investment My education. I'm not a good person for finance. I am, in that sense, conservative.

Worst investment My ex-wife, who is a good friend, worked for a telecommunications company that wanted to do an IPO to employees. She wanted to buy $3000 worth of shares. She said, "They're undervalued compared to the market." The price-to-earnings ratio was 40 to one. I said, 'That's crazy. We shouldn't buy them ... but well, OK, we can afford to lose $3000." They went down to 300 bucks.

Biggest regret Probably not getting in at the beginning of this speculative bubble in housing when I first moved out to rent in the 1970s. If I'd wanted to be financially comfortable, I should have done that. I didn't buy a house until 1989. I didn't believe the bubble could go on for as long as it did.

Personal philosophy We've turned capitalism into a kleptocracy. It should get back to being capitalism again.