Let the First Home Vendors Grant die

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Last week, sev­eral news­pa­pers ran a story in which the Labor Oppo­si­tion crit­i­cised the New South Wales Lib­eral gov­ern­ment because the num­ber of first home buy­ers had plunged after the first home owner’s grant was ended for exist­ing homes. A photo of act­ing Oppo­si­tion leader Linda Bur­ney look­ing out sternly and sin­cerely accom­pa­nied the arti­cle, as she intoned in The Syd­ney Morn­ing Herald’s text that the Lib­er­als had aban­doned first home buyers:

The act­ing Oppo­si­tion Leader, Linda Bur­ney, said this deci­sion and the axing of stamp duty exemp­tions for first home buy­ers of exist­ing homes from Decem­ber 31, 2011, meant the New South Wales gov­ern­ment had ‘aban­doned first home buyers’.

’These fig­ures clearly show [Pre­mier] Barry O’Farrell has locked first home buy­ers out of the prop­erty mar­ket with his cuts to stamp duty exemp­tions and first home buyer bonuses,” she said. ”The worst loan approvals for first home buy­ers in 20 years should be a wake-up call for the O’Farrell gov­ern­ment. Their approach clearly isn’t working’.”

What bol­locks. First home buy­ers weren’t locked out by the end­ing of the first home ven­dors’ grant: they were locked out by the impos­si­bly high prices that this grant has helped gen­er­ate over the 30 years since it was first invented. And its pur­pose has never been to give first home buy­ers a help­ing hand: it has always been used as a way of giv­ing the econ­omy the eco­nomic equiv­a­lent of a steroid injec­tion. First home buy­ers have instead been the sac­ri­fi­cial lambs of an asset-price-inflation route to appar­ent national prosperity.

Click here to read the rest of this story

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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22 Responses to Let the First Home Vendors Grant die

  1. koonyeow says:

    Peo­ple in office want to be seen that they are doing some­thing (like giv­ing grants to avert a reces­sion), even when doing noth­ing is the bet­ter option.

  2. Steve Hummel says:

    Regard­ing: http://t.co/Jvgydqz7

    Yes, but solv­ing cli­mate change still doesn’t address com­mer­cial real­i­tyof scarcity of indi­vid­ual incomes in com­par­i­son to prices.

  3. Steve Hummel says:

    And when the next Alexan­der the Great or El Cid gets evan­gel­i­cal about their eco­nomic “mir­a­cle” and Iran, Syria, Rus­sia, China and Japan also don’t kow­tow to Finance’s cur­rent paradigm.…climate change will def­i­nitely be put on the back burner.

  4. Steve Hummel says:


    and Iran, Syria, Rus­sia, China and Japan also don’t kow­tow to NATO’s geo-political chess game….climate change will def­i­nitely be put on the back burner.

  5. Steve Hummel says:

    regard­ing http://t.co/UG2KcEU0

    God bless these guys, but they or their bosses will end up oppos­ing REAL indi­vid­ual eco­nomic free­dom the same as the Amer­i­can Koch broth­ers and J. P. Mor­gan Chase et al do .…and just like the Fabian Social­ists opposed C. H. Dou­glas back in the day.….because it might break up a part of their turf/privilege. And so the unob­served and most sys­tem­i­cally sig­nif­i­cant fac­tor of infla­tion goes on.…doing its work while accoun­tants don’t think about eco­nom­ics and econ­o­mists are igno­rant of the ever present effects of the rules that gov­ern account­ing itself. You have to look at all of the pos­si­bil­i­ties, all of the fac­tors with a newly and actu­ally re-opened mind. Even the “mun­dane” ones or the “every­body already agrees this is not a fac­tor” ones. Icon­o­clasm has to go deeper than the­ory. Total de-construction and re-examination is some­times necessary. 

    Change the indi­vid­ual con­sumer finan­cial par­a­digm from employ­ment and bor­row­ing to Div­i­dend, employ­ment and bor­row­ing if desired and cred­itable and it will change every­thing. Every­thing. By re-balancing power toward the indi­vid­ual. The Koch broth­ers and J. P.Morgan con­trol the monop­oly on the life’s blood of the econ­omy and the means of sur­vival for indi­vid­u­als. We need, we require a SOCIAL/INDIVIDUAL Credit to cre­ate the sym­me­try, the bal­ance, the trans­for­ma­tive abil­ity to the econ­omy that is now so severely lacking.

    And time is run­ning out.

  6. Steve Hummel says:

    Regard­ing: http://t.co/dYkj4syB

    Its headed in the right direc­tion, but still will not get the job done because it does not rec­og­nize the most under­ly­ing cause of price infla­tion and hence loss of value of busi­ness profit and indi­vid­ual income.….the con­ven­tions of cost accounting.

    A debt jubilee is the nascent recog­ni­tion of the truth­ful­ness and effec­tive­ness of the citizen’s div­i­dend. All you have to do is recognize/admit to the exis­tence of the ever present com­mer­cial Gap between total indi­vid­ual incomes and total prices ALWAYS ENFORCED by the account­ing sys­tem ITSELF. That com­mer­cial REALITY can­not be over­come except by a SOCIAL/INDIVIDUAL Credit in the form of a Div­i­dend to indi­vid­u­als because it goes around com­merce directly to the indi­vid­ual first. And its not infla­tion­ary. How much less money will need to be cre­ated if you GIVE an indi­vid­ual money as opposed to mak­ing him take out a loan? And no.…..the business/commercial finan­cial par­a­digm does not need to be changed, that can remain the same. I don’t live in a fan­tasy world.…like the habit­u­ally eco­nom­i­cally ortho­dox do.

    When are we going to smack the finance min­is­ters, cen­tral bankers and pri­vate bankers up along side of the head and say: “You are enti­tled to be a part of the econ­omy, but a much smaller part. Now sit down and shut the fuck up we’re going to make the will to eco­nomic free­dom for the indi­vid­ual the pri­mary inten­tion instead of the will to wealth and power of the var­i­ous finan­cial, cor­po­rate and polit­i­cal enti­ties.” Sheeeesh.

  7. drew priest says:

    Hi Steve, I got a ques­tion about the “sup­ply” curve.

    You make the argu­ment in your book that main stream econ gets the “sup­ply curve” wrong. They use mar­ginal cost = mar­ginal rev­enue, and that is not real­is­tic because it does not max­i­mize profit. In real­ity, you argue, firms use “cost plus” account­ing to set prices. This matches up with my expe­ri­ence in my own com­pany. We are very focused on pro­duc­tion cost plus mar­gin, and main­tain­ing the mar­gin in the intro­duc­tion of new products.

    But then I look at some recent booms and get con­fused on this point. In 2008 the eco­nomic boom was so sig­nif­i­cant that we went on allo­ca­tion, spread­ing out deliv­er­ies so every back-ordered cus­tomer got some­thing. Our deal­ers also increased their mar­gins in that boom time, ask­ing and get­ting MSRP for new orders. This behav­ior cer­tainly implies an upward slop­ing sup­ply curve and upward slop­ing mar­ginal cost.

    Again, start­ing in Dec 2012 Amer­ica is going through the biggest gun sale boom since records started. Retail shelves are bare, dis­tri­b­u­tion cen­ters are empty, sup­ply chains and man­u­fac­tur­ers are back-ordered for the next YEAR. Most retail­ers and dis­trib­u­tors and man­u­fac­tur­ers have CLOSED their back-order books because they have already booked full capac­ity for 2013. In this panic buy sit­u­a­tion, prices have dou­bled and tripled. $900 semi-auto rifles are going for $2700 on open mar­ket auctions.
    This behav­ior again implies a ris­ing mar­ginal cost, which is one of the spe­cific things you call out as erroneous.

    Can you pro­vide some insight in these 2 expe­ri­ences? What part of your sup­ply model am I missing?

    Thanks, Drew

  8. mahaish says:

    i make a liv­ing out of man­ag­ing the rev­enue and yield curve.

    there are fixed costs and vari­able costs.

    fixed costs exist regard­less of the busi­ness throughput.

    i can tell you the real world expe­ri­ence, is that max­imis­ing profit is by clear­ing the market.

    to clear the mar­ket , some inven­tory may have to be sold at less than opti­mal profit. and as long as the sale occures at above vari­able costs, then thats money in the bank.

    so i think the test books are right. to max­imise total rev­enue, we may have to sell at cost or even at a loss, if there is a inven­tory and cap­i­tal­i­sa­tion cost.

    the invest­ment has already occured, and if the prod­uct doesnt clear the mar­ket , you have to flog it at the best ava­ial­able price

    the ques­tion is tim­ing, as to when we sell at less than opti­mal profit or at below cost.

    the rev­enue curve isnt a upward slop­ing curve with vari­able steepness.

    it either a bell curve, or a flat line with a sheer cliff, depend­ing on the prod­uct market.

    i exploit the mar­ginal cost = mar­ginal rev­enue model every day, and the busi­ness i work for out per­formes the rest of the mar­ket by a fac­tor of 3 to 5 when its comes to rev­enue growth.

    the rea­son why we out per­form the mar­ket is that we use the mar­ginal cost model, and our com­peti­tors dont.

    i hate to say it, but the text books are right.

  9. Steve Hummel says:

    Regard­ing Andrew Lainton’s The Prof­its (& Growth) Puzzle:

    Your the­ory simul­ta­ne­ously mir­rors Social Credit The­ory and shows incom­plete research and analy­sis of its ideas and pol­icy mech­a­nisms. The intan­gi­ble asset of a Bank­ing license of Keen and your Fran­chise Value of Equity are Social Credit’s Cul­tural Her­itage of Pro­duc­tive Poten­tial (Inno­va­tion), a com­mu­nal asset whose value has been com­pletely usurped by the Finan­cial sys­tem. Dou­glas can­not sim­ply be pigeon holed into the crank “inter­est is the whole prob­lem” mon­e­tary reform­ers. His insights go much deeper than that and actu­ally pre­cede your own and the analy­sis of oth­ers you site. Finally, veloc­ity the­ory is clearly inval­i­dated by the ever present com­mer­cial and mon­e­tary real­i­ties of cost accounting’s con­ven­tions. A good syn­op­sis of Social Credit can be found here:

  10. Steve Hummel says:

    Veloc­ity pro­vides lots of money churn­ing through the sys­tem as over­head charges, but very lit­tle actual addi­tional pur­chas­ing power. Hence, with­out a direct sup­ple­ment to indi­vid­ual pur­chas­ing power that doesn’t first go through a busi­ness and con­se­quently invokes the scarcity of incomes in com­par­i­son to prices, there is a neces­sity to bor­row and the con­tin­ual build up of debt. 

    Sales from busi­nesses can­not just be used for pur­chases willy nilly with­out pay­ing creditors.…unless there is a tremen­dous amount of unre­ported income which indeed adds robust­ness and is a way of sur­vival in some economies. It shows the pos­i­tive effect a Div­i­dend would have on any econ­omy. Com­bine both the Div­i­dend and the Dis­count mech­a­nisms and you solve both the lower and upper ends of the causes of inflation.

  11. TruthIsThereIsNoTruth says:

    oh man — this used to be a hot topic. 

    Now we have 10 com­ments in 8 days, 7 from the mes­siah at the cen­tre of the uni­verse as he con­tin­ues to demon­strate that all top­ics (now per­fectly ran­dom and unre­lated to the actual post) grav­i­tate to his nau­si­at­ingly inco­her­ent pon­tif­i­cate indulgences.

  12. Steve Hummel says:

    They are all rel­e­vant to the twit­ter ref­er­ences alluded to. No one else is post­ing so.…so what. All you do is show your biases and unwill­ing­ness to open your mind to some­thing new and dif­fer­ent with a neg­a­tive post. So post on the topic. Light a can­dle. Of course with some­one whose moniker is TITINT.…what can we expect.

  13. sj says:

    Steve Hum­mel this web­site had many open debates with inter­est­ing bloggers.
    AK,Bullturnedbear,Barneywasright,Brett123,Elliotwave the list was very long.
    But now you are lucky to get 5 orig­i­nal intel­li­gent com­ments a month?
    What happened?

    Too many extreme polit­i­cal ideas:
    The Pirates and Scum Bag Tour.
    The Debt Jubilee.
    Soft mark­ing at Universities.
    Sup­port­ing a extreme green gov­ern­ment that loves debt. 

    In oth­er­words the web­site has become too polit­i­cal and blog­gers with orig­i­nal inter­est­ing think­ing stay away and you are left with the low­est com­mon denom­i­na­tor mass herd vic­tim men­tal­ity thinking.

  14. mahaish says:

    the pot shouldnt be call­ing the ket­tle black sj,

  15. Steve Hummel says:

    I think the num­ber of posts here has declined pri­mar­ily because Steve Keen ini­ti­ated his paid site and many of the posters went there. You can con­sider my posts as you will. If you’re an accoun­tant you ought to under­stand what I am refer­ring to in many of my posts. Part of the prob­lem with under­stand­ing what I post is, as Steve Keen him­self has acknowl­edged, that you can get a PhD in eco­nom­ics and not even have to take an account­ing class to do so. In addi­tion appar­ently few accoun­tants think either in terms of eco­nom­ics or in terms of the eco­nomic and mon­e­tary effects of their own dis­ci­pline. And then of course you have the ever present prob­lem of cur­rent ortho­dox­ies pre­vent­ing the­o­rists from con­sid­er­ing those same account­ing effects. Ortho­doxy blinds and inhibits look­ing, and it is so preva­lent it is incred­i­ble. Even in the hard sci­ences let alone in the social sci­ences like eco­nom­ics. I acknowl­edge most of the ideas of econ­o­mists like Steve Keen and Michael Hud­son, it’s just that I believe they are miss­ing the point I am mak­ing which is that there is an account­ing flaw which is always in effect and which uncor­rected desta­bi­lizes the econ­omy. Ortho­dox the­ory claims that veloc­ity of money inval­i­dates this, but a lit­tle look­ing and think­ing about how all money passes through the cost­ing sys­tem that every busi­ness must adhere to instead of just mul­ti­ply­ing pur­chas­ing power by sup­pos­edly pass­ing from hand to hand with­out doing so, in fact inval­i­dates the veloc­ity the­ory and acknowl­edges the com­mer­cial REALITY I am refer­ring to. 

    The other thing I often post about is modernity’s exces­sively intel­lec­tu­ally com­part­men­tal­ized state which inhibits wis­dom. Wis­dom is itself actu­ally the inter­dis­ci­pli­nary inte­gra­tion of think­ing which enables one to bet­ter under­stand issues and so more effec­tively act and/or cre­ate poli­cies that will be wise as well. 

    I find it hard to under­stand how sug­gest­ing that true open mind­ed­ness and Wisdom.…can be ratio­nally opposed.…but these are indeed inter­est­ing times.

  16. sj says:

    SH some older blog­gers will remem­ber the time of 2008 Steve keen, get­ting over 300 com­ments a item.
    Now in 2013 lucky if you get 20 comments?
    Just stat­ing the obvi­ous Mahaish if that’s call­ing the ket­tle black then I will have a nice cup tea and relax!

  17. Derek R says:

    There’s not a great deal of activ­ity on the paid site either, Steve H. I think the fact is just that Prof Keen has had to spread him­self extremely thin since Sep­tem­ber and as a result his Web pres­ence has suffered.

    How­ever I don’t think that’s nec­es­sar­ily a bad thing. Fun­da­men­tally it’s a side-effect of the mes­sage get­ting out. The more in-demand he is by the MSM, think-tanks and politi­cians the less time he has to spend on here. But it’s far more use­ful that he is get­ting the mes­sage out to movers and shak­ers rather than just to Inter­net nerds.

  18. sj says:

    Derek is the mes­sage really get­ting out is the Prime Min­is­ter ask­ing for Steve Keens advice?

    Debt has increase since 2008 in Australian.
    No debt Jubilee at the moment in Australian.
    Soft marks and Pirates and Scum Bag tours will not move any movers and shakers.
    Aus­tralian would rather watch the cricket than lis­ten to extreme left agenda.

  19. Steve Keen says:

    You’re cor­rect Derek. In fact I’m going to have to dras­ti­cally scale back my inter­net activ­ity soon. Hav­ing been a way that I got my non-orthodox mes­sage out, it is now one of the main rea­sons that I am not able to develop my analy­sis as much as is needed.

  20. sj says:

    Well done Derek 100% pass on this herd blog site.

    Non –ortho­dox mes­sage is very clear don’t ques­tion or have crit­i­cal think­ing of the cult message.

    I’ll think dis­ap­pear from this site, like all other old time inde­pen­dent bloggers.

    Good luck to all!

  21. kalman says:

    Dear Bhaskara II– Jan­u­ary 20, 2013 at 10:57 am. In response to your ques­tions regard­ing invest­ing in pre­cious met­als, I have the fol­low­ing response.
    I am not an investor, I work very hard, live well and save well. I don’t believe in the con­cept of invest­ment, this was a model imple­mented as the Baby­lon­ian Law code dat­ing back to 1772 BC and since meta­mor­phosed into a Charles Ponzi scheme.
    How­ever if I was to gamble/speculate/invest in any­thing at the moment other than cash, I would buy a lot of Sil­ver. I have done my exten­sive research and the fun­da­men­tals look favor­able at the present price, cer­tainly below $50US/Ounce. It is impor­tant to note that I am 36 years old and would not need to cash in the gam­ble for up to 40 years, so there is a lot of years to make an enor­mous gain.
    I hope this helps, Kind regards, Kalman.

  22. Pingback: First Home Buyers Deserting the Market

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