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.

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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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  • koonyeow

    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.

  • Steve Hum­mel

    Regard­ing: http://t.co/Jvgydqz7

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

  • Steve Hum­mel

    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.

  • Steve Hum­mel


    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.

  • Steve Hum­mel

    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.

  • Steve Hum­mel

    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.

  • drew priest

    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

  • mahaish

    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.

  • Steve Hum­mel

    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:

  • Steve Hum­mel

    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.

  • TruthIs­ThereIs­NoTruth

    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.

  • Steve Hum­mel

    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.

  • sj

    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.

  • mahaish

    the pot shouldnt be call­ing the ket­tle black sj,

  • Steve Hum­mel

    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.

  • sj

    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!

  • Derek R

    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.

  • sj

    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.

  • 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.

  • sj

    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!

  • 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.

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