House prices shoot towards a ceiling

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The bulls are roar­ing, house prices are ris­ing, and all’s well with the world.

Or maybe not. Cer­tainly house prices have risen — and con­trary to pop­u­lar opin­ion, I expected price rises this year, since mort­gage debt has been accel­er­at­ing since the begin­ning of 2012 (see Fig­ure 1). One of my many eco­nomic here­sies is the argu­ment that asset prices are dri­ven by ris­ing debt. Ris­ing asset prices — in this case, houses — require accel­er­at­ing debt (in this case, mort­gage debt), and that’s indeed what we’ve had since the begin­ning of 2012.

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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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33 Responses to House prices shoot towards a ceiling

  1. Steve Hummel says:

    Intan­gi­ble assets like pri­vate bank­ing licenses require a sym­me­try pro­duc­ing intan­gi­ble coun­ter­part like a Citizen’s Dividend/Discount Author­ity to finance consumption.…just to mir­ror the sym­me­try that is present…in the rest of the cosmos.

    Sym­me­try and whole­ness in all things! Even finance.

  2. Steve Keen says:

    When things sim­mer down a bit”… Now that’s a day I dream of!

    It was a very good ses­sion though, and the dis­cus­sion was good–though to be hon­est I can’t recall any of it right now. But we did focus upon the inher­ent insta­bil­i­ties of cap­i­tal­ism, from three very dif­fer­ent but com­ple­men­tary perspectives.

  3. Steve Hummel says:

    When I have sug­gested that the ever present effects of the rules of cost account­ing have a desta­bi­liz­ing effect on our abil­ity to liq­ui­date prices most ortho­dox econ­o­mists chor­tle that “the maths just don’t add up due to the var­i­ous veloc­i­ties of money”. Some, per­haps because they are less arro­gant, just rarely if ever acknowl­edge my input. I’m still not buy­ing that cri­tique actu­ally, con­sid­er­ing that cost accounting’s effects ARE ever present on every dol­lar actu­ally remain­ing in and pass­ing through com­merce itself, but this idea is my answer to it anyway.

    Re-visiting my post on a CDG (con­sumer div­i­dend grace as in gift) currency….the idea arose from my think­ing about Wis­dom being the sci­ence of inte­gra­tive think­ing and act­ing, what I refer to as the BOTH/AND per­spec­tive, and the nat­ural expe­ri­ence of Grace as the pin­na­cle of the dis­til­la­tions of that wis­dom also being a BOTH/AND phe­nom­e­non. In other words a CDG cur­rency is one designed to have BOTH the plus AND the minus aspect of our money sys­tem, and even more impor­tantly also be a means of redress­ing the asym­me­tries of power between the world’s economic/financial and mon­e­tary sys­tems and the individual.

    What I am say­ing about a CDG cur­rency is that it be added to the pool of indi­vid­ual pur­chas­ing power cre­ated by work for pay and inter­est on sav­ings, directly dis­trib­uted to the indi­vid­ual and orig­i­nally exclu­sively tagged as only for con­sump­tion. Now it could be kept in exis­tence after retail sale as either profit or sav­ings for indi­vid­u­als or busi­nesses and uti­lized by them for only more con­sump­tion or, if used for tra­di­tion­ally pro­duc­tive investment…it could be trans­formed back into reg­u­lar money and allowed to re-circulate for that spe­cific pur­pose only. Thus within the reg­u­lar money sys­tem it could be a BOTH/AND form of money, and it would also be BOTH an indi­vid­ual free­dom enhanc­ing mech­a­nism AND liq­uid­ity pro­vid­ing mech­a­nism for tra­di­tional investment.

    Tra­di­tional Bank­ing would still exist and spec­u­la­tive ven­tures would also still be pos­si­ble, but only with non CDG monies and under tight regulation.

    This is my BOTH/AND Production/Grace the free gift economic/financial/monetary system.

  4. Steve Hummel says:


    Per­haps we should call this DCDG cur­rency as in Domes­tic ONLY Con­sumer Div­i­dend Gift cur­rency. That way any coun­try can adopt it.…instead of hav­ing a pri­vate self inter­ested glob­ally con­trolled one.…which omi­nously seems to be the trend of thinking.

  5. Steve Hummel says:

    I can hear it already:

    But what about the poor Bankers and Bank­ing system?”

    Well, maybe it will be good if they, like every OTHER busi­ness plan.….had some actual com­pe­ti­tion instead of no com­pe­ti­tion or faux competition.

  6. Endless says: brought to you by Steve Hummel…

  7. Steve Hummel says:

    Who’s stop­ping any­one from posting?

    And if the major thrust of my ideas/policies is the very thing that addresses/resolves the most glar­ing prob­lems fac­ing us like the dom­i­nance of the TBTF Banks/Banking sys­tem, the elim­i­na­tion of both exces­sive per­sonal debt and the per­ma­nent robust­ness of the tra­di­tion­ally pro­duc­tive econ­omy as well as the eco­nomic free­dom of individuals.…with a dual pur­pose trans­form­ing currency.…what is the objec­tion? Cyn­i­cism is not rel­e­vant debate, and is more an indi­ca­tion of lack of Faith as in Con­fi­dence. But after all, that is what the present sys­tems are designed (con­sciously or uncon­sciously) to cre­ate. Let us have some­thing sys­tem­i­cally “new under the sun”.

  8. Patrick Sunter says:

    Steve, I’m won­der­ing if you’re pre­pared to com­ment on the spa­tial polit­i­cal eco­nomic issues that are part of Australia’s high house prices :- do sup­ply con­straints play at least some role, as well as gov­ern­ment poli­cies like first home own­ers grant, neg­a­tive gear­ing, and bank lend­ing policies?

    I.E. the right-wing Demographia con­sul­tancy recently reported on Australia’s highly unaf­ford­able house prices rel­a­tive to income — but then basi­cally pointed the fin­ger of blame com­pletely at “the wide­spread adop­tion of urban con­tain­ment poli­cies” since the 1980s (

    Alter­na­tively, just saw a more bal­anced blog post argu­ing land sup­ply is one of the fac­tors, along with pop growth, plan­ning restric­tions on rede­vel­op­ment in exist­ing areas (

    So are sup­ply con­straints at least part of the pic­ture?
    BTW this is in no way a ‘trick ques­tion’, I’m cer­tainly skep­ti­cal myself of the sup­ply argu­ment being advanced as the primary/only cause of high prices.

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