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Open letter to Senator Derryn Hinch

Australian Budget Owls is a group of concerned citizen economists who believe debate in Australia should be informed by Modern Monetary Theory. Australian Budget Owls write open letters challenging what we see as false and misleading statements, based on a zombie economic orthodoxy, described variously as “fake knowledge” and “junk economics” by leading academic economists. We ask the proponents to put up or shut up, provide clear and valid reasoning, which we would say doesn’t exist, to support their position or, change.

Dear Senator Hinch,

We write to address your comments in the media regarding home ownership for younger Australians.

Australian Budget Owls is a group of concerned citizen economists, informed by Modern Monetary Theory.

In our model of the economy we believe that money is created by banks endogenously. While this is somewhat controversial, we note that the Bank of England released a working paper in 2015 essentially confirming our views. The banking system can create as much money as it can sell, at the interest rate set by the government through the reserve bank.

The consequence of this is obvious. The supply of money, available for speculation on house prices, and hence the resulting bubble and corresponding levels of private debt, are constrained by:

  • the interest-rate set by the reserve bank,
  • prudential rules set by APRA,
  • any other laws constraining the lending by banks that may be decided by Parliament and,
  • taxation of the proceeds of housing speculation currently given discounted treatment.

The aforementioned all fall within the purview of the parliament and government, and therefore are the responsibility of you and your colleagues.

Conclusion – Parliamentarians have a social responsibility.

Your comments that younger Australians should not expect to own their own home are, from the perspective of social equity, unacceptable to us.

We would like to suggest that you, and your colleagues in parliament, consider the work of economist Prof Steve Keen on private-sector debt. Specifically, adopting a long-term policy targeting a private sector debt to GDP ratio in a similar manner to the way we now target inflation. In addition, you may wish to consider professor Keen’s Modern Debt Jubilee proposal to defuse the systemic risk associated with current high levels of private debt.

Best regards,

Damien Smith
Australian Budget Owls

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19 comments

  1. Jack Straw

    When I much younger I used to think Derryn Hinch was marvellous and that he knew so much. Though I now realise most of his comments are other peoples thought bubbles planted on him in a pub or over 3 bottles of wine at dinner. Hinch is an astoundingly unwise man and very misinformed on many topics.He’s Dick Head,

  2. John Kelly

    I doubt Derryn has the mental capacity to absorb MMT. His comments on housing are typical of his bluff and bluster image so remeniscent of his days on radio in Melbourne. Suggesting he listen to Steve Keen, Bill Mitchell or Steven Hail is a bridge too far.

  3. john ocallaghan

    I wish you and your organisation all the best in your pitch to Senator Hinch,and i hope he stops,reads, and absorbs all the aspects of your case!

  4. ozibody

    Thank you Australian Budget Owls ! … No fluff …. no fill ….. and no side alleys ( for dodging into !) … I have archived the earlier article and video illustration of MMT.. Cheering you all on ( tho’ your Hinch foray may be optimistic) … Cheers.(again) …:-) …

  5. Andreas Bimba

    In regard to housing affordability, the gorilla in the room is the taxpayer funded subsidies for property investors of negative gearing and the 50% CGT concession. These foolish subsidies are leading to most owner occupier home buyers being forced out of the market to be replaced by affluent local and foreign property investors. Not only is Australia losing its once high levels of home ownership but rents are taking up a very large share of incomes leading to declining real living standards and the suppressing of economic activity. The federal governments revenue is also reduced by tens of billions p.a. which harms worthy government areas of spending such as health care, education and so forth. The major banks also benefit greatly from the massive mortgage repayments that arise from the real estate speculation bubble. The net result of the negative gearing and CGT discount concessions is a massive transfer of wealth from moderate wage earners to the already wealthy.

    It is conceivable that the property investment bubble in Sydney and Melbourne will continue to grow for much longer than Steve Keen predicts as all it needs is an ongoing supply of willing affluent buyers. I suspect this affluent elite already knows how much it must collectively invest each year to ensure the speculative bubble grows indefinately. Only when land prices become truly ridiculous such as what happened in Tokyo many years ago will an almighty crash occur. Better to prick the real estate bubble by removing negative gearing and the CGT concessions before it gets that big.

    Social housing on a massive scale is also needed to provide affordable housing to the millions of Australians that have been harmed so deeply by this scam by the rich and to provide much needed employment.

  6. Ricardo29

    Endogenously? I am a reasonably well educated Australian, a journalist of 40+ years experience and the same age as Senator Hinch, though obviously not as famous. I wonder if he knows what endogenously means? The owls, presumably named because they believe they are wise, might gain more benefit from offering the Senator, and his (interested) colleagues of all political persuasions an introductory lesson to MMT. I might, facetiously, suggest that ScoMo be restrained with force and made to attend, tied to a chair and gagged so he can’t say anything.andreas Bimba hits nails on the head.

  7. lawrencewinder

    Hinch, listening? Haw, Haw, Haw!

  8. tony h ridler

    #ZeroTolerance has nothing to do with change, and coincidentally, bigotry has nothing to do with having a choice-;!

  9. Hettie Lynch

    Major problem. Hinch either has never heard or does not subscribe to the dictum thet we have one mouth but two ears, and they should be used in the same proportion.
    Like the two orange abominations, he seems to believe that whatever comes out of his mouth is a fine idea, incontrovertible, fabulous. Like them, he is dead wrong. Like them he will never learn because he is so busy mouthing off that he has no time to listen.

  10. 131

    Hinch is an insane alcoholic. No logic or reason will sway him. He needs to be manipulated into a position where he thinks the progressive ideas are something he thought of himself.

  11. RonaldR

    This mob sound like the Bullshit think tanks that came up with the policy that got us in the economic mess we are in they want to give a private bank more control over our economy
    Then APRA has not done its job looking after the Australian people but the opposite.

    Rudd, Gillard, Rudd, Abbott & Hockey all failed to push through the legislation known as Bail-In as requested by The International Bank of Settlements as it had been voted at the G20 all G20 countries would put the legislation in place. Bail-In legislation is where depositors are made unsecured Creditors to the Bank and the Banks are allowed under the legislation to steal depositors money when they get into trouble and also turn small shareholders shares into worthless shares.
    Even though Rudd (on his return) promised the BIS he would have the legislation in place before the election but failed and Hockey promised to have it in place before the Brisbane G20 but he also failed due to a campaign fought by long standing Minor Party Citizens Electoral Council (www.cecaust.com.au ) the campaign funded by CEC and its supporters (new minor parties and Greens were asked to join the fight but they were not willing to fight for the Australian People.
    At the Brisbane G20 BIS and the government admitted they would never get Bail-in through the Australian Parliament not even in Trojan horse legislation like in the other G20 countries. But they had to come up with something to replace Bail-outs by other countries. (like with Greece even though the debt was that of Foreign Banks in Greece not the Greek people who are suffering the Austerity measures)
    The Biggest Money pool in Australia is Australian Super and that is where they turned their attention and BIS ordered the Banks to set up Bail-In Bonds (not called by that name) they had to pay high Interest on them to sucker in the Funds so these Bonds are referred to as High Yielding Bonds.
    The Australian Government did put some restrictions on these Bonds they are only to be sold to Super Funds and Mum and Dad investors ( Not local Government , Health insurance funds and Businesses) so if you want high interest for your life savings you can buy them.
    APRA
    Malcolm Turnbull a Goldman Sachs Banker, Goldman Sachs man in Australia and inserted into our Parliament.
    Turnbull knows that Australian Bank regulations have quietly and Continually been watered down –meaning a Bank could drive a truck through them a way of explain how bad they are as it is commonly known regulations have to be tighter than Wall paper Glued to the Wall as Bankers will slide between the paper and the wall.
    Malcolm Turner looks at the Subject of Bail-In again as our Foreign owned Banks have to be looked after at our expense we have to pay their Gambling Debts.
    Turnbull and APRA set to work together and find a way of inserting Bail-in under existing Bank Regulations as our regulations have been weakened so they can do what they like with them. You are now unsecured creditors if you have money in the Bank. Tony Abbott and Joe Hockey even though they did not succeed with Bail-in they did put in draconian legislation to protect the Banks after they steal the Money of the Australian population ,but they have put nothing in place for you when you have no money and no food. Your plastic will be nothing but plastic. Australian Budget Owls are nothing but a bunch of arseholes connected to the Liberals, the Banks, The Foreign Think tanks that have corrupted Government policy for decades. Derryn Hinch should be exported back to NZ

  12. Roswell

    I don’t think Hynch has it in his head that he only got elected because of the ‘donkey vote’.

    Most Australians don’t like him. Most Australians wouldn’t normally vote for him. Most Australians don’t think he’s smart. Most Australians don’t think he’s doing anything worthwhile.

    He’s there because of the luck of the draw.

  13. Denise Drysdale

    Don’t knock my man Derryn Hinch !

  14. Roswell

    Denise, perhaps you can tell us why he is so good.

  15. Denise Drysdale

    Yes he’s a very brave man.

  16. Roswell

    So am I. So what?

  17. Denise Drysdale

    You sound angry Roswell.

  18. Roswell

    Me angry? You got that wrong, Denise.

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