The new infrastructure for new houses is included in the price of land and so yes house dollars can be used for new land.

The idea is to isolate some money that has to be used for housing (new or old) and that does not “escape” to some other purpose.

This is one of the things that worries economists. That is, people say why put a restriction on where money can be used? The answer is that we are not. People can always sell their house dollars for unrestricted money but they will get less for the money than if they build a new house. The difference or discount on house dollars is related to the inflated value of houses to other asset classes. Once the inflation bubble is gone from housing then house dollars will be on a par with unrestricted money and we can get rid of them. This is one of the strengths of the system. You see a market failure problem, set up some restrictions on the money used to make the market under question work as expected and the problem is likely to sort itself out probably no matter what the underlying reason for the market failure.

Again I am now speculating on why this might be but I think it is to do with the nature of money. That is we create or tag money for a purpose. Money really only exists because it represents an asset of some form or other. By keeping the reason why we want the money with the problem asset class then we isolate asset bubbles from the rest of the economy.

My thanks to Nicholas because space in forums like this is invaluable. He has scratched my back….

Nice to see you’ve got your views up in The Market-Place Of Ideas.

Your timing is superb …. with the Australia 2020 Summit on one side and the enforced facing up to the follies of financial shenanegans on the other.

This time, I’m sure you’ll have a very attentive audience. Best of luck.