Fortsätt till huvudinnehåll

On the rocks

There is lots of comment on the Northern Rock affair again today in the Sunday papers. Now there are calls for regulation.

The next great crash is unstoppable. It will probably come in a couple of years' time. It is too late to do anything about it. The time to have acted was some time between the previous one of 1992 and 2005. The best analysis of the process is by Fred Harrison, who successfully predicted the crash of 1992. Harrison has now demonstrated that the boom/bust cycle, which recurs about every 18 years, is due to the interaction of the land and financial markets. Harrison's prediction is for 2010. Read Harrison on the next great crash

The Northern Rock affair shows the process in actions. Their imprudent loans have been helping to stoke up house prices. But, and this seems to go unremarked by the politicians and pundits, it is not house prices that have been stoked up. What has been stoked up is the cost of land. And the stupid lenders imagine that land is solid wealth and safe collateral.

LAND IS NOT WEALTH. Everyone needs to understand this: politicians, economists, people who work in finance, journalists, and the man in the street.

This is indeed an area where governments should intervene. Lenders should not be allowed to advance loans using land as collateral. But a direct prohibition is not the way to do it.

The whole process which causes these cycles and the associated problems could be prevented through the right tax reform. If land was subject to an annual tax based on its rental value at market assessments, the entire crazy roller-coaster of land-price boom and bust would come to a stop.

How to tax land values

Kommentarer

Populära inlägg i den här bloggen

Importing people to sustain demand

I got involved in a discussion with a Youtuber called “Philosophy all along”. This was in connection with criticism of Trump’s policy of deporting illegal migrants, which he argued would be bad for the economy as it would reduce demand. This implies that there is a need to import people to sustain demand. There is no obvious reason why a population should not be able to consume everything that the same population produces. If it can not, then something else is going on. It is a basic principle that wages are the least that workers will accept to do a job. Wages are a share of the value added by workers through their wages. The remainder is distributed as economic rent, after government has taken its cut in taxes. Monopoly profit is a temporary surplus that after a delay gets absorbed into economic rent. Land values in Silicon Valley are an example of this; it's like a gold rush. The miners get little out of it. Rent and tax syphon purchasing power away from those who produce the g...

The dreadfulness of British governance

I wrote to my MP on two entirely separate issues recently. The first was to do with the replacement for the Inter City 125 train, which at £2.6 million per vehicle, is twice as expensive as it ought to be. The second concerned the benefits of a switch from business rate and Council Tax to a tax based on site values. In both cases, the replies were full of spurious, unsubstantiated assertions and completely flawed arguments. This is typical. You will not get an iota of sense from the government on any area of public policy at all - finance, economics, trade and employment, agriculture, housing, health, transport, energy. All junk. If you write to your MP you will invariably receive answers that are an insult to your intelligence, no matter what subject you are writing about. Of course they cannot understand statistics. They are innumerate. Whitehall is staffed with idiots with a high IQ. Look at their IT projects. And mind your purse, they will have that too.

How much more will the British tolerate?

The British are phlegmatic, tolerant and slow to rouse. Thus there was no great reaction after the terrorist attack in July 2005. The murder of Lee Rigby created a sense of outrage, but nothing more, since it appeared to be an isolated incident. Two serious incidents within a fortnight are another matter. Since the first major terrorist incident in 2001, authority has tried to persuade the public that Islam is a religion of peace, that these were isolated events, or the actions of deranged "lone wolves", having nothing to do with Islam, or to reassure that the chances of being killed in a terrorist attack were infinitesimally small. These assurances are are beginning to wear thin. They no longer convince. If government does not act effectively, people will take the law into their own hands. What, however, would effective action look like? What sort of effective action would not amount to rough justice for a lot of innocent people? Given the difficulties of keeping large n...