Ignoring real crisis

Now accompanying every notice of assessment issued by the Tax Office are the figures for the federal government’s gross debt: this year’s ($340 billion); last year’s ($257 billion), and the interest payments on this gross debt ($13.2 billion). No doubt this was mandated by the Treasurer.

While such information is instructive under the government’s narrative of a debt and fiscal crisis, I wonder if the government would mandate disclosure of how much gross private debt Australians owe to financial institutions – $2200 billion – thereby making all aware of the real crisis engulfing us and the rest of the privately indebted world.

Tom Fanning, Blackburn

(Letter to THE AGE 27 August, 2014)

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rentSo, if all the economics textbooks have to admit that Henry George was right that revenues from economic rent cannot be passed on in prices like taxes–generating massive deadweight in the economy–how can the 0.1% fight back?

Why by disinformation, of course! By lying to say the quantum of rent is insufficient:-

The percentage [of property rent in the economy] has dropped to well under one percent today”, New Ideas from Dead Economists: an introduction to modern economic thought, Todd G Buchholz, Plume, 2007, p.86.

But by 2000 urban land rents represented only four percent of national income”, A Farewell to Alms, Gregory Clark, Princeton University Press, 2007, p.198.

Rent is one percent of the US income in 2004”, Economics, Paul Krugman and Robin Wells, Worth Publishers, 2006, p.283.

Rental income was 4.7 billion, or 0.079% of GDP in 1992”, Economics (Third Edition), Karl Case and Ray Fair, Prentice Hall, 1994, p.559.

Rental income is $7.9 billion of a total GNP of $5,234 billion, or 1.5 percent”, Economics: Principles and Policy, Fifth Edition, William J Baumol and Alan S Blinder, Harcourt Brace, 1991, p.137.

… land rent forms such a small percentage of national income: that 2% is nothing compared to the present tax percentages which is around 30”, Income Distribution, Jan Pen, Pelican, 1974, p.210.

The chart on the previous post gives the lie to these six gross misstatements, as does Karl Fitzgerald’s Total Resource Rents of Australia, 2013, which should have made the headlines all around Australia, but has been buried by the neo-classical economics fraternity who have a lie to uphold for their bosses.

See also post –> How to corrupt the economy in favour of the rent-seeker.

Australians (and others) would do well to demand answers from economists and politicians about the vast quantity of community-created economic rent being privately stolen by the 0.1%, because ignorance on the subject allows the super-wealthy to continue capturing more and more of the GDP at the expense of the 99.9%.

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rentier steals

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blush“I do not know of a single Nobel Laureate in Economics who forecast the present crash, or any other. Two of them, Chicago-Schoolers Robert Merton and Myron Scholes, founded Long Term Capital Management to demonstrate the brilliance of their investment theories. It went down in flames in 1997, saved only by a Federal bailout. Nothing daunted, media and public speakers seeking confirmation lean hard on citations of Nobel Laureates. The media might better consider others with better track records.

“Modern Georgists enter this period of danger and opportunity in relatively good shape. Several have outstanding scorecards calling the current crash. These include Fred Foldvary (2007, The Depression of 2008); Fred Harrison (2005, Boom/Bust); Michael Hudson (2007, ‘The New Road to Serfdom’, Harper’s); and Bryan Kavanagh (2007, Unlocking the Riches of Oz).”

- THE MASON GAFFNEY READER: Essays on Solving the “Unsolvable”, 2013


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There’s any amount of money to be found for conservative think tanks, such as the Heritage Foundation, the Institute of Public Affairs, the Sydney Institute, etc., because these bodies believe things are pretty right as they are. (“Only leftists and socialists want reform.”) This mindset appeals, of course, to the 0.1% who become big donors.

Gina Rinehart and Harry Triguboff would not support a body that supports mining and land taxes. Fair enough. I guess that’s democracy?

Well, only up to a point. Did classical economics need to be redesigned to conflate land with capital in order to suit these people, the 0.1%? Once there was land, labour and capital, but natural resources have somehow transmogrified into capital, simply to appease our rent-seeking overlords. (Mason Gaffney provides chapter and verse here.)

Also, did our tax systems have to be redesigned to relegate land and resource taxation to the bottom of the list of revenue bases, instead of being placed at the top where it once stood in the progressive era?

If you haven’t noticed, the world is currently reaping the whirlwind for appeasing those who rent-seek in land and natural resources but, curiously, no politician has had the gumption to say as much. In fact, in Australia Tony Abbott glories in the fact that he is abolishing the mining tax!  Stupidity rules in Australia!

Although the taxation of land and natural resources remains invisible to economists and politicians, as the limerick suggests, they must eventually wake up to reality:-

An economics professor planned

to live without acknowledging land.

He would have succeeded

but found that he needed

food, clothing and somewhere to stand.

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Look again at that dot. That’s here. That’s home. That’s us. On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was, lived out their lives. The aggregate of our joy and suffering, thousands of confident religions, ideologies, and economic doctrines, every hunter and forager, every hero and coward, every creator and destroyer of civilization, every king and peasant, every young couple in love, every mother and father, hopeful child, inventor and explorer, every teacher of morals, every corrupt politician, every “superstar,” every “supreme leader,” every saint and sinner in the history of our species lived there–on a mote of dust suspended in a sunbeam.

The Earth is a very small stage in a vast cosmic arena. Think of the rivers of blood spilled by all those generals and emperors so that, in glory and triumph, they could become the momentary masters of a fraction of a dot. Think of the endless cruelties visited by the inhabitants of one corner of this pixel on the scarcely distinguishable inhabitants of some other corner, how frequent their misunderstandings, how eager they are to kill one another, how fervent their hatreds.

Our posturings, our imagined self-importance, the delusion that we have some privileged position in the Universe, are challenged by this point of pale light. Our planet is a lonely speck in the great enveloping cosmic dark. In our obscurity, in all this vastness, there is no hint that help will come from elsewhere to save us from ourselves.

The Earth is the only world known so far to harbor life. There is nowhere else, at least in the near future, to which our species could migrate.  Visit, yes.  Settle, not yet.  Like it or not, for the moment the Earth is where we make our stand.

It has been said that astronomy is a humbling and character-building experience. There is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly with one another, and to preserve and cherish the pale blue dot, the only home we’ve ever known.

– Carl Sagan, Pale Blue Dot, 1994


Hint:  Just over half way down in the light brown band; that’s earth from Voyager at 6 billion kilometres.


And the hope for humanity on this pale blue dot?

It lies within the formula  Yt – rRt = wLt + iKt, or, more simply,  P – R = W + I


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I’m just over half way through reading Lindsay David’s Australia: Boom to Bust.  I’m up to page 123, which is headed “Property prices in Australia were not always disproportionate to incomes.”

What a sensible, well-researched book! How it challenges the existing Australian mindset! (“We’re different!” or, “It’s supply and demand.”)

So far, David has twice emboldened the sentence : In Australia, Real Estate prices do not depend on supply and demand, but the banks’ willingness to lend excessively to property purchasers. Spot on! That sentence squares exactly with the statement in a recent post of mine by former Wall Street banker, now professor of economics (UMKC), Michael Hudson.

Lindsay David has Australia resting on three pillars: financial institutions, natural resources, and real estate. He dissects and analyses each pillar and shows how the collapse of one must affect the others. His description of an auction (pp.110-112) is priceless—so to speak—not because it is far-fetched, but because it is so hilarious to see such rampant stupidity documented in print.

Even before I’ve completed it, I can recommend Australia: Boom to Bust as an excellent read.

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“THE AGE” 22 AUGUST 2014


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Note:  ACTEW Corporation (ACTEW) owns and operates the water and sewerage assets and business in the Australian Capital Territory.

14 May 2014
Industry Panel Secretariat
GPO Box 158
Canberra ACT 2601

Dear Sirs


I wish to refer the Panel to my previous submissions over many years to both the Independent Competition and Regulatory Commission, the Productivity Commission, the Queensland Competition Authority and other regulatory inquiries. I am happy to provide copies.

The fundamental problem the Panel faces is that the system of regulating monopoly utilities in Australia is fundamentally institutionally corrupt.

It is a corruption of economic thought in that it mistakenly assumes that maximisation of profits in a monopoly situation has some relationship to economic efficiency. That is the reverse of the truth. Economic efficiency requires that society obtain satisfaction of its needs at least cost.

In a competitive market, profit maximisation is valuable because it drives the search for least cost solutions: in a monopoly market, profit maximisation really represents the imposition of a toll or tax upon the community.

It is a corruption of legal process in that hardly ever is evidence tested on oath and the victims of monopoly abuses are forced to pay through their tolls and charges for the expensive legal and technical advice used to justify the abuses perpetrated against them. There is no equality of funding in any of these matters and the illusion that independent regulatory commissions are consumer watchdogs is false. They cannot be. They are meant to be independent decision-makers, not advocates for consumers.

The result of this one-sided system is that consumers are never properly represented. It was indeed remarkable that ICRC actually tried to do something sensible.

Terence M. Dwyer

FTIA, B.A. (Hons), B.Ec. (Hons) (Sydney) M.A., Ph.D. (Harvard), Dip. Law (Sydney)

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