All posts by Bryan Kavanagh

I'm a real estate valuer who worked in the Australian Taxation Office (ATO) and Commonwealth Bank of Australia (CBA) before co-founding a private valuation practice, Westlink Consulting. I discovered that we leave too much publicly-generated land rent to be privately capitalised by banks and individuals into land price bubbles. This generates repetitive recessions and depressions. These need to be avoided by capturing more revenue from land values to free up wages and household debt.

IF YOU WANT TO WIN, KEEP THE PRESSURE UP

photos by Sebastian CostanzoThe game between undefeated Geelong and Collingwood lived up to expectations as I braved the MCG’s sharp winds with 81,600 fans last night.

What a great result for the mighty Cats!

Committed Magpie, Cat, and non-aligned supporters were connected as one by the intensity of the final quarter.

I leapt from my seat, arms akimbo, as Joel Selwood shot that incredible handpass across to Stevie J standing a metre out from the goal line, ready to toe-poke the ball through.

Beer and circuses? Nonsense! ‘Aussie Rules’ is a phenomenal remnant piece of the social fabric at which the huns have been tearing.

As the plutocrats rip and tear at the social tapestry, the holes grow: ravaged resources and environment; failing economies; lack of job opportunities; impossible debt and excessive gambling; inadequate time for friends, family, study and hobbies; scant funding for education, health, social welfare and public infrastructure .…

The social network connects us as never before, not unlike the electricity and intensity of that crowd at the football last night. Slowly but surely, we are beginning to use this network to call the powers-that-be to account for their ravages.

These faltering efforts will grow. Eventually they will bear fruit.

DELUSIONS

Pop-partyTWO REALITIES?

I missed Wayne Swan delivering his federal budget on TV last night because I was out at a party in the city celebrating with champagne and caviar the popping of Australia’s real estate bubble.

Karl Fitzgerald and David Collyer spoke entertainingly, and David proposed the toast to the pricking of the bubble.

There’s now some hope for younger Australians’ access to a home, regardless of what the treasurer serves us up tonight, I thought.

When I got back home, I did a bit of late night channel-surfing to learn what had happened in the budget. There was some good news about mental health.

Also, looming large as life was genial shadow treasurer Joe Hocking smirking that Wayne Swan would never deliver a budgetary surplus. He’s right. He probably knows the disastrous implications of the residential market now starting to revert to its long term trend, although he’s obviously quite unprepared to mention this rampaging elephant within Treasury’s budgetary rooms.

And there was Paul Bloxham being asked what might curtail Wayne Swan’s heroic aim of bringing in a surplus budget by 2013.  As he considers Australia doesn’t have a real estate bubble, he had to hesitate for a moment.  Something would happen to show up Swan’s “rubbery figures” on our burgeoning resource sales with China, Bloxham opined.  

I went to bed chewing over the vast discrepancy between our small group celebrating the collapse of the property bubble and the millions of words in which the media will analyse the budget without making this necessary connection.

I know which group has a firmer grip on reality.

I AM: the shift is about to hit the fan

Tom ShadyacTom Shadyac wrote and directed the comedy films “Ace Ventura: Pet Detective”, “The Nutty Professor”, “Liar, Liar” and “Bruce Almighty”.

He has now attuned himself to the current historic watershed that has spurred me into blogging about it.

I’ve not seen Shadyac’s new documentary film, “I AM: the shift is about to hit the fan”, but it sounded in a US interview with him last night (via ABC News Radio) as though it gets straight to the point. He clearly thinks the world’s about ready to make the shift to change its bad habits. 

Listening to the discussion of the documentary, it appears “I Am” does everything except identify the final mechanism, the private capture of the public’s rent, that has been used to destroy humanity’s common bond.

The glue that held us together for so long has given way, and our “Stuff you!” individualism has begun to wreck the planet and society, so we need to establish a new equilibrium.

Of course, the Wall Street wreckers will claim Tom Shadyac’s film is fudge. They have to, to justify their misanthropy, because much of their work is founded upon a deep-seated disgust of mankind; people in the broad are no more than the market from whose rent they must steal.

I’ve written here many times that as economic rent represents the human community, insofar as it is community-generated, we need to make a revenue shift from taxes to land and natural resource rents – to socialise what is society’s, and to leave alone what is private property. Breaking this natural law of economics, as we do, has devastating consequences.

It would be nice if those who see “I AM”, as with the great mass of people feeling the need for a shift in values, are able to make this final connection sooner rather than later, because it’s essential to guaranteeing a future for the human race, and because all of us have an equal entitlement to the rent we equally produce.

They haven’t yet woken to this in revolutionary Egypt, Libya, nor near-revolutionary (?) Portugal, Ireland, Italy, Greece, Spain, the US ….

USA UPDATE

Helicopter BenUS housing market update from patrick.net

House Price Index shows Double Dip (calculatedriskblog.com) Discuss 

Are home sales slumping because lenders refuse to lend? (irvinehousingblog.com) Discuss 

Strategic defaults could get very ugly (marketwatch.com) Discuss 

Las Vegas halfway through housing downturn? (vegasinc.com) Discuss 

The Fed may deny it, but Americans know prices are rising (newsweek.com) Discuss 

Expectations with respect to Inflation and interest rates (patrick.net) Discuss 

$368/month for gas (patrick.net) Discuss 

Commodities Plunge, Stocks Slump, Dollar Strengthens (bloomberg.com) Discuss 

Europeans back off Rate Hikes; US Dollar Up Sharply (Mish) Discuss 

Prediction of ‘Hundreds of Billions’ in Muni Defaults (bloomberg.com) Discuss 

Can Obama Use bin Ladens Death to Help Fix the Economy? (time.com) Discuss 

Who Rules America at the Local Level? Growth Coalition Theory (sociology.ucsc.edu) Discuss 

THE REGIONS: PLENTY OF QUESTIONS, NO ANSWERS

The ABC’s “Q&A” was set in Albury/Wodonga last night as it discussed the problems existing in Australia’s regions. Most of these were obviously heartfelt by the big local audience.

There’s no doubt the coastal capital cities win out revenue-wise, and otherwise, and those in the regions, having grown most of Australia’s produce, go without as they also pay more in petrol for living outside the capital cities.

How do we deliver equivalent infrastructure to them? Do they have to make do with occasional carrots, such as the $65 million cancer clinic Minister for Regional Australia, Regional Development and Local Government and the Arts, Simon Crean, promised will be in this year’s budget?

Regional issues seemed endless. At least the national broadband network offered them a superhighway on which better health and education services might be delivered, most agreed.

But not one of Tony Jones’ Q&A guests, nor one of the people in the audience, got to grips with their greatest problem, which paradoxically also offers the only real solution to their long list.

People in the regions pay the same taxes as those in the cities. “That’s fair!” do I hear you cry? But what if the taxes paid, both by people in the cities and the regions, are patently unfair because they penalise production and reward property speculation?

What if there was a better source of revenue that recognised, perfectly, all the problems in the regions? What if Australia was to make a revenue switch based upon land values?

Land values are lower in the regions because of their smaller population, locational, capital works and facility disparities when compared with the cities.

Therefore, rural and regional areas would clearly be benefitted by the abolition of the 128 taxes  and the re-introduction of a federal land tax recommended in “Australia’s Future Tax System” by Ken Henry’s panel – but Tony Jones, the Q&A panel and his audience showed this is not even showing up on their radar.  Why not? Their circumstances would see them paying far less to each level of government.

Such is the ignorance on the issue of land value-based revenues that former Olympian and Gold Coast City Council mayor, Ron Clark, has been pleased to announce (in connection with the introduction of site value rating) that almost 50% of his municipality was “eligible” to pay the minimum rate.  That sounds nice, doesn’t it:  “I’m eligible to pay the minimum rate.” But let’s examine what it really means.

It means that people with lower-valued properties are having to pay more than if they were to pay the same rate in the dollar on their land value as is paid by the owners of more valuable land. Lower value property owners are therefore subsidising higher-valued properties, or, put another way, the Gold Coast City Council has progressed that half of the people with the least valuable properties onto what amounts to a poll tax.  And yet people found the gumption to revolt in the streets of London in 1990 when Margaret Thatcher tried to introduce a poll tax; but we don’t revolt, we cop it in the neck.

If the rating base is land values, then land values it should remain – and there must be no minimum rate – but the theory and benefits of land value taxation are as badly understood in the regions as they are here in the cities.  So, we continue to be screwed.

Meanwhile, as Q&A avoided the issue of how land-based revenues at local, state and federal levels might assist rural and regional areas in particular, Australia’s handful of uber-wealthy rent-seekers rubbed its hands that the secret of its free ride at the people’s expense remains a mystery.  

[FWIW, I’ve written on the subject of decentralisation in Online Opinion.]

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AUSTRALIAN BUREAU OF STATISTICS CONFIRMS COLLAPSE

house-cartoonProsper Australia

Access Opportunity Prosperity 

Prosper Australia Press Release:

ABS Confirms Falling House prices

 

The ABS House Price Index* released today confirmed house prices are falling.  Both Brisbane and Melbourne are down 2.5 per cent QoQ and the eight capitals are down 1.7 per cent QoQ overall.

“While the price fall is modest it confirms the new downward trend in house prices is firmly established and will proceed rapidly from here,” Prosper Australia campaign manager David Collyer said today.

“The federal government has no further market interventions available. A fresh first home buyers’ grant would be met by derisive howls by young adults. They have learned such trickery merely inflates prices by at least the size of the grant.

“A cut in interest rates would prompt universal withdrawal of overseas funding from our banks. These now support over a quarter of bank lending.

“The boosters and spruikers of the property industry have suddenly flipped to a new narrative, that this modest change makes real estate a ‘buyers market’.

“Their claim is utter garbage. They should hang their heads in shame. This self-serving argument is an attempt to coerce naïve buyers to commit to a lifetime of debt at the peak of The Great Australian Land Bubble,” Collyer said.

Prosper Australia’s Buyers Strike and repeated warning – Don’t Buy Now – addresses prospective home buyers trying to negotiate the traps and pit-falls on the road to home ownership.

“House prices have a very long way to fall to become attractive. I say, house prices at three times buyers income is a neutral market and at 2.5 times is a buyers market. These targets remain a long way off.

“A third of adults are renters. While not every renter aspires to home ownership, all are excluded by high land prices. This is an abuse of the idea of citizenship in a property-owning democracy and our profound national commitment to opportunity for all.

“Prosper sees no reason why young Australians should pay grossly inflated prices for homes just so vendors can exit with their unearned wealth intact.

“I take no joy in the widespread economic destruction the bursting of the bubble will bring. The villain in this drama is the tax system, a scheme that advantages land speculation over genuine investment and wage-earners,” Collyer concluded.

*ABS 6416.0 – House Price Indexes: Eight Capital Cities, Mar 2011

KARL FITZGERALD INTERVIEWS STEVE KEEN

Fitzgerald & Keen

If you can find 20 minutes, Karl Fitzgerald’s recent interview with Steve Keen on 3CR’s “The Renegade Economists” will reward you with facts on the economy you’re often denied in the mainstream media.  [Click on “Listen to Steve Keen” on the above EarthSharing link.] 

As Australian residential real estate prices begins to fall from their stratospheric heights, I sense those economists and financial analysts who’ve clotted together with the real estate industry to pooh pooh Steve Keen’s research and steadfast warning of an enormous Australian debt implosion are starting to squirm.

FIGHT OF THE CENTURY? NO, THE CHAMP’S MISSING

George Hayek KeynesFight of the Century, Round 2, is a brilliant video.

Keynes v. Hayek touches on ‘bubbles’; but do you hear them actually mention land or real estate? No, nothing.  It wasn’t there.

Even the Austrians, who come pretty close, manage, like Keynesians, to make what’s real – no, not money nor debt – LAND, disappear into the ether. (Geo-libertarian Dan Sullivan challenges libertarians to recognise this mocking stumbling block.)

Until real estate is reintegrated into economics, we’ll keep having this pointless Keynesian v. Austrian economist debate.  There’s a valid synthesis.

I like this recent dismissal of the Austrians – well, of Murray Rothbard in particular – from a colleague on a Georgist school discussion site:-

Murray Rothbard.  I consider that he was confused. He extolled the free-market, but could not see it was rigged, or gave any real method of ensuring it would remain unrigged and free. 

His view of landed property, was that once you mix your labour with land, all profit and rent extracted from it becomes the landowner’s, 100% until you sell the land. What we have now.

He believed that, as a result, individuals owned the fruits of their labor. So, full LVT should appeal to him, and eliminate income tax. He was not a great fan of LVT at all.

He created the rather odd Rothbard’s Law that, “people tend to specialize in what they are worst at.  Henry George, for example, is great on everything but land, so therefore he writes about land 90% of the time. Friedman is great except on money, so he concentrates on money.” 

Rothbard fails to see where community created wealth ends up.

                                            —ooOoo—

If there’s a point to be made, I reckon it can always be put simply.