Congratulations Bill Evans, Group Chief Economist at Westpac Bank, you got it right in May 2012 about the “endless easing” of the Reserve Bank’s overnight cash rate.

But it was typically belated for a bank economist to wake up so slowly to what’s happening around you, Bill. Seven years late.

In an article in THE AGE on 15 June 2005 I said “We have now inflated the current residential bubble to voluminous proportions and economic growth is primed to tank into a major deflation (and) …. the next adjustment of Australian interest rates would more properly be down.”

And the RBA simply shouldn’t ratchet interest rates up during a major deflation, Bill.

Tomorrow, if I’m to earn my continuing professional development points, I’ve got to go and listen to Alan Oster of the National Australia Bank give me his latest assessment of the state of the market.  [Sigh!]

I don’t say this to disrespect these men. Unfortunately, they’ve been tightly shackled to a false economics.

When will the Australian Property Institute give Steve Keen or me a guernsey to speak to valuers in more realistic terms? Of course, that’s a largely rhetorical question because, as with banking, the property industry per se is usually backward in coming forward with the facts about bubbles.

The apparent reason for this: “We don’t want to scare the horses” may alternatively be read as “We want to squeeze the last drop of blood out of this bubble market before it bursts”.

So, let’s simply disregard the damning consequences of inflating the bubble even further, eh guys?

“It’s not a bubble?” Oh? And black is white?

I consider not becoming compromised is a pretty good reason for valuers to be at arm’s length from bankers and real estate agents who continue to deny the existence of a land price bubble.

♦  Economics is the way we arrange our daily lives once we’ve seen a country’s natural resource rents are owed equally to all citizens.

♦  An economist is a person who understands natural resource rents can’t be privatised, short of corruption.

♦  As the rentier runs the show, the way of the world is corruption. Politics, business and sport are built around this corruption and labelled democracy.

♦  Classical economics (where land isn’t capital) has been made heterodox, and fudging and ‘equilibrium’ orthodox.

Young researcher Philip Soos has shown the enormous tension that has developed around home ownership in Australia is capable of being resolved with a little honest analysis.

Whilst baby-boomer grandparents believe their departure from this mortal coil might assist their grandchildren into a home, their grandkids are starting to ask a pretty fundamental question:  What’s happened to the fabric of Australian society that their hard-earned wages are now insufficient to service a mortgage?  And why did the oldies seem to experience a warm inner glow as the value of their properties escalated skyward, effectively locking Gen Y out of home ownership?

Australia has developed a split personality over the cost of a home.  Grandkids ask: Aren’t the baby boomers avoiding the real issue? How can Australia’s twenty-two million people generate higher houses prices than America’s three hundred and fourteen million?  Shortage of land? Growing population? Rubbish!

Soos has studied the data and, unlike many of our institutions, has been unable to avoid the logical conclusion. It seems baby boomers have fallen for a series of lies fed to them by the Reserve Bank, APRA, ASIC and the FIRE sector, i.e. finance insurance and real estate.

If we don’t agree with it, we’ve almost come to understand the self-interested spin of the real estate industry, but how is it possible that our publicly-funded instrumentalities can be permitted to contort housing figures into lies, thereby becoming the FIRE sector’s partners-in-crime?

It all comes back to the land.  It’s the land prices that have been increasing – because we’re capturing too little of its annual rent for public revenue, and increasingly taxing labour and capital. Land price is notoriously volatile, coming down with a thud every eighteen years, but banks nonetheless accept it as ‘security’.

Land prices are high because of insufficient residentially-zoned land? Nonsense! If Australia was to do as the Henry Tax Review suggested, that is, tax land and natural resources more, and labour and capital less, the divide on home ownership would be resolved once and for all.  Grandma and Grandpa’s house might be valued less, but at least Gen Y would be able to afford a roof over their heads.

The Reserve Bank, ASIC and APRA have obviously sold out to real estate interests and can no longer tolerate a truthful interpretation of housing data. They’ve a lie to uphold – that these are not bubble-inflated property prices.

But inveterate crusader for victims of the banking sector, Denise Brailey, has seen through this grand lie for twenty years.

Click on photo

Land and natural resources can no longer be treated as private commodities – because the price society pays for this lunacy is excessive.

If we wish to ensure our natural resources can no longer be withheld for private profit, we must apply a fee for their use equal to their annual rent, instead of drawing public revenues from taxes on work and enterprise. It should becoming increasingly obvious that current tax regimes favouring resource rent-seeking over productive activity largely explain the parlous state of world economies.

We’ve been paying a devastating price, but mainstream economic analysis can’t yet bring itself to admit it. In this pathological scenario, heterodox economists of the ilk of Mason Gaffney, Michael Hudson and Steve Keen provide shining beacons of reason and hope.

But isn’t US employment already showing signs of improvement? Isn’t most economic strife is behind us?  Unfortunately not: our misguided high priests of the economy, Bernanke, Stevens et al, try to instill this false confidence as a desperate substitute for structural reform. We’ve had bogus ‘latent recovery’, ‘green shoots’, ‘turned the corner’ and ‘risk off’ fed to us multiple times since the outset of this depression and need no further econtrickery.

A land and resource fee, alone, would get the world’s economies into gear and the world’s unemployed back to work quickly, but Australia’s Ken Henry has been a lone voice in suggesting as much in “Australia’s Future Tax System”.

Released from taxes on them, labour and capital would at last be rewarded for combining to generate national wealth instead being fined for so doing. Additionally, we would more readily be able to see the relationship between worker and boss is a complementary one, not the antagonistic one promoted by the media, and finally expose the parasitic rentier for the destructive role he has played in world economies.

We’re still in denial, however, and can’t yet see the need to publicly capture the public’s resource rents. This delay will compound social and economic distress.

http://www.guardian.co.uk/commentisfree/2013/jan/21/i-agree-with-churchill-shirkers-tax

Many great personalities, including Leo Tolstoy,* have noted the case for a Georgist economy is unanswerable, and arguments put against it are either based upon ignorance of what Henry George actually said or otherwise fallacious.

So, if the case for the public capture of land and resource rents is logical, and Georgists are not simply tilting at windmills, why have countries suffering so badly under the deadweight of taxation failed to put it into practice?

The only possible answer is that political power has so far been able to defeat reason on the issue – and this comes through in a resigned fashion in discussion with intelligent people:

“Oh, the argument is fine, but powerful vested interests will resist it!”

“It’s impossible to break through the existing mindset.”

“It’s a big issue, and people can’t accept such far-reaching change, even if it does correct many of the ills we face today.”

Of course, this tragic situation has parallels. Just as an enormous taxation industry now feeds off an economic system tailored to the whims of the big rent-seekers in banking, mining and real estate (the 0.01%) the pharmaceutical industry feeds off illnesses and ailments we may not experience had we taken greater care of our diet and exercise.

The big difference is the pharmaceutical industry won’t tell you a good dietary regime and healthy exercise is bad for you.

So, the question becomes: How do we tackle the wealthy corporate entities who steal the public’s resource rents, in order that we may free ourselves from the parasite which not only preys upon our personal wealth and health but also drives nations into the depression and penury we’re witnessing?

It’s a riddle we need to solve urgently, because the usual rotation from this point is: currency wars; trade wars; world war.

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* “People do not argue with the teachings of George, they simply do not know it. … He who becomes acquainted with it cannot but agree.”  – Leo Tolstoy

The Christmas- New Year “silly season” in Australia: endless summer holidays; the beach; catching up with friends and relatives; the Aussie Open tennis …. nothing much by the way of routine stuff getting done; politicians and the law taking a break from disjunctive activity; newspapers becoming thinner.

I like it.

Things seem to start working better.

‘Taint silly at all.

But now it’s back to the grind: the fight to get yourself and your family somewhere; the competition between local government, the states and feds and their public bodies to find funding for necessary infrastructure, health, safety and education; the misdirected fight with labour and capital at each other’s throats whilst the big rent-seekers continue to rob them both blind.

I reckon it’s the rest of the year that’s the silly season.