“Land shall not be sold”

We had fair warning but were taught to disregard that prohibition.

But anyone who was anyone continued to say that the privatisation of land rent into a land price came at a great cost: it generates excessive private debt.

Land price became Henry VIII’s model.

The English labourer of the 15th century lived the life of Reilly because he had more than half his income to spend after food, clothing and shelter. He had no debt because he paid land rent: land had no price. No, he didn’t drive a car, have TV nor a computer, but neither did the King of England. Today, like the rest of us, the English labourer is in debt.

Australia tops the class in pumping up land prices: it’s a case of every man to the wheel. Housing (read ‘land prices) has become unaffordable for everyone needing a house except the very wealthy. Many young people feel they need to overstate their incomes to be able get a loan from the bank for a house.

So, here we are today, with everybody saying the Reserve Bank of Australia needs to increase the cash rate from 0.1%, even though it will put many Australians into deep mortgage stress – and worse. Let’s see what the RBA does next Tuesday?

Whatever the RBA does, I doubt the property market will collapse next year. This looks more like October 1987 than October 1989 to me, when the share market collapsed two years before the property market. Of course, a property market collapse is the sine qua non for an economic depression, and many people don’t realise that world real estate markets had collapsed before the 1929 share market decided to follow suit.

The land price virus, along with all the taxes we levy on labour and capital (instead of on land prices), has just about done civilisation in. That’s why we’ve need bigger and bigger budget deficits to cope with the background inflation that’s not measured by the CPI.

So, my money remains on real estate markets topping out in 2026 before we have the mother of all financial depressions because of impossible land prices – once again. Obviously, this is not mainstream analysis, but it’s likely correct because it’s Georgist.

With the planets aligning in the heavens at the moment, let’s hope for a realignment of our thinking such that we’ll be prepared to recognise the urgent need for VIMMLBUTT?

Oh, so we’re about to ‘tighten’ at a land price bubble again?

Well, lookee here!

From Fred Harrison’s “The Power in the Land: Unemployment, the Profits Crisis and the Land Speculator (1983)

And this from Stephanie Kelton, citing Frederick Thayer

Working towards a recession again – or is it a financial depression this time?

Seems we reject gentle fiscal action at this time because economists and politicians don’t understand the role of land prices and private debt in boom-bust?

Some under-appreciated financial lessons

Now, guys, inflation is all about taxes and land prices (as below).

Reminder: If you don’t have your copy yet, you’re missing out on an Australian book comparable to “Progress and Poverty” and “Social Problems”.

The hOle in ecOnOmics

We need to work, but we tax those who do. A tax that checks production and acts as a penalty for working. Is this the best we can do?

Taxes on land differ from all other taxes insofar as they are actually rents and cannot be passed on in prices.

Most economists say that the times have changed since Henry George and there is no longer enough rent to replace all other taxes. The times have changed, but there is more rent than ever before!

In fact, people from John Locke to Mason Gaffney and Joseph Stiglitz say that as all taxes come out of rent (ATCOR), there’s always sufficient rent. And, of course, the excess burden of taxation passed on into the prices of our goods and services also comes out of rent (EBCOR).

Australia’s total economic rent is now in the order of 50% of the economy, so the net incomes derived from work have declined to 50% of GDP.

If we taxed land rent away, this would not only reduce the inflation-generating burdens of land prices and taxation, but also provide scope for a decent universal income.

Seems we’re stuck here because too many people believe this is about as good as it gets. However, they’re wrong.

OK, I’m getting repetitive.

But good news bears repeating.

On 9 November 2001, Senator Marise Payne kindly responded to an email of mine. On receipt, I interspersed my thoughts:

At 11:55 AM 9/11/01 +1100, you wrote:

>Dear Mr Kavanagh

>Thank you for your email of 23rd September 2001. I apologise for >the lateness of this reply.

That’s no problem at all, Senator. Thank you for the courtesy of a reply.

>In your email you state “…bailouts just do not work. Not only are >they pernicious, but it is morally wrong that business privatises its >profits but seeks to socialise its losses.” I could not agree more with >this statement.

>Recent calls for the Federal Government to intervene in the Ansett >fiasco are indeed very misplaced. Governments cannot be held >responsible for every firm that goes out of business. Recently Ross >Cameron MP, Member for Parramatta made the comment that >small businessmen in his electorate would never be bailed out if >their businesses went bust.

We’re on common ground here, Senator!

>With regards to your other comments on the possibility of Land >Tax being used by the Federal Government as a way of depressing >the housing market at times when interest rates are reduced, I am >very much of the opinion that this could have many deleterious >effects on the economy. I have never agreed with Land Tax in any >case, as it is in essence a punishment for owning property. The >reason why I believe that it is wise for us to pursue lower interest >rates, is that while the price of land may fluctuate according to land >price speculation, the only way that we can actually directly assist >home buyers is through seeking to reduce the amount they have to >pay to the bank in mortgage repayments.

I am afraid that isn’t possible in the longer term, Senator.  My paper concerning forthcoming economic depression (published in the British magazine Geophilos) makes the case that short term interest rate cuts feed directly into higher and higher land prices and ever-escalating mortgages. Mind you, you’re certainly not alone in your views; I doubt that anyone on any side of politics favours the re-introduction of the federal land tax, such is the lack of knowledge about its virtues when used to curb land price escalation, speculative activity, and replacing taxes on productivity.

>I hope that this letter has given you a clear understanding of where >I stand on these issues.

Yes, Senator: you stand beside every other politician in Canberra – that is, in favour of escalating taxes and land prices, both of which are directing us towards global depression.  Maybe we can speak again when people start looking for a way out of the depression?

I didn’t post this response. My bet is on world property markets peaking in 2026 (viz, 1954-1972-1990-2008-2026) and breaking into an enormous financial depression because we didn’t want to employ the land tax weapon against skyrocketing land prices. I was wrong about Beazley and Crean; I hope I’m wrong about the depression.