RESCUING AMERICANS FROM THE 1%

The USA currently has 50% of its $14.66 trillion GDP stolen—viz, the $7.33 trillion being that part of the economy constituted by land and natural resource rents.  This $7.33 trillion is mainly stolen by the 1%, leaving the 99% dancing to the tune of immense wealth.  Observe how an apparently well-meaning President Obama has been bought off by Wall Street; the US has clearly morphed from a democracy into a kleptocracy.  Goldman Sachs appears to rule.

As the government captures only a small part of the people’s economic rent at present, it is forced to tax the earnings of people and normal businesses to the tune of $3.456 trillion.  So this amount is also stolen from the 99%.  Debt and despondency pervade.

However, were the US to capture the 50% of the economy which is the rent of land and natural resources, it could not only abolish all taxation, but, after the necessary running of government, could actually deliver a dividend of $3.874 trillion ($7.33 trillion – $3.456 trillion) to be shared equally between all of its citizens. i.e. $12,389 per head – for every man, woman and child.

This would allow the nation to grow again by eliminating the structural financial and fiscal burdens besetting it.

Wages would then flow directly from this increased production to its producers, instead of to rent-seeking parasites; no ‘wage fund’ is necessary!

Cowardice, partisanship and political dysfunction should not be permitted to stop this plan from being put into place—if US society is not to be completely destroyed.

IN SUMMARY, THE USA NEEDS TO:

1. default on its national debt – as debt that can’t be repaid won’t be repaid
2. nationalize the banks, writing off all private debt relating to land
3. dismantle the IRS (in favour of a small body to preside over the new revenue base)
4. institute site rents on land and natural resources for revenue, viz:-

1) shift the revenue base from taxes to the site value of all land only (i.e. exempt improvements)
2) charge the market rent for frequency ‘sites’ on the electromagnetic spectrum
3) apply a resource super profits tax on all mining (@50% on profits to acknowledge the American people’s joint ownership of its natural resources), and
4) charge market rents for airport slots, fishing and forestry licenses, etc.

This is the only plan that can work, but the USA is far from this solution, so batten down everyone!

With issues of great moment up for debate at the Labor Party’s annual conference this weekend, now that Ken Henry has put land tax back on the national agenda, the time may be ripe for ALP-inclined people to consider how the land tax plank came to disappear from Labor’s platform.

It was written out of the Labor platform in 1964 by party secretary Cyril Wyndham.

It was never voted out by the membership, as required.

When the federal land tax was abolished in 1952 by Robert Gordon Menzies, Labor’s  Arthur Calwell had promised to restore it when Labor returned to office.

But land tax was ‘forgotten’.  It was uncomfortable.  And the 1% have never had a better time of it.

Like the entertainment industry in general, shock jocks, agents for the 1%, disseminate their bilious opinions with incredible self-importance. Ignorance is bliss, and hubris must be your stamp if you aspire to the biggest audiences. Sometimes you may even be both correct and right.

On the other hand, I’m always amazed when perpetually perplexed commentators of the left are able to conduct their discussions with such confidence and aplomb. I guess the search for answers remains their anchor and inspiration.

I’m not sure whether the ABC’s Geraldine Doogue, the thinking person’s commentator, can be classified as being on the left of the political spectrum, but I’d put her into the second category anyway.

On Saturday Extra this morning, Doogue managed to skirt around and overlook economic rent in her discussion on social cohesion in modern day Britain with Gary Sturgess, director of the Serco Institute.

In looking for “the glue that holds society together” she might also have blended rent into her following topic –  Resolving the future of a viable banking sector – with Harrison Young, a non-executive director of the Commonwealth Bank of Australia .

You see, if you don’t understand public capture of economic rent holds society together, you won’t perceive that it’s the privatisation and breaking down of this common glue that almost single-handedly generated the global financial collapse.

And banks were the culprit, the catalyst, in taking this publicly-generated surplus away from the people to whom it was owed, and in delivering it to the 1%.

For this reason, I’m not as confident as Gary Sturgess that things will repair themselves in Britain, nor that Australian banks are as solid as Harrison Young believed in this morning’s program.

Meanwhile, Geraldine, please try to discover economic rent. You’ll become wide-eyed!

BANK BAILOUTS EXPLAINED

MONEY REFORM

By Dan Sullivan

Much of the discussion about money is amazingly similar to discussions about land value tax by people who had never really studied the issue. It becomes, largely, a battle of misconceptions, ignoring the central theories it pretends to dispute.

Assuming that a free market can handle credit without government issuing the money supply is very much like assuming that a free market can handle land allocation without government collecting rent. Both assumptions ignore the nature of the thing being “handled,” and ignore the source of the values being captured.

Even though we know money is not wealth, and that credit is the provision of wealth on faith that there will be a return, people speak of banks extending credit (providing wealth), when they merely issue certificates. It is the people who give real wealth or services in exchange for these certificates who are actually extending credit.

The real credit (giving of wealth for paper) is extended, not because the of creditworthiness of the holder, or even of the banks, but because advanced, sophisticated trade is impossible without money, and this is the only source of money, and because this money is accepted for taxes, and staying in business is impossible unless one can pay one’s taxes.

Thus, it is the community of traders that gives value to money, just as it is the community of traders that gives value to land. It is, therefore, appropriate for a democratic government, as legitimate agent of the community, to issue and redeem money, just as it is appropriate for such a government to collect and distribute rent.

The absurd argument that a bank does no harm because it lends out its money and recollects it (twice over every seven years), while an ordinary counterfeiter only spends it, has the matter backwards. That is, the ordinary counterfeiter only robs society once, when it issues the money. After that, the money circulates without obligations, and benefits society. The bank, on the other hand, snares people into forced debt, first by lending them what is not the bank’s to lend, and then by removing, as interest, a value that was created by society and rightly belongs to society.

Surely the counterfeiter, if he did not have to act surreptitiously, would find it far more profitable to lend his funny money into circulation once and live off the interest forever than to undergo the risk that attends to counterfeiting over and over again. One cannot get something from nothing, and whatever the counterfeiter or the bank gains necessarily comes at someone else’s expense.

Again, the land analogy appears, as we have all heard that the person who profits from land robbed nobody, because the buyer and seller voluntarily accepted the trade, just as parties voluntarily exchange money.

What is really happening, however, is the private collection of a value that rightly belongs to the public, because the government has defaulted on its obligation to collect that value on the public’s behalf.

Fears that government could not properly assess how much money to issue, like fears that government cannot properly assess land values, are based on self-serving distortions of history, calculated to prevent occasional and correctable errors in the public sector by sanctioning wholesale robbery in the private sector.

Thus, if government were to issue money directly, through spending or per capita grants, and if that were the only money accepted for tax purposes, there would be little point in private bank issuance. Private issues would be spurned by the trading community as unreliable.

That is, checks backed by the fiction of fractional reserve banking would become suspect, and all that would be required to virtually end it (besides the removal of government-backed insurance) is a statement on every check noting what fraction of the money registered to the account is actually in the bank.

Every merchant would prefer a 100% bona fide check over a fractional reserve check, and would discount the fractional reserve checks accordingly. The profits accruing to fractional reserve banks would then come, not from the community at large, but from the people who chose to deal with those particular banks, as it should be.

Thus, just as Georgism does not prohibit the private collection of rent, but merely pre-empts such collection through public collection, so could Greenbackism allow the private issuance of private money, but would merely pre-empt that issuance by issuing a fundamentally superior public money. Those who would prefer commodity notes, fractional reserve notes or any other kind of notes are free to accept them, but nothing would be so ubiquitously exchangeable as a soundly managed government note, especially if the government itself covered a large trading area and functioned as a sound institution.

Therefore, the only rationale for the issuance of money by private consortiums is the reality that government itself is so dominated by banking interests that it refuses to pre-empt their privilege by doing its job, just as the only rationale for land trust communities is that government does not preempt real estate privileges by collecting the rent.

The battle between Austrian and Keynesian economists, though sometimes painted as being ‘heterodox’ in comparison with ‘orthodox’ neoclassical economics is little more than a charade.

BBC World Service radio last night featured a very good run down on what both schools had to offer the world in its current financially strapped state. It included audio excerpts from the now famous ‘fight of the century’ between Lord Keynes and Friedrich Hayek.

I’ve previously featured the excellent video on this site, but challenged that it couldn’t possibly be the fight of the century when the champ, Henry George, was precluded from the bout.  George concerned himself with people and the planet – the combination of which makes up the real economy.

And Europe and the US aint going nowhere until governments introduce the real economy into their currently mistaken considerations.

So, like the video fight of the century, the BBC has also managed to exclude the Georgist school of economics.  After all, this devastating financial havoc WAS indeed initiated by real estate bubbles!

To underline this point, if you revisit my model here, you’ll see that Austrians and Keynesians, like neo-classical economists, have become too fascinated by the man-made moon on the left of the diagram, and are not getting to grips with the central real world economy, comprised of people and the planet, nor the natural moon of economic rent.

In a tightly packed audience I watched the Melbourne preview of Pria Viswalingam’s documentary film “Decadence” in cinema 10 at Carlton’s Cinema Nova last night.

With another in what’s likely to become a spate of films documenting this damning episode in human history, one trusts it won’t need to be buried in a bomb-proof container for some newly-emerging posterity to discover.

The well-travelled and talented Viswalingam features in the doco in the manner of the laconic casual observer that made his SBS “Fork in the Road” and “Wine Lovers’ Guide to Australia” series so interesting and enjoyable.

What with the financial collapse, and protesters milling against corporate greed as they occupy Wall Street, Pria VisW has decided the time is ripe to document the western world’s recent supremacy has come to an end.  I’d go so far as to say he’s correct.

Viswalingam invokes the late British historian Kenneth Clark to help us realise past civilisations have similarly managed to destroy themselves by the gradual decline in their morality and confidence.

He flits engagingly from hither to yon to present compelling evidence of the decay and imminent collapse of western society.  His visuals and sound are impressive, especially his outdoors audio which is not, but could have been, recorded in a studio.

Loved your reference to our economic “boofheads”, Pria!

Unfortunately, however, and despite having trained in the liberal arts at Cambridge, Viswalingam fails to pinpoint the mechanism identified by Pliny the Elder as being responsible for the collapse of Ancient Rome is also inextricably involved in removing the US from its occupancy of the economic pinnacle:  i.e. “Latifundia perdidere Italiam”. (The great landed interests destroyed Italy.)

Whilst the documentary is more far-reaching than “Inside Job”, I believe its reasoning doesn’t quite match up to Karl Fitzgerald’s punchier and more incisive “Real Estate 4 Ransom” as the explanation of western society’s collapse.  Pria is comparatively preachy and generalised in his opinions, but maybe I’m biased in favour of RE4R because I’m in it.

The difference is that, in identifying the rent-seeking catalyst, “Real Estate 4 Ransom” offers a belated means to avoid the catastrophe by reversing the process.  Surely, after all, it is civilisations that fail to evolve by correcting their mistakes that die?

It was a pity there was no Q & A after the session.  Although Pria did invite everyone down to Jimmy Watson’s, I chose not to go, whether out of laziness or not wanting to be seen to indulge in such decadence, I’m not certain; but like the doco, I’m sure it would have been enjoyable.