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 Westlink Consulting, a real estate valuation practice. I discovered, by leaving publicly-generated land rents to be privately capitalised by banks and individuals into escalating land price bubbles, this generates repetitive recessions and financial depressions. We need a tax-switch: from wages, profits and commodities onto economic rents/unearned incomes, if we are to create prosperity and minimise excessive private debt.


Economic analyses that do not factor in what’s happening in the real estate market have proved to be vacuous in the extreme. This is why 99% of all economic forecasts are wrong.  As the director of the Land Values Research Group showed yesterday: “It’s the housing crash, stoopid.



The GDP figure was released today after I posted the above.  Dr Gavin Putland was proven correct – although he admits he believed the decline in growth may have been even worse.


Iraq’s Saddam Hussein was America’s hero when the freedom-loving Taliban were fighting those devilish Russians in Afghanistan, but he had become the devil incarnate by the time America took over Russia’s noble role of fighting those terrible Taliban in Afghanistan.  Er …. huh?

Well, opinion changed once Saddam invaded his neighbour, Kuwait, in 1990, you see?  And he certainly had to be got rid of after September 11, 2001.  Why? Well, the spinmeisters thought we should all know that he had weapons of mass destruction, and also probably designed the carnage at the twin towers on S11.

But what’s that got to do with the Taliban in Afghanistan going from being heroes to being persona non grata? It was al-Qaida, you see: al-Qaida works with the Taliban and was responsible for S11.

So S11 wasn’t really Saddam Hussein’s work, then? No. Nor did rotten ol’ Saddam, who was once our friend, really have weapons of mass destruction at all.  But he did invade Kuwait.  Oh, I see …. er, I think!

But weren’t the Taliban working with al-Qaida before S11?  Yes they were, but they were our friends then.  Oh, OK.

Public opinion can be turned around on a sixpence with a bit of deft perception management, and the west’s fourth estate will usually fall in behind the wishes of the state, in this case, the American government.

I’ve often made the point that a propertied elite, the plutocracy, has for too long called the shots in western nations, all the time working its propaganda that we, like they, are property owners.

That they are less than 1% of the population, and control more land and natural resources by value than the other 99% of us, barely rates a mention in the media, because we seem to know and understand our place: that a wealthy elite has the right to rule over us. We’ll remain happy as long as we can keep shopping and spending.

There’s a country called Greece that has begun to challenge all this nonsensical media spin in the name of democracy.  The people are saying they won’t be paying Greece’s debt to Europe’s banks.

Now that’s a dangerous thing, because democracy shouldn’t be allowed to interfere with privilege.


Back it


Gina Rinehart
Gina Rinehart


Lang Hancock went over the top in excoriating his ‘once nice but now fat and ugly’ daughter, Gina, for accusing his wife Rose of being a gold digger. That didn’t stop Gina Rhinehart from forcing an inquest into her dad’s death. She accused Rose Hancock (then Porteous) of being involved. Nor did it stop her from paying witnesses sums of $250,000, $200,000 and $50,000 to give evidence against Rose Porteous.  She was most concerned about how things were going to pan out in the wash as between Rose and herself, you see? So she went on the attack.

The inquest found no evidence that Rose was involved in her husband’s death and the government considered charging Gina for what looked suspiciously like bribery.

BRW’s Rich 200 now lists Gina Rinehart, who did end up inheriting Hancock Prospecting, as Australia’s richest person. She’s done well. Her wealth in the Hancock Group is now assessed at $10.3 billion and she’s up there as Australia’s number one.

Number two on the list is the quiet Ivan Glasberg of ‘commodity trader’ Glencore, at $8.8 billion. Amongst others, Glencore controls the Australian coal miner, Extrata, and the metals miner Mt Isa Mines (MIM).  

Number three is Andrew Forrest (Fortescue Metals Group).  Andrew’s a scion of the famous Australian explorer, John Forrest.

The three people head companies having mining interests in Australia, right? You understand how mining works?  The companies are given lease rights to mine particular pieces of land and the state levies a royalty in favour of the people. This has historically been grossly under-assessed.

The federal inquiry into ‘Australia’s Future Tax System’ under the direction of Treasury Secretary Ken Henry suggested this situation might be remedied by levying a super profits tax (read rent) at the rate 40%, and the federal government then coming to some accommodation with the states. (BTW, Norway successfully levies a 70% profits tax on its petroleum leases.)

Prime Minister Kevin Rudd announced the federal government’s intention to adopt Ken Henry’s panel’s recommendations in respect of the super profits tax on mining.

However, Gina Rinehart, ‘Twiggy’ Forrest and their friends quickly got $25 million together to dispute the government’s decision. They protested in the streets and advertised on TV that the tax would see miners move overseas and mining employment drop.

How this would happen was not made clear: the mines certainly couldn’t be taken overseas, and wouldn’t other mining interests simply move in to take over the leases?

Australians, and most of the media, even The Daily Reckoning, fell nevertheless for the mining magnates’ propaganda – hook, line and sinker. The Labor Party’s backroom boys sacked Kevin Rudd for being so stupid as to want to go ahead with the mining super profits tax on mining regardless of worsening opinion polls, promoting Julia Gillard to Prime Minister instead, because Rudd might lose the looming federal election.

So, the miners’ deceit and trickery against the people won out. The 40% profit rental was dropped in favour of a more modest mining resource rent tax (MRRT). The big miners, and most Australian taxpayers who would continue to carry them on their backs, were both happy again.

So, whilst all Australians are actually entitled to a greater interest in their mineral resources, they chose instead to forego it – to pay higher taxes – so Gina, Ivan and Twiggy could become even richer at their expense.

We are said not to be as philanthropic as the Americans, but this is not correct.  Australians major in being very proficient at that most perverted form of philanthropy of all – giving to the rich.


Now you see it


The modern economist is a great illusionist. He makes the planet, territory (over which wars are fought), land (from which every product is made) disappear. As a result, presidents and prime ministers, their economic high priests in tow, have become lost souls.

British writer and economist Fred Harrison, who forecast the global collapse, confirms their mastery of the art of magic with the following observations:-

The Queen could not be told the truth

When the Queen of England visited the London School of Economics she asked a simple question about the looming economic disaster, “Why did no one notice it coming?”  Professor Garicano replied, “At every stage everyone was relying on someone else, and all thought they were doing the right thing“.  As modern economists use a collection of mangled economics, the Queen could not be told the truth.

Economists 100 years ago colluded to distort economics

A century ago a group of influential economists: John Bates Clark, Frank Knight, Francis Walker, Edward Seligman and Richard Ely, colluded to manipulate the building blocks of classical economics. They had an ideological agenda.  The future they shaped is our reality. Their mission was clear, to protect the vital interests of the privileged few. To so they had to conceal the unique qualities of the classical factor of production – LAND.  (Read here the incredible story of how these economists were asked to make land and natural resource rents disappear.)

A century of economic disasters followed, literally messing with our lives.  Economics has been a tool for contorting our collective consciousness, the current economic crisis an example of the pathetic state to which economics has been reduced.

Modern economists are confused

We handsomely reward economists to fine tune the economy to keep it stable. When boom turns to bust they escape into mysticism. They claim, “occasional slow downs are natural and necessary features of a market economy“.  The people we trust to keep the economy on an even keel have no idea what makes an economy explode. Take the central bankers, they pontificated, moving interest rates up and and manipulating the money supply.  They didn’t know what they were doing – it was all an illusion.

The problem lies in some of the theories invented by economists. They do not reflect the real world. They are fictions invented to explain an imaginary market economy.  When the economy overheats the imaginary equations turn out to be useless.

Economists admit their economic models do not work

The daddy of all central bankers was Alan Greenspan, of the US Federal Reserve. He said, “the models do not forecast recession because the parameters are dominated by what happens in normal times when the economy is growing”. 

As the economy crumbled, He said to the US congress, “I discovered a flaw in the model which I perceived as a critical function structure which defines how the world works, I was shocked”. Greenspan’s victims are more than shocked, they are traumatised, losing their homes and jobs.

In failing to raise the warning flags, Greenspan was not alone, economists at the Bank of England also failed to forecast the end of the business cycle. They confessed their economic models break down when the going gets tough. Rachel Lomax, deputy governor of the Bank of England confessed, “When it comes to quantifying the changes in credit conditions, our workhorse economic models still cannot help us very much”.

If you were caught by surprise when the bottom fell out of the credit market, don’t worry, you were in good company. Leading economists at places like the LSE were also shocked. Professor Sir Charles Woodhart, served on the Bank of England monetary policy committee, he now admits that standard forecast economic models are “effectively pretty useless“.

Here is an example of the nonsense that can be produced by economic theory. According to the British governments Property Valuation office in Jan 2008, land values will continue to rise until 2013.  Six months later the economy had broken down.  The graph has been erased from their web site.

Land speculators are the biggest gainers

Who gains from this intellectual mess?  One groups of people reap spectacular rewards, property developers, land speculators all reap windfall gains from one asset that sustains us all, LAND.

In the good times when people go mad buying and selling properties, we lionise these developers. Yet all they are doing is cashing in the on the land values others create. Take the case of a cluster of flats adjacent to a prime brownfield site. Their presence gives value to the adjacent site, yet the thousands of residents of the flats will not share in the increased values they help create.

Banks fuelled the property/land bubble

Bankers around the world played their part in the economic crisis pumping up credit to fuel the property bubble.  As land values rose bankers even created more money. This was a self inflated bubble of hot air. It had to burst.

Economists who know the answers are suppressed

For the past century economist have messed with our minds.  All is not lost.  A few economists have been stewards of the precious knowledge of how the economy works. The Nobel prize winning economist Bill Vickrey and California professor, Mason Gaffney. All voices of reason that have been suppressed.

We need to force through change to eliminate vested interests

With all the global crises converging – mass unemployment, poverty, terrorism – it is time to make up our minds and stop playing the game that was rigged 100 years ago. If we do not challenge the vested interests that exploit people, all of us, the environment and future generations will pay the ultimate price. We have to oblige our elected leaders to deal with the realities on the ground.

In the end it is up to everyone to assume personal responsibility and restore common sense in the way we govern society.

[Acknowledgment to John at Land Cafe]


Oz economyAmericans are now awake to the fact that their housing market will be ‘cactus’ for years, but most  Australians remain blissfully ignorant that our beginning-to-burst bubble is even worse than the US’s.

Take a peep at this excellent discussion between David McWilliams, Gabor Steingart, Joseph Stiglitz, and Simon Wolfson, as moderated by Stephanie Flanders. It canvasses the possibility of the ending of the Eurozone. McWilliams is a standout.

The discussion touches upon the two approaches destined to fail: “Helicopter Ben’s” USA method , simply running the money-printing presses ad infinitum, and the austerity strictures Eurozone lenders are seeking to apply to the PIIGS “sinner” nations (which must clearly worsen their plight).

It also suggests the best approach. McWilliams says Iceland is bluntly correct:  “We don’t have any money, we have fish. We’re not paying your money back.”  Nor should they, of course, because each and every one the European banks were disdainful of risk management. They lent out funds that could NEVER be repaid, so who exactly are the real “sinners” here?  Debt that can’t be repaid won’t be repaid.

What’s the relevance of all this to Australia, you may ask. Well, when we do awaken from our Rip Van Winkle torpor (it seems we must suffer the collapse before the mainstream is prepared to contemplate solutions), we have the benefit of seeing the failures transpiring in the US and Europe, and, making the comparison with those countries that have wiped their hands of the shortcomings of banks, we will be able to hang our miscreant banks out to dry, too.

When real estate has finally tanked in sleepy Ozland and carcasses are all over the floor, I’m betting our government(s) will try nevertheless to send us down the “austerity measures” trail, to bail out our banks at grave cost to people and the economy; but by then we’ll know better and resist.

The difficult-to-beat solution would be refusal to reward banks for their spendthrift policies, combined with Ken Henry’s panel’s recommendations to start the wheels of the economy rolling again.

If we take heed of the warnings we’ve had the luxury of already witnessing from overseas, we’ll be able to navigate our way through banks’ self-interested arguments (which will undoubtedly be taken up by the spin doctors in the ‘respectable’ media).

To make their same mistakes doesn’t bear thinking about.



EarthSharing Australia has published its 2010 update of properties held vacant in Melbourne. The speculative vacancy rate has dropped from 6.84% in 2009 to 4.94%, suggesting that many Melbourne ‘investors’ (read speculators seeking capital gains) have read the signs and taken their money and run before the property market tanks.

Although the average vacancy rate across Melbourne is one in twenty properties, the EarthSharing survey reveals several suburbs having as many as one in every thirteen properties being held vacant.

(Read the full report here.)


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.



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.