….. solves the mystery of the economy.


Bon jour!


Poirot sets the scenario

I have a mystery for you, mes amis. Although the Australian Consumer Price Index it does not show significant inflation to have occurred during recent times, the value of the Australian currency it continues to fall and it has fallen for more than a century, as has the dollar of the Americans.

Clues and responses

“Yes, that’s correct, but it’s no mystery, Hercule. The price of all goods and services has risen. That’s inflation.”

Non, non, mes amis! What is it that is the cause of these prices to rise?

“That’s easy! Excess demand. There is too much demand for the undersupply of goods and services.”

But the capitalist system, does it not immediately by the invisible hand adjust to this undersupply of goods and services?

“Well, yes it does, but there’s too much money in the system.”

Oh, it is too much money, then? How does this excess money get into the system, mes amis?

“It should be obvious to everybody right now. Clearly, the government is printing it!”

But why is it that the government is printing too much money? Does it not infer that it is the government trying to hide or repair, how do you say, “an underlying problem”?  

“Yes, there’s been too much welfarism. The government is spending far too much in supporting public health, the jobless and the poor!”

Why is it that you do not also add “too much in defence spending”, mes amis? So, we do not need any of these public expenditures? Surely, if all of these were to be abolished is it not that the people and the economy, they would all fall into “the heap”? No, mes amis, there is so much more than the government spending and printing of money that it is creating this inflation.

“What is it then, Hercule?”

Poirot has a solution!

Gather round closely, mes amis! I have an important solution to announce to you. The mystery of the economy, it is solved! When we see the, how do you say, distinction between the taxation of incomes and goods and services and the placing of a levy upon the value of the land that each one of us holds, the latter it is fair because it is the exact measure of what we take from society for our exclusive use, whereas the arbitrary taxation, it is not fair at all!

The taxes, they are also unfair because they are passed on in the prices, and they have been inflating the cost of the Australian goods and services at every point in the businesses, but the consumer price index, it does not tell us that the taxes act to double the prices of everything and to have concomitantemente cut in half the returns to the Australian labour and the capital! Moreover, does not the banking system create money and inflation as it generates the mortgage debts against the escalating land prices? Land, it has no cost of production, no?

And, yes mes amis, the society, it does exist, but it is the taxation and the land prices that are destroying it!

“They’re remarkable findings, Hercule! But if we were to abolish taxes and put a levy on land values, that would double wages and profits without creating tax-generated inflation, but land prices would fall also! Yes, that’s anti-inflationary, too, but can governments and the Reserve bank of Australia afford to let land prices fall?”  

You have come to the critical cross of the roads, mes amis! The Australian governments must allow the land prices to fall, because the high taxes and the high land prices interfere with the invisible hand from doing its work. This interference distorts all of the Australian markets which include the stock market and the marketing of bonds.

And, now, what do we say about the people of Australia, their governments and the Reserve Bank of Australia who will fail to let their land prices fall, mes amis? Well, that it another mystery! That will resolve itself badly in 2026 because that is the end year of the 18-year cycle in the real estate and in the Long Wave of Mr Nikolai Kondratieff. For not attending to this failure, the big correction in the markets will have its terrible way with Australians!

“That bad, Poirot?”

Oui, mes amisfâcheusement.