Prosper Australia

photo credit: PhotoGraham

That is the call as the bankers bailout of US$700bn gets rejected by US Congress. Meanwhile the US Fed has the printing presses running at just about as much - US$630bn.

Kohler says:

Essentially Congress has ensured that for the moment at least the crisis will be treated by money printing instead of bond issuance – by inflation instead of debt.

Inflation aficionado’s such as Steve Keen will see this as a subtle move to ensure that inflationary pressures act to subsidise US debt.

One may remember back to Michael Hudson’s recent comment that the Fed’s involvement in the economy is nothing more than a bailout for the Republican candidate McCain.

Why not go to the source of the problem - the carrot of economic rent - to shut down the boom-bust motivations of 2 dimensional economics? Shifting government revenue sources off wages and onto land would move the emphasis of banks from profiteering on the loans of an inflated property market and towards the lending of capital for productive purposes.

This would reduce the chances of such boom-bust economics occurring in the future by removing the allure of property flipping and it’s ability to deliver speculator’s ‘money in their sleep‘. This is the primal cause to this meltdown and should be taken seriously.

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One can only laugh when such a blatant shock doctrine exercise as this bailout tries to get through. If only some Hollywood stars were included then the bankers bailout might work. Warren Buffet should know better.

A forensic investigation must take place before Australia gets woo’ed into this Kev!

photo credit: betta design

The $840bn bailout of US banks provides the US Treasury with a unique opportunity. Will the as yet unnamed new Federal agency (which we will call the Bailout Agency), charged with the responsibility for selling off the bad debts of risk-bending bankers, use this money to reduce the chance of future boom-busts to occur?

This could be a reality if the whopping $840bn dollars (more than spent on 5 years of the Iraq war) was used to switch the 3 million odd sub-prime borrowers over to a Community Land Trust model of land ownership. The Trust could become a department of the Bailout Agency.

The new system would see the former sub-prime lenders paying a yearly Site Fee to the Trust based on the earning capacity of that site. This would allow land valuers, those who many argue are the front line to the realistic economy (vis the desk loitering economists and their mathematical models) to adjudge what someone on an average wage in an average location could earn in that locality.
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photo credit: amirjina

Can someone please write in their diary June 2024? Because that’s when we are going to start warning about the next big bailout for bankers. If we do not learn from the horrors of this downturn and collect the economic rent that accrues to land, then the next 18 year cycle will be chugging along by 2024 and another asset boom-bust will be underway.

It is almost beyond belief that the $870 billion bailout equates to the entire spending of the US Department of Defence, Education, Health and Human Services. With rumours surrounding Goldman Sachs as the next to go bust, one wonders if the revolving door between Goldman and Treasury, where US Treasury Secretary Paulson worked until 2006, will see another bailout for insiders.

Of greatest concern with the $870bn bailout is whether the thousands of mortgages acquired by the government will be drip fed to the market. This will put the government in direct opposition to the community. A market system would see these banks fail and the price of land fall back to levels that can be realistically earnt off the site via the average wage in the area.
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photo credit: Arturo J. Paniagua

Officials worldwide are scrambling to avoid a run on the banks, such is the fear sweeping markets. Rarely do you hear the need for statements by government finance honchos like Paulson (US) and Tanner (Aus) that the banking system is safe (as houses). This must mean a run on the banks is on the cards.

During such tumultuous times, we continue to ask the hard questions. Are rising property prices good for society? Is anyone really up for another land boom-bust?

Fred Harrison over at the Renegade Economist comments on how new British legislation will give the taxpayer greater say on which assets it securitises loans against. He reminds us:

With Lehman Brothers now added to the list of bankrupts – another victim of reckless speculation in real estate - the terms on which they may be rescued from their own folly is of no little consequence to taxpayers who are being forced to clean up the mess.

The latest US reform is to tighten rules on short-selling, for which some blame the downward plunge of sharemarkets.
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photo credit: {dpade1337}

The escalating US financial disaster is fast forwarding into a grapple for handouts, with the vested interests having the ear of the policy makers whilst the less privileged are left behind in a trail of bewilderment, attempting to grasp the unfolding situation one fragment of horrible data at a time.

The call for the US Fed to cut interest rates tonight by as much as 0.5% spells disaster for the middle classes. This will in effect reward those that have leveraged the US system into such debt. What is the debt based on? Primarily land.

An interest rate bailout, following the massive tax payer funded cash injections in those institutions dominated by Chinese investors (Fannie, Freddie & Bear), will prolong the recession. The Japanese economy suffered for 16 long years as the government tried to bail out or pump prime the economy. A 16 year recession ensued until land prices fell back to what can be realistically earnt off them - reflecting their true land value.
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With property prices have dropped 23% in the UK over the last year and the UK verging on recession, what role do banks play in the quagmire? To think that Brown believes cutting property taxes will turn the UK property market around!

photo credit: mtbdeano

Professor Mason Gaffney

Get yourself comfortable - this is Must Read!

This crash is The Big One; it has the signs of becoming a Category 5. How do we know? We’ve “been there and done that” so many times before, roughly every 18 years over the last 800 or more. Major wars and, rarely, plagues have broken the rhythm, along with the little ice age, reformation and counter-reformation, political revolutions and reactions, the rise of nation-states, the enclosure movement, the age of exploration, massive European imports of stolen American gold, the scientific and industrial revolutions, the Crusades, Mongol and Turkish invasions, and other upheavals.

Yet, the endogenous cycle keeps returning, as soon as we find peace, and economic life returns to its even tenors. What President Warren Harding famously called “normalcy” soon evolved into another boom and a shocking bust, as so often before. Calm and routine prosperity has never been man’s lot for long: it somehow leads to its own downfall, cycle after cycle.

Homer Hoyt published his classic 100 Years of Land Values in Chicago, 1833-1933, in December, 1933. He covered in fine detail the 5 major cycles that crested and crashed in 1837, 1857, 1873, 1893, and 1926-29. At the end he generalized “The Chicago Real Estate Cycle”, a regular rhythm of boom and bust with the same features in the same sequence. The boom sets us up for the bust. He could have omitted the limiting word “Chicago”, its cycles were synchronized with national waves recorded by other scholars like Arthur H. Cole, Philip Cornick, Lewis Maverick, Frederick Lewis Allen, Harry Scherman, Carter Goodrich, Ernest Fisher, Homer Vanderblue, Herbert Simpson, and others – surprisingly few others, in fact.
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photo credit: Mike Licht, NotionsCapital.com

How can the world’s most right wing administration delve into the biggest act of socialism since the Great Depression? By allowing the economic fundamentals to be skewed towards speculation rather than production, the Bush administration has accelerated the push towards short term profiteering.

The last 30 years of global economic policy has encouraged this move away from manufacturing and towards speculative services. CDO’s and the like are the effect, Tax policy is the cause of such lucrative arbitrage.

Tune into the Renegade Economists tomorrow as we interview Dr. Michael Hudson on one of the biggest financial headaches of the decade. Dr Hudson was the former Chief Economic Policy Adviser for the Kucinich for President campaign.

The bailout of Fannie Mae and Freddie Mac could see up to $240 billion diverted away from crucial areas like health and education. But will this propping up of the market assist in the long run? Millions of US foreclosures on properties are occurring, with another raft of Adjustable Rate Mortgages to kick in with higher rates during the month of October.

Foreclosures occur because land and property was purchased at levels that were beyond the wages of the working class man. They paid speculative prices, expecting land and property prices to continue upwards forever - “You Never Lose on Property”. As we are seeing, you do if you buy at the wrong time, when land prices cannot be passed on to another optimistic buyer.
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photo credit: therapycatguardian

Dr Terry Dwyer

HENRY GEORGE COMMEMORATION ADDRESS
Tuesday 2 September 2008

Sixty people gathered last night on Henry George’s birthday to hear the Commemorative Address. The venue was the Conservatory, just across the road from where Henry George himself spoke to a packed house at the Exhibition Centre to a rumoured 10,000 people in 1890

The Athenian historian Thucydides wrote of “the great and the good” but the phrase may connote cynicism or irony. Tonight we honour the memory of a genuinely great and good man. Henry George spoke truth not merely to power but to that more capricious master, the voting public. He always preferred to appeal to men’s reason and their better natures rather than to score easy political victories on the back of some sort of class envy or hostility.

In that spirit, tonight I want to pose some questions concerning equal and inalienable rights to the Earth, to ground, water and air and to ask “When and how should one allow enclosing the commons?”

The avarice of Henry VIII launched the great enclosure movement and saw the common people reduced to landless rural and urban labourers. We are still living with the consequences of that great enclosure and those which succeeded it, such as the engrossing of the lands of the Australia, against which some of the founding fathers of Federation such as Sir Samuel Griffith and Sir John Quick wrote.

But today we are seeing a new enclosure movement. The “great and the good” of the political and business establishment and the wizards of high finance, blessed with the incantations of many priests from the temples of science, are now saying that we have entered a new period of scarcity where we must - for our own survival - consent to an enclosure of the carbon and water commons. Just as we needed to surrender the over-grazed common lands to selective private ownership to secure their better management, so it is now being urged that water and air are limited resources which should be subjected to some form of licensing or rationing - whether by free grant, by auction or by taxation.
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