Prosper Australia

photo credit: The Joy Of The Mundane

Perhaps the recent US stock market rally is in expectation of the new free lunch Helicopter Ben is preparing. The derivatives market is now in the Quadrillions. Apparently that is worth $199,000 for every human being on the entire planet. Staggering.

Keeping up with the backroom moves are tricky, but this article by Mike Whitney at Information Clearing House delivers some sharp tongued warnings:

Fed chief Ben Bernanke’s new funding facility is a real doozy. In fact, if the Term Asset-Backed Loan Facility or TALF, which is set to launch on Thursday, doesn’t convince the American people that it’s time to take a wrecking ball to the Central Bank and start over, than nothing will. Bernanke and his co-conspirator at Treasury, Timothy Geithner, are planning to revive the shadow banking system by dumping $2 trillion into the same over-leveraged, derivatives-based garbage that blew up the financial system in the first place. All the blabbering about a “good bank-bad bank” remedy appears to have been a diversion.

photo credit: sekundo

Throw out the theory! That’s what policy makers are doing world-wide. From neo-liberalism to neo-handouts, one must ask what has happened to confidence in free market theory? Which leader in the western world will stand up?

Failure to address the fundamental cause of this bust, the irrational expectations inherent in the lure of low risk profits from property flipping, is what has led us to the world-wide meltdown. Check the internet phenomenon of Casey Serin, the world’s most infamous flipper to see how short termed this line of thinking is.

The tragedy is that the bankers bailout will do nothing and now this trend has spread to aiding and abetting political donors in Europe as well. Democracy is now officially dead. Lobbyocracy rules decision making, distorting us from genuine, forensic analysis.

Check Fred Foldvary, the legendary editor of the Progress report on a brutal but effective reform process. There’s about 200 words of damaging analysis there, crucial to turning the world economy around.

At a point in time when we need our most intelligent thinkers working on how to re-shape society towards sustainability, the very people who have polluted our thinking processes are the ones who get the bailout.

Switching taxes off incomes and onto natural resources like land is the only way to stop future asset bubbles occurring. It is also the fairest way to ensure those who pay their taxes get a fair return on their investment in government. Land cannot be hidden in Liechenstein’s tax havens!

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.

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.
(more…)

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.
(more…)

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.
(more…)