Prosper Australia

Now you’ve seen Steve Keen deliver a damaging analysis on the 7.30 report, listen to
Professor Mason Gaffney call a Great Depression (on yesterday’s Renegade Economists) and why current economic policy will only prolong the negative outlook.

Dr. Michael Hudson was Chief Economic Policy Adviser for the Kucinich for President campaign in 2007. He gave a compelling interview recently well worth your attention:
Michael Hudson are rising property prices a good thing?
Hudson pt2 - Houses as a tax shelter

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.
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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: {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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