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The enews of Prosper & Earthsharing Australia
 AUGUST 2015

What makes a successful tax state?

Wednesday September 2nd
Royal Society of Victoria, 8 La Trobe St, Melbourne
From 6pm
$30 (includes dinner and lecture)
RSVP & Tickets

We are pleased to announce Professor Miranda Stewart, leading international tax law and policy expert as our next Henry George Commemorative Dinner speaker.

She poses the question: What makes a successful tax state?

Miranda is Director of the Tax and Transfer Policy Institute at Crawford School, ANU, and has more than 20 years experience at the leading edge of policy research, design and development. She is an interesting and engaging speaker with a wealth of knowledge on taxation issues. Her talk will consider the history of Australia as a ‘tax state’ and look at the role land and property taxes in establishing a fair, efficient and resilient economy.

For over a century the Henry George Commemorative Dinner has been a fixture in Melbourne’s economic and political calendar and we hope you can join us for this – the 124th occassion. The evening begins at 6pm in the Burke and Wills room, with food served from 6.15 and the lecture at 7.15. The event is licensed and drinks are pay-as-you-go. Tickets and more information here.

Matt Cornock
Housing Inquiry

David Collyer and Catherine Cashmore received a positive reception at the House of Representatives Inquiry into Home Ownership. Read David’s commentary on this important opportunity.  Their presentation followed a list of prominent speakers advocating a switch from stamp duty to land taxation, including Gavin Wood Emeritus Professor of Housing and Urban Studies at RMIT, and AHURI.

Jason Mrachina
Council of Georgist Organisations report

The 2015 Council of Geologist Organisations conference was held in Southfield, Michigan with over 60 attendees. Participants visited from Denmark, Nigeria and West Virigina. The event was hosted by the International Union for LVT and the CGO. Karl Fitzgerald represented Prosper Australia courtesy of a scholarship from the Robert Schalkenbach Foundation. He writes:

The week began with the IU meeting where we heard of interesting developments from UN representative Teckla Negga Melchior, who is researching just how many UN resolutions have had a land-reform component. She suggested there is a high proportion of land reform type motions not backed up by complimentary economic policy. My proposal for IU support to quantify the tax loopholes handed out to rent-seekers post the GFC was supported.

The formal CGO conference kicked off with a series of passionate seminars. Maureen Taylor from the Michigan Welfare Rights group was the standout on the first day, telling it how it is with regards to political processes in the city: “there is no common sense”. Over the week we heard more on how the Detroit Emergency Management team was part of a Disaster Capitalism type handout to insiders. Watch Maureen in action on the first panel.

Paul Martin from Nicaragua was a presence over the week, with his urgent call for more support of his outreach project in Latin America. Gordon Abiama was visiting from Nigeria and we were reminded of Alanna Hartzok’s earlier call for $25,000 to build Gordon’s eco-village in the oil ravaged region. Watch out for a Renegade Economists interview with Gordon soon. On the other side, of the many wise elders was Carl Shaw, who quietly attends most conferences and supports advocates such as Alanna and her recent Democratic candidacy. Carl had a pamphlet entitled “Wanted: A Solid Georgist to manage my enclave of economic rent, the Justice Trust, here in Calhoun County, West Virginia.” Carl has 80 acres of hilly forested land with 2 – 3 acres of tillable land. Make contact if you are interested in taking over! Another wise soul was Mary Rawson from Vancouver, who had published a highly regarded paper on Property Taxation and Urban Development – Effects of the Property Tax on City Growth and Change in 1961. I was happy to hear of Georgist analysis from a planning perspective.

Josh Vincent gave one of the best presentations of the conference on Why Pensylvania’s Cities are Bouncing Back from the Collapse of Big Steel. His work on building bridges between builders, small business groups and housing rights organisations is inspirational. See the video here.

Paul Justus is doing a terrfic job getting many of the conference presentations online on his vimeo channel.

I gave two main presentations on:
Towards International Collaboration – a discussion about the means to develop better international synergy via the various online tools now possible.
Total Resource Rents of Australia and the neocon constriction – a presentation on the upcoming report for 2012-13 period. Both were well received, more to come.

As always with conferences, it is hard to capture the spirit of the event, of Dan Sullivan singing his powerful Oil Bombing Run rendition based on Harry Belefonte’s Banana Boat, of first timer Patrick Han asking for advice on his thesis, of Alodia Arnold from the Fairhope Single Tax Corporation playing this song, to the after hours conversations in the hospitality sweet. This CGO had a defiant spirit of land reform ever-present. With economic devastation surrounding us, it certainly was a timely location. It was excellent to see HGFA chairman Andrew Gunter and trustee Leo Foley in attendance. Will you be there next year?

Jakob Montrasio
China’s Economic Fundamentals Exposed

Karl Fitzgerald writes on the Prosper blog:

In June 2014 I warned of looming troubles with reports of land turnover falling 45% year on year in China Watch – land turnover ‘plunge’ a predictor of recessionary forces.

A paucity of Chinese data makes it difficult to track further land sales data. But every now and then we get hints, such as Shanghai land sale volumes plunged 103.7% in the year to April 2015.

Whilst this is far from a thorough investigation of the role high land prices play, we do remind you of Gavin Putland’s in depth post GFC analysis of 36 nations in the From the Subprime to the Terrigenous report. Putland demonstrated how land sales turnover acts as a pre-cursor to economic recession.

Let’s step through the cycle:

  • Land prices reach a new high beyond what wage earners can realistically afford.
  • Experienced investors realise the economic fundamentals no longer relate to reality, reducing demand.
  • Land banking developers try to manipulate the market, reducing supply in order to choke prices. That plays out over 3 – 4 quarters.
  • Banks get concerned, warning developers not to drop prices or margin calls will occur.
  • Developers offer free cars, furniture or carpet to entice purchases in order to maintain the inflated land price, playing out over a number of months.
  • Land bankers have no option but to reduce land prices on the back of low land sales turnover.
  • Banks make margin calls, calling in the difference between loans given and the value of land holdings at current market prices.
  • Developer bankruptcys build.
  • The wider economy starts to weigh down under the pressure high rents and mortgage payments place on  consumer spending.

And so the script goes. We are currently seeing the Chinese sharemarket take its part by shining a light on the fundamentals.

– See more at: https://www.prosper.org.au/2015/08/25/chinas-economic-fundamentals-exposed/#sthash.jzsGjv4m.dpuf

In June 2014 I warned of looming troubles with reports of land turnover falling 45% year on year in China Watch – land turnover ‘plunge’ a predictor of recessionary forces.

A paucity of Chinese data makes it difficult to track further land sales data. But every now and then we get hints, such as Shanghai land sale volumes plunged 103.7% in the year to April 2015.

Whilst this is far from a thorough investigation of the role high land prices play, we do remind you of Gavin Putland’s in depth post GFC analysis of 36 nations in the From the Subprime to the Terrigenous report. Putland demonstrated how land sales turnover acts as a pre-cursor to economic recession.

Let’s step through the cycle:

  • Land prices reach a new high beyond what wage earners can realistically afford.
  • Experienced investors realise the economic fundamentals no longer relate to reality, reducing demand.
  • Land banking developers try to manipulate the market, reducing supply in order to choke prices. That plays out over 3 – 4 quarters.
  • Banks get concerned, warning developers not to drop prices or margin calls will occur.
  • Developers offer free cars, furniture or carpet to entice purchases in order to maintain the inflated land price, playing out over a number of months.
  • Land bankers have no option but to reduce land prices on the back of low land sales turnover.
  • Banks make margin calls, calling in the difference between loans given and the value of land holdings at current market prices.
  • Developer bankruptcys build.
  • The wider economy starts to weigh down under the pressure high rents and mortgage payments place on  consumer spending.

And so the script goes. We are currently seeing the Chinese sharemarket take its part by shining a light on the fundamentals.

Read the rest of the post at www.prosper.org.au

Thomas Hawk
Rounding Off

This article in The Guardian by Lindsay David takes aim at the banks for treating our housing market as a Ponzi scheme and points to the alarming parallels between Australia and the US, Ireland and Spain before the global crash. Speaking of the big banks – ASIC has released a critical review of the approval process for interest only mortgages finding that “in more than 30 per cent of files, there was no evidence the banks had properly considered whether an interest-only loan was appropriate for the borrower.” 

Melbourne was named the world’s most liveable city again…. what’s that sound? Just the rush of more speculators wanting a piece of liveability…  Imagine how much more livable Melbourne would be with affordable housing – the Australian Institute of Health and Welfare has found the great Australian home-ownership dream is an unattainable fantasy for most.

There’s an entertaining piece at The Bull – the author uses the game Monopoly to paint an accurate picture of the state of the modern housing game:

The young Boot watches Scottish Terrier push out onto the board with the naïvety of youth. In a land of opportunity where skill and hard work are the ingredients of success, Scottish Terrier throws the dice with confidence. He lands on private land; he rolls from Piccadilly to Park Lane, shelling out landlord fees and coughing up rent. Before long his $1,000 has dwindled to nothing at all, and he calls from the board: “Nothing is affordable!” But his cries are muffled by property bidding as the established players battle it out for Leicester Square.

Get in on the conversation by joining us on Facebook and Twitter, or show your support by joining Prosper. Don’t forget the dinner is next week and is a great chance to build links with our growing network of economic reformers.

Looking forward to seeing you there,

Jess Wright
Office Manager

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