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Reality   2009 Apr 29, 2:14pm   ↑ like (0)   ↑ dislike (0)     quote        

Bingo! Patrick, the real problem is limited supply! Government license requirement in cahoots with AMA! If anyone and everyone is allowed to practice medicine, prices will come down.

The 31% administrative cost is peanuts when compared to the 87% administrative cost in government-run single-payer welfare. Only 13 cents out of every dollar allocated to welfare budget actually reach the intended recipient. What residual competition there is among insurance companies and among hospitals (for those who pay their own bills, especially for things like dentistry, which is usually not covered in most plans now) is what's keeping administrative cost down to 31%. Without competition, an industry would be almost entirely taken up by administrative cost, just like government-run single-payer welfare industry. Comes to think of it, under a single-payer medical system, medicine will indeed be like welfare: from each according to ability (i.e. tax on ability to earn), to each according to need . . . i.e. the presumption of perfect knowledge in resource distribution without any cost associated with acquiring such knowledge. In real life, every single piece of knowledge on where resource is most urgently needed comes at a cost; market price signals are what transmit those pieces of knowledge.

Reality   2011 Apr 24, 7:05pm   ↑ like (0)   ↑ dislike (0)     quote        


If you levy a 5% tax on commercial land value, most of the land value would simply collapse and give you no tax at all. Land value is calculated on how much rent it can generate, 5% tax is as high as the mortgage is. You can check what towns with 5% property tax is like; in fact, as soon as property tax level reach over about 2.5%, the town finances collapse altogether as the property value collapse and people abandon the town.

5% tax on $4M/acre valuation would probably kill most big-box retail stores and make the rest stores much more expensive, resulting in much higher cost of living for low-income to middle income families that rely on the likes of Walmart and Target for their daily needs. The limousine set frequenting Niemen Marcus and Tiffany's may be less affected, until the rioters arrive at their gated communities and their limo drivers can't support their families.

The idea that there can be an objective land use value is quite absurd. Land value in zones of 1/8 acre obviously have different valuation from zones where the zoning minimum is 2 acres, on a per acre basis, even in the same town. A 1/2 acre lot is not going to be worth 4 times as much as the 1/8 acre lot right next to it, simply because both lots can only build one residential building each. Proximity to roads, rail, water, even elevation and wind direction would have significant effect on land value as residential lots. When we get to mixed use and commercial lots, we face enormous value difference due to the type of use. Who is to decide which plot is to be used for what? What kind of building is to be built on it and how big? Obviously, the plot's ability to accommodate a bigger building vs. a smaller building would carry different value during different periods in the economic cycle. Do you honestly believe the town or state government is really well suited for managing such minutia? instead of leaving it to the building owners? The reality on the ground is that in cities like New York, we not only have building owners renting from land owners, who in turn "rent" (fee-hold) from the city/state, even the tenant renting parts of the building often sub-let or sell their leases in capitalized form to other tenants/sub-tenants. Economic conditions change, and new ways of making best use of land change all the time. Only the diversified fee-holds at various levels can cope with the rapid changes. There is a real time price discovery process at each level, whenever a tenant/sub-tenant moves in or moves out of the place.

This whole idea of accruing all land use value to the government sounds awefully like historical attempts to "cut out the middlemen" and turn all food production and distribution over to a government monopoly. The result of such central planning is inevitably bureaucratic inefficiency and mis-allocation of resources, fattening the well-connected and starving the rest of the population. In land use, such a centralization would simply create a nexus for one big monopolistic developer to capture.

Reality   2011 Apr 24, 7:06pm   ↑ like (0)   ↑ dislike (0)     quote        


Then there is the situation where the lot was so uneven that it was utterly un-buildable. Then some "pioneer" came along and leveled the lot. How do you differentiate "land" in the Georgist sense vs. improvement? Does every home owner have to document all land scape changes from when the lot was created/recognized?

After the house was built, if the builder then had to fire-sale at a loss below the construction cost of the house/improvement itself. Does that then allow the buyer/next-owner hold the land free-and-clear (instead of fee-hold land from the town)? As he paid zero for the land.

It goes to show that the whole drive behind Georgism is the same as every other excuse for taxation: envy, and the ruling class' pretense to to put a lid on it and protect the middle class from it.

Reality   2011 Apr 25, 12:56am   ↑ like (0)   ↑ dislike (0)     quote        


Look at the example you provided: if the current value is $1.6mil because it can collect $104k in rent in a year, how much is the land worth when $80k of that is taken away in taxes? Back-of-evnvelope calculation seems to indicate the land would be worth $369k, a 76% reduction in value. That's for a prime location. The vast majority of other locations simply would not have that kind of income numbers, so such a high tax rate would simply lead to abandonment and dilapidation . . . just like in almost every town foolish enough to have imposed property tax rate above about 2.5%. There is no beauty in raising property tax rate to those levels; it would simply raise rent and collapse property value at the same time, destroying both tenants and landlords at the same time for the wished for benefit of the government, which would also be ruined as its "tenants" (both landlords and renters) are ruined.

I have already read Gene's article that you have referenced so many times. His so-called critique of Rothbard's writing is really quite silly. He was making the same mistake as you did: assuming that value is objective and unaffected by the drastic policy proposal itself. In reality, land value would be drastically affected by the proposal, resulting in widespread bankruptcy (most commercial land carry mortgages) and little tax collected (due to value collapse)

Have you ever lived in places like Tokyo or Shanghai? These are horrendous places to live compared to much of the US. The multi-story malls are not easy to access by the handicapped or elderly. The jam-packed land use is also called "concrete jungle." Niceties like green zones maintained by most American malls and companies surrounding their buildings are usually absent in Tokyo and Shanghai (except for way out in the outer suburbia, 20 miles or further out from the city centers). Do we really want pack Americans into pigeon boxes like they do? Incidentally, even in a place like Shanghai, where the government actually does own all the land (the ultimate wet dream of socio-Georgists, unlike Henry himself), there are still mutliple tiers of "landlording" arbitraging long term leases vs. short-term subleases.

The "save your invoices" argument is silly on two accounts:

(1) The owner wielding a shovel or running a Bobcat put in far more of his labor value than the invoice on the shovel or the Bobcat rental cost would indicate. As any good Georgist would understand, his labor should not be taxed.

(2) Inflation. A new Bobcat would cost $2k only in 1970, but that 1970 $2k is worth more than $20k today. While one may argue that land value increase due to inflation is liable to tax, but the Bobcat use is not land value but the guy's labor input (or labor input of someone else that he bought and paid for with the fruits of his own labor).

The market value of land is not smooth at all. Property assessing is indeed an art, not a science. It's a matter of creating a smooth income stream to pay for the town's obligations without the property owners burning down the assessor's office. The drastic ups and downs in the real estate market is mostly due to change in market land value. The cost of material and illegal immigrant labor do not change nearly as much (union labor cost fluctuate even less, if at all).

London, Lisbon, Chicago and San Francisco did not retain their land value during the fires and in the immediate aftermaths any more than Tokyo is fully retaining its land value in the nuclear fallout or LA retained land value during the 1992 riot or New Orleans retained land value during the aftermath of Katrina. Property and land value fell drastically during those disasters. Some of them were able to recover because commerce and low taxation business environment returned. If you want to see drastic land value change in a city over time due to high property tax, look to Detroit. As far as I know, it didn't even experience any natural disaster or massive fire. The high property tax alone is quite sufficient to destroy a city. BTW, the 70-80% decline in land value during Black Death is far better explained by the decline in commerce than the population decline per se. People were afraid of meeting other people, so in the pre-internet age, that meant stoppage of commerce; many towns even banned traveling vendors, the engine of "inter-state commerce" back then. So as you can see, land value is not constant at all, but drastically affected by economic conditions . . . i.e. something that the government would be illl-equipped to evaluate and adjust vs. the individual landlords cutting rents and digging into their savings. Governments are nortorious for not having reserve funds. Any additional tax in boom time would simply be leveraged out for more debt to build more boondongles.

Henry George proposed the Single-Tax idea as a way of reducing the overall tax burden on the economy. However, nowadays, many of his alleged followers seem to be looking for ways for the government to take a bigger bite out of the economy by monopolizing land management. Detroit is a good example of what happens when the government dominates land use management through high property tax.

Reality   2011 Apr 25, 1:25am   ↑ like (0)   ↑ dislike (0)     quote        

Ownership of land is already an illusion in modern western society predominated by "fee-hold." With property tax rates typically 1-2%, the math works out to be the equivalent of a 99-yr or 50-yr lease. "Landlord" is in effect arbitraging between long term lease vs. short-term leases. So why shouldn't the town take the entire rent income? Because the economy is not constantly smooth rotating. Rents are much lower and vacancy rates are much higher during down turns. The government can only collect so much "rent"/tax from the "owner" as to allow the owner still be able to afford the up-keep of the building and paying his creditors during a down turn (often out of his reserve funds if necessary), before the buildings would be abandoned. Based on past performance with projects, the government would be a terrible agent for managing abandoned properties. Even as we type now, many properties can be purchased at prices lower than building replacement cost alone; i.e. the land portion is valued at zero in the market place, despite what the assessor's office says on paper.

Reality   2011 Apr 25, 2:56am   ↑ like (1)   ↑ dislike (1)     quote        

"Progress and Poverty" did not impress me because I had already read "Das Kapital," where not only land but all "means of production" are owned by the monopolistic government bureaucracy. Government being the only rent collector necessarily means that government becoming the only developer. We already learned from real life experience in the 20th century that what's worse than oligopolistic big corporations running people's lives is a monopolistic government that doesn't allow any choice at all. More precisely, both "government" and "corporation" are artificial mental constructs designed to allow a small elite to screw the rest of the population without getting too personal. Displacing multiple competing corporations with "the government" would mean the same bunch of feudalistic elites putting themselves in government official robes instead of corporate suits running your life . . . and your choices are reduced from "a few"/"too few" to 1 or zero. Both books read to me like advocating jumping out of the frying pan and into the burning flame itself (and many nations in the 20th century did precisely that).

Since most buildings are fixed, not on trailer platforms, and any land improvement like leveling the lot and laying pipes and fences is non-transferable sunken cost, land valuation in a market where properties are bought and sold with land is guaranteed to invite fraud and corruption. Arbitrary allocations are tolerated now mostly because tax rates on both land and improvement are the same and remain relatively low; if one is raised way high and the other is reduced to zero, it doesn't take a genius to figure out what will happen in the byzantine government halls, where even the lawmakers are bought and sold routinely.

Reality   2011 Apr 25, 3:04am   ↑ like (0)   ↑ dislike (0)     quote        

If land tax is a matter of bidding, what happens then if someone else wins the bidding for the land under your house? Does he get to pay for your tax or does he get to kick you off the land? Does everyone have to live in trailers and cars? Would the town then go bankrupt the moment the economy slows down, because every home owner simply gas up their cars and trailers and leave? the same reason why trailer park owners have cash flow problems every 8-10 years?

More importantly, nobody would make any permanent improvement to the land, just like in the trailer parks. There is a reason why not even rental apartments are put on the block for auction every year or every month to maximize rent.

Incidentally, there is already an auction market for property tax liens; i.e. on houses where the owner is late on property tax payment. Reports seem to indicate that it's a very corrupt process, where families down on their luck are hit with exorbitant interest rate and have their houses seized by predatory tax-lien lenders.

Reality   2011 Apr 25, 3:50am   ↑ like (0)   ↑ dislike (0)     quote        

Then you are being oblivious to a HUGE BUG, a bug so big that it's "sucking out the life flood of humanity," to paraphrase Matt Taiibbi from RollingStone and put "bug" in place of his more graphical phrase "vampire squid stuck on the face of humanity."

There is a crucial difference between the "LANDOWNER" and the "STATE": the former is usually an individual held to account for his/her own actions whereas the latter is a case of Identity Theft (some privileged individuals doing things in the name of the STATE). When the LANDOWNER borrows too much based on that cash stream during boom time, he and his banker will suffer for their mistakes. The "STATE" however is too big to fail, and will put you and me under gun point to pay back whatever boondongle some bribed government officials took out loans to build.

The "LANDOWNER" will use the cash stream to make improvements based on what will create economic value (despite occasional mistakes), whereas the STATE will spend improvement funds based on political patronage, nowadays for the sake of creating public debt so the banks can be paid out of tax money for decades to come. More importantly, when a LANDOWNER doesn't allocate his resources efficiently, you and I can shop somewhere else . . . with the STATE we have no such luxury. The STATE is by definition coercive.

That neo-Marxian disdain for "speculative parasite" is badly misplaced, IMHO. Private investors that face the risk of failure/bankruptcy actually adds value to the economy: profitability is nothing more than the society deeming their output being more valuable than their input. It is the "too big to fails," including the STATE itself, that are the economic parasites.

Reality   2011 Apr 25, 4:03am   ↑ like (0)   ↑ dislike (0)     quote        


How do you define "median" in an ever changing market? In a typically Gaussian distribution, you'd have thousands of people in the "fat middle" not knowing if they are liable to a huge tax or not depending on what the cut-off that year is and how their particular home is evaluated. Can you say invitation to massive briberies?

What do you mean by "deferred into a lien"? Would the town then auction property tax liens to predatory tax lien lenders? Like many towns already do nowadays, much to the detriment of many families?

Singapore, HK and China have leaseholds that last 99 years or 50 years. That's practically the same as our "ownership" with 1-2% property tax. Land parcels sitting under their buildings are not coming up for auction every year. Otherwise, there wouldn't be fixed building.

Reality   2011 Apr 25, 4:15am   ↑ like (0)   ↑ dislike (0)     quote        


HK and Singapore also have their economic cycles. Property speculations were and are rampant in both places despite leaseholds. "Landlording" are widespread in both places. "Landlording" is simply the arbitrage of long-term lease (including from the State, as in our current property tax system) vs. short-term leases. You can do that without even owning land or owning any property. You can go lease an entire commercial building for long term, and subdivide to smaller units and shorter terms now. Commercial Mall operators and hotel operators do precisely that on a routine basis.

The idea that the state should be the only landlord and no other intermediate landlords can exist is about as absurd as trying to make the state into the only food producer and no other food producers and distributors are allowed, because they are all allegedly "parasitic." If the state is the only legit owner of all land, then should it also be the only legit owner of all sunlight shining down on the crop plants on the land? and all the flour mills and all the bread baking facilities and all the grocery stores that either sit on the land or burn mineral out of the land to stay warm? The rub against such thinking is of course that:

1. all future planning is speculative;
2. if such speculative decision making is not individually held accountable through private ownership (and no bailouts), the result is "too big to fail" and throwing good resources after bad bets, as in all the failed socialist schemes.

Reality   2011 Apr 25, 4:24am   ↑ like (0)   ↑ dislike (0)     quote        

Not a trick question at all. Two different appraisers can have two entirely different sets of "comparables." It's not much of a problem now, but would be a huge problem if there is some kind of drastic cut-off line for tax payment running through the fattest part of the Gaussian distribution of home values in town. You can easily have neighbors fighting each other physically over $5-10k tax liabilities.

Land values do change drastically from year to year. We are looking at some neighborhoods with 50% or more in price reduction over 3 years . . . the buildings have not changed at all in those 3 years (most are far more than 17 or 30 years old, so fully depreciated in the accounting sense). So the entire change is due to land value.

"If I were king . . ." well, that just shows your fangs as a wannabe feudal aristocrat. The only legitimate thing to do if one finds himself to be a king (with real power) is to resign and make sure that nobody else can acquire that kind of monopolistic power afterward over his fellow men.

Reality   2011 Apr 25, 4:40am   ↑ like (0)   ↑ dislike (0)     quote        


Redirecting financiers from private landlords to the State would be a huge curse on the rest of the population. The State can force you to pay back whatever it borrowed from the financiers.

Buying a property, improve upon it and rent it out actually involves far more labor than buying a stock and collect dividends. Do you also call all stockholders thieves? Do you call bond-holders thieves? A case might be made that holders of government bonds are indeed engaged in supporting theft as government tax collection is theft as it is coercive. Rent on the other hand is something that both the renter and the owner enter into without coercion from either side.

BTW, I'm speaking as a renter. Having numerous owners offering to rent is the reason why I have low rent on a decent place to live. Can you imagine what it would be like if government effectively owned all housing and have to use over-paid bureaucrats and union labor to do the maintenance and review applications? You can look to the projects, the DMV and the city hospitals for an answer. A stay at the government-run hospital room is like over $1000 per day, not including any of the medical services.

Reality   2011 Apr 25, 5:01am   ↑ like (0)   ↑ dislike (0)     quote        


The government is already the "basal landlord." That's what the 1-2% property tax / 90-yr / 50-yr leases are. Real life experience seems to indicate that anything much over 2.5% leads to rapid deterioration in the community due to property value collapse.

America's success came from the liberty enjoyed by the American people . . . a people that have enjoy the freedom to compete with each other and bring better value to the table for fellow Americans. Government undertakings are by definition monopolistic. Many other countries have governments undertaking far greater projects than ours have (especially proportionally speaking to the economy size), and usually end up as white elephants.

Never assume that private sector would not undertake on better terms what the government monopoly has brought forth, and never discount the time-cost of pre-mature investment. Every single transcontinental railroad sponsored by the US government went bankrupt, whereas the privately funded Great Northern did very well. After about 1913, the accounting became fishy for government projects because of the imposition of the fiat money regime. Almost all the "great projects" undertaken in the 1930's that the statist-worshippers would like to boast so much can only be termed "success" when assuming zero interest cost . . . just like all the bailouts of the financial industry and GM in the last couple years. When measured against real economic opportunity cost (reflected by gold price), they are resounding failures. Those "great undertakings" are usually nothing more than exploiting destitute Americans as slave labor, a condition of poverty that was created by the government to begin with.

Being skeptical about the government is very American, and a defining character of libertarianism. I was quite correct in suspecting your "libertarian" credentials in your use of "geo-libertarianism." While Henry George came up with Single-Tax as a way of reducing taxes, many of today's Georgists are not libertarians at all, but socialists/communists looking for a new home after the failure of the former soviet union. Your repeated allusion to violence against what you consider "parasites" is quite indicative of your communist inclinations.

Reality   2011 Apr 25, 5:35am   ↑ like (0)   ↑ dislike (0)     quote        

The idea that landowners are taking a huge bite of the economy doesn't jive with current reality at all . . . especially given how many times Patrick has re-emphasized (correctly) that it is still cheaper to rent than to buy in many places. The bulk of the rent that we renters pay actually end up as mortgage payment to banks. The landlords are in effect passing along some of the savings that they got when they bought the house before the bubble . . . either that, or they are digging into their own savings to make up the mortgage cash flow shortfall, or using the rent as a way of getting a relatively secure return that is lower than our own mortgage interest rate would be but higher than they can get in a savings account, if they put a big down payment on the house. These are the only three possibilities (assuming they are not defaulting to their creditors). In any case, the landlords have to make sure that they are solvent by themselves, unlike a STATE as "landlord" that can dig into our (taxpayers') wallets when it runs out of money. When was the last time any landlord could coerce us renters to cough up more money just because they partied too hard themselves? but the STATE as the "landlord" can do precisely that.

Raising land taxes would raise rent and reduce maintenance . . . and more importantly, make everything we buy much much more expensive if homeowners are exempt from it but commercial land users have to carry the entire tax burden. Businesses do not actually pay taxes (because they do not have to exist); they are just conduits for collecting money from their customers to pay the government; their profit comes on top of that: if a business has market power (like a convenience store), it may even take tax expense as one of the costs of doing business and apply the same profit margin to it before arriving at the prices. Individual consumers can not avoid paying the taxes / raised price without killing themselves or drastically cut back on standards of living.

Reality   2011 Apr 25, 7:52am   ↑ like (1)   ↑ dislike (1)     quote        


You wrote "Whenever an economic agent gets something for nothing, that’s theft. You can identify the thieves in any economy by removing them from the picture and seeing if anything changes in terms of wealth creation.

Landlords qua landlords fail this Thief Test spectacularly. They are liquidatable, though of course they say they are not, but to do so they have to argue with fallacies and lies."

With intimations of violence like this, and you call yourself a libertarian (a philosophy based on non-initiation of violence)? By your test, wouldn't the old and the infirm be liquidatable too? What kind of fascist monster are you?

Without landlords, from whom would I be renting from? More precisely,

Who would have kept the house that I'm in now pristine and available before I moved here?
Who would have paid for the leveling of the lot?
Who would have paid for the landscaping?
Who would have paid for paving the driveway?
Who would have paid for the construction of the house?
Who would have paid for the expansion of the house?
Who would have kept the pipes from freezing in winter before moved in?
Who would have paid for the broker who showed me the house?
Who would have paid for and tracked the warranty repairs for the appliances that make the house livable?

and from the town's perspective, who would have paid for the property taxes when the house was vacant and being renovated?

I'm not trying to kiss up to my landlord here, but it's preposterous to suggest that he is not rendering a service when I know I'm getting a better deal than I would have to pay if I took out a mortgage to buy the same house that I'm living in. To suggest that somehow his hold on the land is illigitimate is tantamount to saying that my use of the land is illigitimate! My paying the rent (at much lower price than a mortgage would be on the same house) is the reason why I have the use right, and nobody else can trespass. Unlike the property tax levy, the rent amount is something that we arrived at by mutual consent, a consent that is renewed each year! I even talked him into lowering rent by a couple hundred bucks a month when the recession hit, while the town raised tax on him! Talk about rapid market response vs. slow-motion bureaucratic response to changing reality on the ground.

Reality   2011 Apr 25, 8:19am   ↑ like (0)   ↑ dislike (0)     quote        

"Not sure how the two bids would work together though. Greatest sum of land tax and purchase price wins?"

That's essentially what the current price system with land included means. With 1-2% total property tax rates, the town is getting a free house plus the entire land value from the "owner" every 36-72 years. Not bad at all. This approach actually smooth out the town's income from year to year, instead of a higher tax on land value alone, which is far more economy-dependent and far more volatile than the cost of improvements. I wouldn't trust the town officials to handle a binge and purge cash flow.

Reality   2011 Apr 25, 8:42am   ↑ like (0)   ↑ dislike (0)     quote        


Why would you want the state to force communities into building upward? Most towns have zoning laws restricting the height of buildings and minimum lot sizes . . . precisely because most people associate quality of life with relatively low density. The vast majority of Americans would not want to live a life like those in Tokyo.

I don't hope you had something to do with the death of your old landlord. . . seeing that you think they are "liquidatable." Remind me not to enter into mutually beneficial transaction with you, because you consider counter-parties as thieves and liquidatable.

Commercial land use often has very high volatility, due to the fluctuating conditions of the economy (rent income) and carrying cost (mortgage interest rate; they are refi'ed all the time). They are already appraised for much higher value than residential lots per acre. Prop-13 on commercial property is the result of combination between the desire to keep businesses and jobs in town and a bit of skulduggery that is typical in the legislative process.

Reality   2011 Apr 25, 9:11am   ↑ like (0)   ↑ dislike (0)     quote        


So you want the US to follow the HK and Singapore model? Guess what? They have even higher real estate prices than we do! Rental housing is widespread in both places.

You really need to give up on your Marxian Labor Theory of Value. Modern economics has long moved beyond that. Karl Marx himself halted the second volume of Das Kapital after learning about Carl Menger's Marginal Utility Theory (invalidating Marx' earlier faith in Ricardian labor theory of value as shown in Volume One of Das Kapital). Value is determined subjectively by the two parties in an exchange, and a voluntary exchange takes place not because both parties agree the two goods are of equal value but because each party has exactly reciprocal preference! e.g. if I have 10 apples and you have 10 oranges, my preference for my first orange is greater than my preference for my 10th apple, and your preference for your first apple is greater than your preference for your 10th orange . . . then we can have an exchange. Whether an apple is exactly equal to an orange is irrelevent and impossible to judge (apples to oranges).

Money for housing exchange (rent) is legit so long as both parties enter into the rental agreement voluntarily, without coercing each other (or third party agents acting on behalf of either). Rental housing provide several very important social functions:

1. Provide housing to people who want housing on intermediate time horizons (a few weeks to a few years), much less expensive than hotel stays or the vagaries of buying houses;

2. Upkeep and maintenance of those same houses. Short-term home users wouldn't pay for long-term improvements like trees, fences, driveways, etc., or even properly fixed roofs.

3. A stable retirement income for retirees; no I'm not in favor of liquidating them.

4. A stable tax base for the town in times of economic downturns and vacancy

5. Lower cost of housing in boom times. I'm have been taking advantage of this for half a decade waiting for purchase price to drop, and you obviously took advantage of that too when renting from the old lady for $90/wk. Cost of housing would be much higher if either of us had to buy. If I had bought a similar house in the area when I started my current lease half a decade ago, I would have lost $300k by now! in capital depreciation alone, and another $270k in interest payment and taxes (total $570k in potential dead losses) instead of the $180k or so that I have paid in rent so far.

6. Less credit-worthy people and families need a place to live too, even if the banks wouldn't lend them enough money to buy a house.

Individual landlords can upkeep and market the rental units much more effectively than a government bureaucracy. We get a hint of what a bureaucracy for housing is like in the fiasco that is known as mortgage lending in the past decade (most of those loans were passed on instead being retained by the lender, like an individual landlord would be have his skin in the game). So long as the government is not forcing people to stay with a particular landlord (like a mental hospital or prison), the private landlords are actually working pretty hard for their money: the tenant can leave and sign up with another landlord at any time! A high LVT would actually function as a cartel price fixing for landlords.

Reality   2011 Apr 25, 10:51am   ↑ like (0)   ↑ dislike (0)     quote        

A raised LVT would function as a cartel price setting mechanism, and raise rent amount. It's just like a raised sales tax would raise the total price of everything that is subject to sales tax; the vendors would not absorb it because all other vendors face that charge too. Not having to pay other taxes in a Single-Tax scheme would also make more money available for paying rent. Giving owner-occupied homes exemption like Troy suggested would disproportionally burden us the renters. Although you and I may not be in the low-income group, many renters and their families are. Such a lopsided taxation would severely disadvantage families that have to rent because that's all they can afford.

I'd be very surprised if your landlord doesn't have a mortgage to pay. My landlord took out a sizable mortgage to renovate the house after the previous tenant moved out and before I moved in. In any case, you are benefiting significantly from lower cost of housing over the past 7years than would have been the case if you bought (counting interest payment, tax payment and massive capital depreciation), that's a huge service to you. In my case, the difference is nearly $400k over half a decade: $570k potential losses/expenses ($300k drop in house value, $210k interest payment at 6% fixed half a decade ago and $60k in taxes and repairs; not fulling counting the depreciation of his new renovation just before I moved in and now could use some after half a decade of use) vs. $180k rental expense over the same half decade. My landlord's service practically saved me the bulk of my next house's likely purchase price. The house I'm in had a market value around $700k when I moved in, and now is probably around $400k if I bargain hard enough. I don't think I have ever received any service/benfit of that magnitude from any other single individual (besides my parents' raising me and teaching me when I was young, which was not quantifiable).

Reality   2011 Apr 25, 11:22am   ↑ like (0)   ↑ dislike (0)     quote        

The "public" monopoly, once established, would just kill, rape and pillage even harder. What do you think is going on with the multiple wars? and Trump's contention that he would just keep Libyan oil? All the warmongering around the world leads to is easier for American corporations to operate overseas with impunity; the lack of risk from foreign tinpot dictatorships makes it possible for shipping jobs overseas, especially since jobs here actually have to pay for the "public army" that is subsidizing shipped out jobs overseas. The standing army shouldn't even be there at all; remember from the Constitution?

Americans used to be the most literate and well-read people in the world in the 18th and 19th century, before public school monopolies came along.

Without a government enforced medicine monopoly, there used to be charity hospitals . . . now those charity hospitals are bankrupt and bought up by for-profit hospitals because medical equipment and medical school graduates are so loaded up with huge government-guaranteed non-dischargeable (student) debts that they can not afford to work for charity hospitals. Why is the same MRI or CT scan costing 10-100 times as much in the US compared to India? Why is a surgical knife costing $900 when a kitchen knife made of the same material costs $2? Price is determined by supply and demand. When the demand/purchasing power is forcibly pillaged from the off-springs and neighbors of the patients, the sky is the limit for price. The wrong crowd has been attracted to the government enforced medical oligopoly. Medicine has become a massive machine for raping and pillaging patients, their families and other taxpayers alike to pay off debts to banks at gun point (that's what taxation and fiat money is, at gun point). In every technology field that does not involve government enforced monopoly and subsidy, goods and services get better and cheaper very rapidly: a $10,000 computer 20 years ago would cost only $1000 10 years ago and 10 times faster, and now costing $100 and fits in your hand! The same thing refuses to happen in the publicly funded and monopolized medical field, nor the publicly funded and monopolized education field. I have great respect for private citizens who are part time volunteer fire fighters; I'm fearful about what will happen when the six-figure salaried firefighters and policemen find out their pensions are not secure and their wages are to be cut.

Speaking of essential services, what can be more essential to human existence than food? Yet every time a government tried to monopolize food production and distribution, it led to starvation and famine. Every single time that's been tried in human history! All the other "essential services and goods" are just less essential, not needed by everyone three times a day, so the inefficiencies of a monopoly vs. free market alternatives just takes longer to become obvious.

Reality   2011 Apr 25, 12:40pm   ↑ like (0)   ↑ dislike (0)     quote        


Glad we agree on the distaste for warfare-state.

Public schools are a monopoly because one has to pay for them even if placing kids in private schools. That's the ultimate form of charging and not providing service. When it's a badly run gym, you can cancel membership the next month, but not with public schools. The kids from poor families have been educated by charitable organizations for hundreds of years. People used to go into teaching (and medicine) for charitable causes, not to get rich or get tenure and cushy pensions; not having a non-dischargeable student debt also helped freedom in career choices.

I certainly agree with you that medicine prices have to be listed. Can you imagine what it would be like if restaurants did not list prices and all restaurant bills are paid for by the government? There would be free-for-all food fights using lobsters inside the restaurant while long lines outside waiting to be seated. The cost of medicine would be much less if there is no licensing requirement to artificially restrain supply of service providers. . . and if there is no FDA limiting the supply of drugs. Many elderly may well choose legalized pot or even legalized opioids at much lower prices instead of the ridiculously expensive patent drugs that the big pharma come up every few years like the Cox-2 painkillers that ended up killing the patients. The net effect of life extension for old adults from modern medicine is only a few months for the entire population on average. Many of the so-called cancer cures in the past couple decades have been the result of over-diagonosis: if 1% of women die of breast cancer and 1% of men die of prostate cancer in a general population before cancer medicine, then after the tests came along, suddenly 10% of the population are diagonosed with them and the cure rate is 90% . . . what exactly has been the net benefit of those tests and cures? Big Zero! No net improvement at all, still 1% of the population dying of these cancers. Only now that zillions of dollars are spent on cutting off breasts and making old men impotent, all paid for courtesy of taxpayers, who also have to foot more bills for healing side effects and mood enhancers after the dismemberment.

The ARPANET reached only a few hundred govoernment and educational institutions (and I was on it). It was the free market forces that made internet accessible to billions of people around the world. It's also a mistake to assume that had government not taken away the resources from the private sector, something like ARPANET would not have evolved in the private sector. AT&T network was built by the private sector before WWI and WWII enabled government take-over of the high tech sector of the economy (and much of the rest). Perhaps that's the reason why big-government types love wars.

The incident where the firemen let someone's house burn down a few months ago for lack of membership was actually a publicly established monopoly, trying to make the victim into an example of the perils of not subscribing to their service, even after the homeowner offered and begged to pay several times over the annual membership fee. Competing private service providers would have had enormous incentives to accept his offer; can you imagine the reputational damage if it's not a mafia-like monopoly?

Reality   2011 Apr 25, 12:46pm   ↑ like (0)   ↑ dislike (0)     quote        


and you pretended to be a libertarian only a few posts ago.

Reality   2011 Apr 25, 3:14pm   ↑ like (0)   ↑ dislike (0)     quote        


The same laws of economics indeed apply to both the government and the private sector. When people had the freedom to buy well made Toyota's and Hondas instead of poorly made Chevy's and Ford's, more resources were allocated away from the underperforming carmakers to the better carmakers. If there were two DMV's, one were run more efficiently than the other, and the DMV workers got paid based on the customers that they serve, then yes, more resources would get allocated from the poorly run DMV to the better run DMV. In reality however, DMV workers are paid the same regardless their performance, so good workers leave and the slackers stay. Likewise, when the government keep bailing out poorly performing "private" companies at the expense of better run companies, the economy grinds to a halt, just like the DMV.

Economic exchange and "wealth creation" takes place when division of labor takes place: someone else renders a service for you that is of greater value to you than what you have to pay them in return (from your perspective). . . . and conversely, they deem what they receive in return is of greater value than what they are giving you (otherwise, they would not voluntarily consent to the exchange). Both sides are made better off as a result of the exchange. Hence "wealth creation." Robbery at gun point is certainly not wealth creation.

MRI and CT scans used in the US and those in India are roughly comparable in medical value because:
(1) the same models of machines are used;
(2) the same Indian doctors read and interpret those images.

Reality   2011 Apr 26, 6:40am   ↑ like (0)   ↑ dislike (0)     quote        


I agree with the gist of your latest post. The reality is even worse than you have described:

1. There is no rich guy lending the government money. The banking cartel is lending back to the government at 3-4.5% what the government paid out to the TBTF banks as "bailout" at 0%. The entire game is just a scam for the banking cartel to collect a slice from the rest of the economy, using the government as the leg-breaker. Since the banking cartel never put up the principal money to begin with, this loan sharking scheme has an infinity as ROI. The bulk of the increase in US government debt load during Bush and Obama years is the result of the bailout; the banking cartel is collecting twice on the money: once during the bailout, and a second time in interest after it lends the money back to the government. Now they are screaming for austerity measures . . . just another way to make the interest payment worth more.

I agree with you that government shouldn't be allowed to run deficit. However, the real problem is not deficit, but the concept of public debt: something that the banking cartel set up using their paid-for politicians, and the rest of us are supposed to pay back. The whole concept of "public debt" is illegitimate; it's identity theft, just as if I used my unborn grand-children's credit to take out loans and expect them to pay back the creditors.

2. Social Security has always been a pay-as-you-go system. It's actually even more sinister than that: because every time it's rejigged, the demographic break-even horizon is pushed back 2-3 decades, that means the statistical certainty that the few years immediately following the rejigging provides a flood of surplus, to be spent as general fund. When you look at the government spending outside SS and related Medicare/Medicaid, the biggest item in general fund spending is warmaking. It is not a co-incidence that FDR, LBJ, Regan and BushII, the four presidents who setup and/or rejigged the SS/MM scam were all warmongers, and had plenty money to play their toy soldiers. Of course, when the accounting edifice "trust fund" needs to call in the non-marketable Treasury instruments, the rest of us get to pay for it.

3. The housing bubble is another one of those scams: lending money to people who have no business taking out loans (just like the federal government), then expect the rest of the population to pay it back via government agencies bailouts. Meanwhile, the town's tax receipts went up during the boom, so they were talked into "taking advantage of debt load capacity," building boondongle new public schools that run up construction cost like the Taj Mahal, to the tune of about $100 million apiece on average! They are skyscrapers without the tall building to show for it, just like college student loans are like a mortgage without a house to show for it. $100mil is enough money to pay 100 teachers' entire teaching careers (don't forget the interest over 3-4 decades from that pile of money), if there had been no "public school" to force the townfolks to squander resources on boondongle buildings like that.

I shudder at the thought of what those monopolists would do when they get their hands on LVT or "fair tax."

Reality   2011 Apr 26, 7:26am   ↑ like (0)   ↑ dislike (0)     quote        


"Education" vs. "learning" vs. "diploma and tenure mill" are three different concepts. Farmers in the 18th and 19th century America had to enter into all sorts of contracts that involved discounting of future cash flow . . . a skill that is sorely absent among today's general population as exemplified by the mortgage-financing fiasco. BTW, I learned calculus during Junior High, whereas my wife with her Master's degree in education (with certification to be a science teacher) never learned calculus.

The problem with Georgism is several fold:

(1) The concept of "land value" presumes unchanging economic conditions and homogeneous land. That might have been an approximation of reality in Henry George's time when 80+% of the population were farmers. In today's real life, the value of a particular piece of land can change dramatically due to general economic conditions, particulars in localities and new technological development. It is not possible for a government to designate "land value" without being wrong all the time. The market is constantly engaged in discovering "land value"; that's what the rental market is about: discovering the use value in real time. If modern Georgists are saying that the government is entitled to a tax that is the equivalent of the base value of the land as a hunter-gathering ground, perhaps 1/10 of a deer skin per acre, then I'd be fine with such a low tax as the only tax in the society. LOL. Anything more than that would involve the government bureaucrats trying to decide/discover land value. The performance of assessors in the last decade alone should tell us that it's not feasible. Even at only 1-2%, many assessor's offices around the country barely avoided destruction by distraught home owners / mobs. Any substantially higher per centage to replace all other taxes (including taxes on improvements on land) would quickly plunge society into chaos, simply due to differing points of views and taxpayment is compulsory.

(2) "Land value" is highly dependent on the improvements made upon it, even improvements made by neighbor, not just by the government. While roads are important to land use, something like the presence of CalTech or Stanford can have enormous impact on the land value of surrounding lands. Neither institutions are owned by the government. So should Stanford or Caltech be entitled to collect a LVT on their neighbors?

(3) Because "land value" is highly dependent on improvements (on and off property), collecting rent is essential to the upkeep and upgrade of "land value." You can adversely impact your "land value" and that of your neighbor quite quickly just by turning your land into a dump. Improvements to land to enhance "land value" has to be carried out in a timely and efficient manner (in terms of ROI). The government monopoly is a poor candidate to manage that. Leaving land improvement/upkeep resources (that's what rent is) in the diversified hands of multiple layers of lease-holders / stake-holders is far better at discovering new opportunities and how to capitalize on them. In fact, even road building might be better left to private community organizations that coordinate people among themselves on a voluntary basis . . . much like how Stanford developed the Silicon Valley.

(4) The good news for the more social-justice minded Georgist is that: "new land" is actually made available as technology progress; it's called transportation and communication technology; they can turn lead into gold as far as prime land availability is concerned. So long as land in any particular location is not concentrated into too small a set of hands, competition among landlords do deliver fair value: the phenomenon of renting being substantially cheaper than owning in the past few years, despite government subsidies to homeownership, is proof of that the competitive market place is live and well. Concentrating all rent and land-improvement/upkeep resources into the hands of the government bureaucrats would probably be detrimental to the economy.

Reality   2011 Apr 26, 7:49am   ↑ like (0)   ↑ dislike (0)     quote        


Post Office had to face private competition to drop postage rate a century ago. PO, FD and PD still sort of work (aside from the drug war) largely because the full bill is not due yet. Many of the people working there have been paid by pyramid-scheme like promises called under-funded or unfunded pension plans. Saying that they work well is like praising Bernie Madoff in 2007.

It will be interesting to see what happens when they discover the truth. Private security may just become necessity at some point.

The brief period of Anarchy in Somalia actually witnessed very rapid economic growth, much faster than during the previous Said Barre regime or even now after we installed a government there. Wireless cellphone towers were going up rapidly all over the country (giving lie to the theory that only the government would build infrastructure). The off-shore pirates only showed up _after_ the new government was installed. There is some theory that the original pirates coming from the same tribe/clan as the new president may well have been part of an early funding scheme or false-flag excuse to get the US involved militarily in the region. By now the piracy has mushroomed into the leading industry in Somalia, several years after the installation of the new national government there.

Compare Somalia to Sweden is silly. The two countries had very different starting points when the Barre regime fell in Somalia. Somalian standards of living certainly _improved_ much faster in the subsequent anarchy years than Sweden did in those same years despite Sweden also being engaged in getting rid of their previous oppressive socialist central planning. The Swedish central planners had not been quite as hard-core as the third-world socialist central-planners like the Barre regime before the anarchy.

Reality   2011 Apr 26, 8:01am   ↑ like (0)   ↑ dislike (0)     quote        


The big difference between "government" vs. "private" is that consumers / counter-parties have the right to shop somewhere else in the case of the latter . . . whereas in the former, "the government," is by definition a coercive monopoly. Sure, you may subscribe to the "benign Leviathan" theory, history seems to indicate that such great concentrated powers do not stay benign for long. Power corrupts, absolute power corrupts absolutely, most "great men" were bad men. As succinctly put in the Lord of the Rings, to even ask "why can't we keep the Ring for _Good_?" is hubris and naivete writ large. Different people have different preferences; what's "good" to one person may well be "bad" for another. If Superman or Spiderman actually existed, life must be hell for women unlucky enough to find themselves at odds with Louise or MaryJane.

Reality   2011 Apr 26, 10:50am   ↑ like (0)   ↑ dislike (0)     quote        


I find "monopoly vs. free market choice (individual liberty)" a much more precise paradigm than "public vs. private." For example, is the state of North Korea a public institution or a private fief of the Kim family? When a government creates a monopoly in water service, the difference between a bunch of "capitalist pigs" screwing the people vs. a bunch of "bureaucratic aparachik swines" screwing the people is only a matter of time; i.e the screwing is inevitable. What makes a free market place work is competition: i.e. the other side of the same coin called "individual liberty." When the consumer enjoys individual liberty, the service providers have to compete for the individual's patronage.

Whenever the government grants monopoly to any institution, be it a "private" corporation or a government department, it makes little difference: both are "too important to fail" . . . when in reality if they were not monopolies/oligopolies, consumers would long have chosen better run alternatives.

side note:
Try FedEX if UPS doesn't work for you. While I use USPS often, I have no illusions about USPS being a taxpayer sponsored carrier service. Frankly, I think it should be divided into multiple competing service providers; such a split-up would certainly be more justified than splitting up AT&T or Standard Oil.

Reality   2011 Apr 26, 4:23pm   ↑ like (0)   ↑ dislike (0)     quote        

I paid $40 for a steak at a restaurant last night, and it turned into poop in my toilet today. I'm sure the restaurant made a decent profit by buying the raw steak at about $8 (only a 16oz steak) and selling it to me for $40 . . . the labor of meat flipping on the grill for a few minutes couldn't possibly have been worth $32! Can I have my "lost money" clawed back from the restaurant owner?

Oh yes, let's also talk about clawing back lottery winnings. I mean, someone has to bear the responsibility of not telling me the winning number ahead of time.

Reality   2011 Apr 26, 4:50pm   ↑ like (0)   ↑ dislike (0)     quote        

Semiconductor chips are like steal a century ago: a mature technology that had been highly profitable a quarter century prior to that, but being rapidly replaced by something else in terms of profit margin / real value-addedness.

Semiconductor fab facilities are extremely capital intensive, costing several billion dollars to build and are usually obsolete within half a decade and nearly utterly useless after one decade. IMHO, many of those Asian countries are doing it out of national pride / silly bureaucratic statistics. They are in effect looting their own citizens to subsidize chip users worldwide.

I'm still trying to decide if the biotech thing is real value creation or an offshoot of our lopsided medical/pharma/insurance/government-subsidy complex.

Reality   2011 Apr 26, 6:32pm   ↑ like (1)   ↑ dislike (1)     quote        

The biggest BS in insurance is actually charging man more for life insurance, or for that matter charging older people more. Isn't old age an existing condition? How can anyone do anything about correcting that? How can they charge more for people who smoke? The auto insurance premium shouldn't be higher for people who have habit of having accidents either; who are they to penalize people who are down on their luck?! BTW, all life insurance should be limited to 2% of a person's income, and auto insurance to 1% of a person's income.

(tongue firmly in cheek of course. LOL)

The real solution to insurance cost being too high is that there shouldn't be any artificial barrier to entry. Then in order to make a living, insurance companies would have to compete against each other underwriting policies more and more favorable to consumers. Government banning practices and micromanaging underwriting details would only further drive out underwriters, leaving the insurance industry even more concentrated.

Also existing condition is not an insurance issue, just like a house already on fire doesn't need insurance but needs fire fighting. The solution to existing condition is not more paper pushing to jack up the cost of medicine even higher and dragoon the neighbors into paying for the overpriced hospital-insurance complex . . . instead there needs to be less paper pushing: remove the artificial limit on supply of doctors by board licensing requirement, and remove the FDA authority so that people can put whatever they want in themselves without having to pay the ridiculously expensive patent meds from the Big Pharma.

Reality   2011 Apr 27, 1:11pm   ↑ like (2)   ↑ dislike (2)     quote        


Nobody put a gun to your head to force you into buying a house (although some wives did force their husbands into buying; there's even an NRA ad hinting at the power of the wife; to that problem, the remedy is divorce! or grow a set of balls and tell her you'd leave if she can't put family financial security ahead of looking good among her chatty low self-esteem fratricidal "friends"!)

Regarding the lemon car analogy, if you find a structural problem with the house that the seller should have disclosed; e.g. if the house collapsed on you a week after you moved in, of course you'd have legal recourse. However, when was the last time any seller of used cars would take the car back years later because you think you overpaid?! There's nothing wrong with the car as a transportation device, and there's nothing wrong with the house as a shelter; you just overpaid! How is it fair to reverse something like that years after a mutually consenting exchange? The whole idea is ridiculous and immature . . . just like the immaturity in pushing a wiser spouse into buying a house in order to show off relatives and friends during the boom to begin with!

There were plenty good advice against buying at the peak, if you cared to find them. Patrick has been running this site since 2004. I started renting shortly after the stock market bubble crashed in 2000 . . . thinking that the housing market would crash within 3-5 years. Looking back, I could have bought a house in 2002, paying next to nothing down, then tapping it like an ATM machine to pay cars, boats and vacations . . . then after 2007, as a homeowner with negative equity in that case I could have stopped paying altogether and stayed in the house for free for a few years. Since I didn't take advantage of the system like that, can I "claw back" the free car, free boat, free vacation and free housing for a few years?!

Free market means that individuals have the right to participate in the price discovery process . . . so that resources can be directed efficiently through the dynamic competitive bid-and-offer process. If you want the government tell you how much a house should be worth and how much your own output should be worth . . . well there's Cuba and North Korea for that. The problem with those system is of course that those god-like government officials always give themselves much more than they give you, just like on the slave plantation, where housing, food, clothing, education and medicine are all free, except the standards of service is at the discretion of the "leaders/real-owners." You have to take your own chances if you want to have a say in what is most important to you; i.e. private property rights means absorbing consequences for your own decisions; the first and foremost private property right is self-ownership!

Reality   2011 Apr 27, 3:16pm   ↑ like (0)   ↑ dislike (0)     quote        


Just out of curiosity, if a 2500sqft duplex double 2br building is going for $50k, but a 3br ranch 1700sqft is at $175k+, why wouldn't someone just buy the former and use it as a single family? Perhaps due to myself being in the suburb of a metropolis, converting Single-family to two-family actually is a very costly and time-consuming process for the permitting alone. Also, the existing two-family would have much better rental income potential, especially given I agree with you that the next leg down will involve much higher interest rate (rental income can cover existing fixed low rate mortgage whereas a sale would necessitate bringing money to the table for closing, assuming the owner has other assets.)

Reality   2011 Apr 30, 1:15pm   ↑ like (0)   ↑ dislike (0)     quote        


I did not take the plunge into RE in the early 2000's because I deemed the risk unjustified. After the 2000 stock market crash, I thought the real estate market would follow within 3-5 years, and because buying and selling houses take much more time than trading stocks, the risk of being caught on the wrong side of the trade was too great.

Those sold at the top were quite justified in keeping their winnings, for a very simple reason: their very action of selling at the top provided extra supply that prevented the bubble from becoming even bigger! If you are thinking of blaming the seller for selling you the house at the bubble top, just think what would have happened if he/she wasn't selling: you would have bought from someone else at an even worse deal for you!

The scums were those who tried to transfer their losses to the taxpayers.

Deciding when to sell is of course one of the most important decisions any investor can make. Those buy at the bottom and sell at the top help stabilize prices at both extremes. Those buy at the top and sell at the bottom not only ruin their own finances but contribute to the extreme fluctuations. I don't see any justice in taking from the former to subsidize the bad decisions of the latter. Your very statement that "everyone else" was saying houses never dropped in value (not factually true) somehow justify making those bad decisions at the market top goes to show that sheep are not only bad for themselves but also bad for other sheep. We do not need more "spreading wealth around" to enforce comformist thinking.

Reality   2011 Aug 3, 4:25pm   ↑ like (0)   ↑ dislike (0)     quote        

If the German factory owner could make an ordinary toilet and sell to their version of Pentagon for 64k DM or Euro, he wouldn't make watches either. If the German worker could earn 100k Euro/DM by adding one more bathroom to his house or someone else' house at the cost of 5k, he wouldn't bother working for export manufacturer either.

Our national trade deficit is simply the result of government largess on the biggest welfare queens: the Pentagon and the TBTF banks. When the government bid worker's wages and material to build toilets (and other sh*t boxes) for Pentagon and extra bathrooms (and other financial vomitorium) in an engineered asset boom, private sector employers and consumers simply can not compete against the government, which can print money! In order to stay alive and without suffering even further decreased standards of living, both private sector employers and consumers then would have to find cheap substitutes from overseas.

Reality   2011 Aug 3, 5:12pm   ↑ like (0)   ↑ dislike (0)     quote        

Your thumbs might be touching the touch pad unintentionally when typing if your cursor is jumping to where the mouse pointer is. I always preferred the IBM mini-joystick on laptops made by Lenovo for that exact reason . . . but alas, the cost of touch pad is lower and that's what the consumers buy.

Goods from China, and from Taiwan/Korea/Japan before that, and from Vietnam, Egypt, etc. in the future as Chinese labor price go up . . . they all show up here for one reason and one reason only: American consumers buy them. Having jack-booted thugs telling American consumers not to buy them would only drive even more Americans into poverty because jack booted thugs do not work for free. Economy is not helped by putting jack boots and uniforms on larger and larger cross section of the population to mind the businesses of others. The soviets and national socialists already tried that in the last century.

Reality   2011 Aug 3, 11:48pm   ↑ like (0)   ↑ dislike (0)     quote        

There is a fundamental difference between the US and Germany: the US prints the world's reserve currency, whereas Germany doesn't. When a country exports money, it has to run a "trade deficit" in goods and services. That's just simple math by definition. Many countries with comparable or higher per capita GDP than the US or Germany have net trade surplus yet do not engage in much manufacturing export: Luxemburg, Switzerland, Denmark, Sweden, Sigapore, Ireland, Iceland, etc. etc.. They have net trade surpluses simply because they do not export money. Keep in mind however, all of them also have far higher percentage of imported goods on their store shelves; they just found some other goods and services to export that are not money or military.

After WWII, there was a reason why the world financial system was set up in such a way that the US provided the world reserve currency: besides obvious economic size of the US compared to the war-torn Europe, the US military had to be funded by goods and services imported from allied countries. When a disproportionately large American resources are spent on the military (almost half of the entire world's military expenditure today), goods and services imported from other countries just serve to stave off decline in standards of living.

Attempting to lock out imports without addressing the structural problem in government spending would only lead to collapse in standards of living in the US: even more jobs would be lost in retailing and distribution of imported goods and services. It would be like if New York City tried to lock out imports of food and t-shirts in an attempt to revive farming and sweatshop jobs that existed in Manhattan in the 19th century and the first 2/3 of 20th century.

The real problem Americans face is not so much import per se (the list of countries above have even higher per centage of imported goods in their markets), but why so many people are witnessing declining standards of living despite the imported goods and services. Just like the city of New York (or any commercial hub cities in any country or state), the imports of goods from outside its boundaries should make the place more vibrant and prosperous than it would be otherwise . . . however, the city fathers can still potentially counteract and outdo that uplifting effect of commerce and ruin the place with taxes and regulations, just like the city of Detroit. Huge mortgages function just like a tax, on living.

Reality   2011 Aug 4, 12:28am   ↑ like (0)   ↑ dislike (0)     quote        

When robots (and foreigners) make our stuff, people (here) can make new things that robots (and foreigners) can not yet do. A Midwesterner grow corn with his combine, and sell a bushel of it (60 lbs), then spend the entire sum on one corn-dog on his visit to New York City.

Like wise, the Chinese can sell us a brand new car for $5k-10k, then blow the entire sum in one week visiting this country, taking a few rides on the same car as taxicab.

Why would they do that? You tell me; people are still visiting NYC in droves despite each corn-dog weighing less than 1/3 lb costing more than 60 lbs of corn in Iowa.

We can keep that up so long as we are still the dreams and aspirations of the world. Incidentally, Germans blew their wad on something even more silly than corn-dogs from street vendors: they gave us tens of thousands of Mercedes for free when they took a bath on Chrysler.

Robots? well, they will make cars and stuff for the cost electricity and grease. People can make the small amount of money needed to pay for the electricity and grease by designing and maintaining robots . . . or coming up with new ways of crashing cars in movies and destruction derbies for other people who do design and maintain robots.

Economy is simply gainful exchanges that optimize resource distribution/allocation. That can take place quite naturally when people are free to engage in voluntary exchanges. The civilization would not end if the sky rained down brand new cars, big screen TV's and stainless kitchens/whirlpools (all parashuted to protect content of course). So why would cheap imports of the same goods from foreign countries and robots? It's not a problem so long as people are allowed to make a living on their own, instead of relying on government largesse, like chronic foreign aid recipient nations. When money only flows down from up high in the government monopoly, even a little free food to keep people alive can ruin the society.

Reality   2011 Aug 4, 12:49am   ↑ like (1)   ↑ dislike (1)     quote        

An iPhone is wealth before it's obsolete; productivity increase and new business opportunities found with the use of the iPhone is also wealth. The manufacturing of iPhone is not wealth: it's pollution . . . and from what we can gather, rather depressing, so depressing that the Chinese line workers at the contract manufacturer have a higher than usual suicide rate.

Why then do Chinese (Koreans, Taiwanese, Japanese before them in reverse-chronological order, and Vietnamese, Indians, Egyptians after them in forward chronological order) do that? because the depressing manufacturing job was thought of as less depressing than scratching a living out of the dirt as a farmer without modern equipment.

Wealth is not a zero-sum blob that moves from one place to another. Wealth is generated through division of labor enabled by free market mutually willing exchanges. Coercions would only serve to destroy wealth: none of the jack-booted thugs at the tariff collection point would work for free!

Hiring half the NYC population to post watches on all the bridges/tunnels leading into Manhattan, and check on each other so that no food or t-shirts could be smuggled across the East River and Hudson by boats . . . that might revive some farming in Central Park as they existed before the 1840's canal opening brought in food and some sweatshops back to SoHo as they existed before the 1960's . . . however, don't even think for one moment the standards of living in NYC would improve as a result.

Reality   2011 Aug 4, 4:16am   ↑ like (0)   ↑ dislike (0)     quote        


Manufacturing jobs are commodidized. China has them for now. Japan, Korea, Taiwan and Singapore had those jobs after the US then "lost" them to China; likewise, Vietnam, India and soon Egypt + the entire "middeast spring" will take the same "jobs" from the China in the near future.

Assembly line manufacturing is more mind-numbing than burger flipping. At least in burger flipping, one gets to take orders and deliver food directly to the customer. Burger flippers do not engage in widespread suicide attempts on the employers' premise, like some of the Chinese contract manufacturing facilities face. Why would anyone want to pay ridiculously expensive jack booted thugs to enforce the revival burger flipping jobs and worse?

The US is suffering from a depression not because of the availability of cheap goods, but due to regulations and taxation schemes (including mortgage, which is a tax on living) that predicated upon the super fast economic growth that early phases of global free trade provided. Just like the internet, cheaper sources like Amazon and Ebay put many local bookstores and mom-pop shops out of business . . . they even had a bubble in their stock valuation and bankrupted many investors who went on margin (i.e. unserviceable loans that had been set up at optimistic times). The solution is not to ban internet and ban international trade, but liquidate bad debts now that the earlier growth projections have been found to be too rosy. The real sustained growth rate, even with the wonders of new ways of doing business, is simply not as fantastic when matured as it was during early adoption period. All the taxes (including mortgage and margin loans) constructed based on early adoption period growth rate simply can not be serviced.

Having cheap goods is the only silver lining in a depression. To destroy or ban that would lead to drastic decline in standards of living, just like the government did in the 1930's, dumping milk into the ocean and slaughtering animals to be burned and buried, all in an attempt to artificially jack up prices. The result was mass starvation. You can not successfully run an economy by having jack-booted thugs enforcing price levels at gun point. The purpose of any production is consumption. Restricting trade directly reduces what's available for consumption, and the cost of maintaining the jackboots is even more expensive, in terms of both economics and civil liberty.

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