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Communist article comes close to admitting that Georgism is the answer


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2018 May 7, 8:15pm   2,293 views  9 comments

by Patrick   ➕follow (55)   💰tip   ignore  

https://www.counterpunch.org/2018/05/04/creating-wealth-through-debt-the-wests-finance-capitalist-road/

The result of this return to pre-industrial bank credit is that some 80 percent of bank lending in the United States and Britain now takes the form of real estate mortgages. The effect is to turn the land’s rental yield into interest.

That rent-into-interest transformation gives bankers a strong motive to oppose taxing land rent, knowing that they will end up with whatever the tax collector relinquishes. ...

Until the 2008 crisis the magnitude of this property wealth was expanded largely by asset-price inflation, aggravated by the reluctance of governments to do what Adams Smith, John Stuart Mill, Alfred Marshall and nearly all 19th-century classical economists recommended: to keep land rent out of private hands, and to make the rise in land’s rental value serve as the tax base.

Failure to tax the land leaves its rental value “free” to be pledged as interest to banks – which make larger and larger loans by lending against rising debt ratios. This “easy credit” raises the price of obtaining home ownership. Sellers celebrate the result as “wealth creation,” and the mainstream media depict the middle class as growing richer by higher prices for the homes its members have bought. But the debt-financed rise in housing prices ultimately creates wealth mainly for banks and their bondholders.

Americans now have to pay up to 43 percent of their income for mortgage debt service, federally guaranteed. This imposes such high costs for home ownership that it is pricing the products of U.S. labor out of world markets. The pretense is that using bank credit (that is, homebuyers’ mortgage debt) to inflate the price of housing makes U.S. workers and the middle class prosperous by enabling them to sell their homes to a new generation of buyers at higher and higher prices each generation. This certainly does not make the buyers more prosperous. It diverts their income away from buying the products of labor to pay interest to banks for housing prices inflated on bank credit.

Consumer spending throughout most of the world aims above all at achieving status. In the West this status rests largely on one’s home and neighborhood, its schools, transportation and other public investment. Land-price gains resulting from public investment in transportation, parks and schools, other urban amenities and infrastructure, and from re-zoning land use. In the West this rising rental value is turned into a cost, falling on homebuyers, who must borrow more from the banks. The result is that public spending ultimately enriches the banks – at the tax collector’s expense.


And yet the article does not mention Henry George or Georgism even once!

I think that's a deliberate omission.

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1   Strategist   2018 May 7, 8:32pm  

The first piece of land ever sold, was sold by someone who never paid for it. Therefore all land belongs to the original owners.....humans and all living things alike. You can use the land, but pay rent and profits from oil and mineral wealth to the real original owners, the human race. Anything above that is capitalism. My philosophy, even though I own parcels of land all over. It is entirely possible, Georgism in some format will materialize some time in the future.
No one takes their land or wealth with them when pass away, so let the future generations who will be much smarter, more educated, and a hell of a lot more advanced, make their own decisions.
2   Reality   2018 May 7, 9:00pm  

1. In a fiat money economy like ours, the government does not wait for tax-collection before spending money. It's the other way around: government spends money created out of thin air by the central bank; tax-collection only provides the cash-flow stream to provide interest payment on the "public debt" (i.e. identity fraud, money spent by politicians to buy votes while having the bills sent to children yet born) and (tax-collection) provides some degree of anchor for the value of the fiat money as everyone has to pay tax using it. The more tax is collected, the more the government will commandeer from the real economy and the deeper the government will go into debt. In fact, that was patently obvious during the Great Recession: major banks pressured the rich towns with high tax base and little debt to load up debt (as everyone else became reluctant to borrow) using some ridiculous metric such as "too low debt ratio" "not taking advantage of tax revenue." In other words, the government is simply an agency for generating interest income for major banks.

2. "Owned by all human race" is a counter-factual concept that comes naturally to people who have more "education"/academic experience than their exposure to market first-hand (which is to say, a large cross-section of people in a prosperous society where parents send their kids to school in hopes of getting a leg up on other people's kids, but in reality ruining a whole generation or more). Ownership is about exclusions (i.e. deciding what to do with the "owned" resource, among multiple competing alternatives); private ownership is about delegating responsibility to specific individuals. "Owned by the entire community" must always become profiteering by "leaders" while taken care of by nobody (i.e. privatizing profit while socializing cost, the worst kind of crony socialism; well, all socialism end up like that). If there is a natural resource (whether land or oil/mineral), the most effective way to benefit the community at large is letting whoever can develop it as quickly as possible at as low cost as possible. That's the logic behind $5 registration fee for any frontiersman to grab as much land as possible in Oklahoma in the 19th century: the beef and wheat the land-grabbing farmers can bring to market would benefit the people back east far more than any auction money the US Army could collect and bring back to the people in the east as welfare payment. The collection of tax and distribution of welfare is a very viscous process with 87+% internal loss in the bureaucratic process (every link in the bureaucracy is essentially a monopoly). By contrast, a competitive market can deliver the benefit of the additional new resource to people who have no direct contact with the new raw input resource much more efficiently: just by the downward price competition due to the increased supply of final products.

3. The path to reducing rent-seeking is increasing competition, not centralizing the collection of economic rent (taxation is the ultimate centralized collection of economic rent; to a large degree, the property tax system we have today is a form of tax-farming, with every "landlord" being a tenant / tax-farmer of the local government). As Romans discovered 2000+ years ago, tax-farming is far more efficient than a tax-collection bureaucracy paid by pre-set salary/pension.
3   Reality   2018 May 7, 9:44pm  

The article's core argument is also a decade or two out-of-date. While the US may have had higher home ownership cost than our main competitors a decade or two ago, nowadays comparable residential homes in the US are less expensive and mortgage interest rate lower in the US than the vast majority of our main competitors, not just Britain, Canada, Australia, Japan, Korea and much of Western Europe, but less expensive now than even China.

The areas rent-seeking against US workers being more severe compared other countries are medical cost and college education. Almost no other country requires monthly-rent sized medical insurance cost or house-mortgage sized college education cost.
4   just_passing_through   2018 May 7, 9:58pm  

"Communist article comes close to admitting that Georgism is the answer"

Shouldn't that be a clue that Georgism isn't a great idea?
5   RWSGFY   2018 May 7, 10:17pm  

just_passing_through says
"Communist article comes close to admitting that Georgism is the answer"

Shouldn't that be a clue that Georgism isn't a great idea?


Yeah, I was about to ask something like that.
6   RWSGFY   2018 May 7, 10:33pm  

Aphroman says
If you ever actually consume any so called medical services, you’re usually still mostly on the hook for them, can easily be another: 500-1000 per month


Huh? Not everyone is THAT sick. Maybe 1-2% of the population.
7   bob2356   2018 May 8, 7:20am  

Aphroman says

I don’t think you have to be sick at all, however if you have the misfortune of taking an ambulance ride to the hospital simply to be checked out and subsequently released with clean bill of health, you can rack up 20k in “medical” bills in the blink of an eye


Prove it.
8   bob2356   2018 May 8, 7:25am  

Patrick says

Americans now have to pay up to 43 percent of their income for mortgage debt service, federally guaranteed. This imposes such high costs for home ownership that it is pricing the products of U.S. labor out of world markets.


The rest of the world doesn't pay for mortgages? How does that work? As of q1 2017 average mortgage payment as 15.8% of income. Which includes taxes and principle repayment, not just interest. .
9   Y   2018 May 8, 7:49am  

"Average" and "up to" change the viewpoint

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