"Real estate price turnover leads and directs the economy." – Dr Ken Henry, Director (Ret.) Australian Treasury Department, Australia's Future Tax System (2010).
"A study of US history reveals a very clear (average) eighteen-year cycle in US real estate prices, measured from trough to trough or peak to peak." – Phillip J. Anderson The Secret Life of Real Estate and Banking, 2009.
Land Banking: This is how it works Apartment developer billionaire Harry Triguboff,
Australia's 2nd wealthiest man, was surprisingly candid
at a lunch held by the American Chamber of Commerce in Oct 2011.
Triguboff told the audience he was able to pay “very little tax”: “I keep a lot of my properties. And if you keep them and there’s capital gain it’s beautiful,” he said. “You don’t pay tax. I don’t lease them so I don’t pay tax on the rent, but I get depreciation.” He paid tax on apartment sales but that’s where the land banking came in. “You have to buy lots of empty land,” he said. “You keep the land and it brings you no income, so you claim it against your tax.”
Source: Financial Review, 07 July, 2012.
(That article has disappeared from the Financial Rreview as of mid-2016, but Leith van Onselen at Macrobusiness has shared a review here.)
"Buying a house should be as easy as waking up in the morning and making a cup of tea."-John Tippett, A Philosophers Take on Economics, 2013
"Housing is a cost of living to wage earners. All outgoings associated with housing, including land taxes, are an attack on their cost of living." - Raymond Makewell, The Science of Economics, 2012
"...governments use the tax system to milk the poor. Why do they do it? To enrich people who own land." – Fred Harrison, Ricardo's Law, 2006
Learning from history.
Update: 2021
Australia: Banks have been offering low-interest on 2 or 3-year fixed interest mortgages since 2016, and now are offering 1.75% on 3 year fixed rates.
>>> Eg. bank small print: After your Fixed Rate period ends, the applicable interest rate will be the variable Principal & Interest rate we offer on similar facilities at the time. Currently this is 2.34% p.a. for Owner Occupier loans and 2.74% p.a. for Investor loans. Rates, repayments and interest charges are indicative only and subject to change. <<<
That's the big trap - proof that the NEXT "18-year Real Estate and Banking Boom-Bust Cycle" is still 'turning'.
Historical formula suggests, with variations, an approximate "14 years to the top and 6 years to the crash"
14 years since 2007/8 = 2021/2 - the top - the 'Turning'.
We're
on the way to the next crash, predicted for 2027/8.
There's uncertainty regarding the impact of covid-19, unlike after 9/11.
Poverty is not only the lack of income and wealth but also the poverty of power. A key part of the poverty of power is to be defined as dependent: dependent on charity, handouts, welfare. Yet, it is the wealthy, not the poor, who are dependent on government subsidies.
To transform dependency into self-determination is the work of poor people's movements. To demonstrate the dependency of the wealthy on welfare as well as on the labor of the poor must be our collective work.>>> more
"But the assumption that land
had always been treated
as private property is not true. On the contrary, the common right to land
has always been recognized as the primary right.
Private ownership has appeared only
as the result of usurpation —
that is, being seized by force." — Henry George (1879) Progress and Poverty, Ch 29.
(available FREE in several formats)
The Problem: How the Corrupt Purchase Luxury Real Estate in Key Markets Problem 1. Inadequate coverage of anti-money laundering provisions Problem 2. Identification of the beneficial owner of legal entities, trusts and
other legal arrangements is still not the norm Problem 3. Foreign companies have access to the real estate market
with few requirements or checks Problem 4. Over-reliance on due diligence checks by financial institutions
leads to cash transactions going unnoticed Problem 5. Insufficient rules on suspicious transaction reports and weak
implementation Problem 6. Weak or no checks on politically exposed persons and their associates Problem 7. Limited control over professionals who can engage in real
estate transactions: no “fit and proper” test Problem 8. Limited understanding of and action on money
laundering risks in the sector Problem 9. Inconsistent supervision Problem 10. Lack of sanctions
Executive Summary
The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds. Not only do expensive apartments in New York, London or Paris raise the social status of their owners and enhance their luxurious lifestyles, but they are also an easy and convenient place to hide hundreds of millions of dollars from criminal investigators, tax authorities or others tracking criminal behaviour and the proceeds of crime. According to the Financial Action Task Force (FATF), real estate accounted for up to 30 per cent of criminal assets confiscated worldwide between 2011 a nd 2013.1
Several cases that have come to light in the past year, including the trial of Teodoro Obiang, son of the president of Equatorial Guinea;2 Malaysia’s 1MDB scandal;3 the Brazilian Car Wash Operation;4 and the Panama Papers’ revelations,5 offer examples of how high-end property in key markets may have been used to launder money. In many such cases, property is purchased through anonymous shell companies or trusts without undergoing proper due diligence by the professionals involved in the deal.
The ease with which such anonymous companies or trusts can acquire property and launder money is directly related to the insufficient rules and enforcement practices in attractive markets. The countries analysed in this study – Australia, Canada, the United Kingdom and the United States – have committed in different forums, such as through the FATF and the Group of 20 (G20), to do more to prevent and curb money laundering and terrorist-financing, including by regulating gatekeepers, such as real estate agents, lawyers and accountants, who may act as facilitators in transactions that can enable money laundering.
This report identifies the main problems related to real estate and money laundering in these four countries and finds that, despite international commitments, current rules and practices are inadequate to mitigate the risks and detect money laundering in the real estate sector. >>> more
Investment Banking History well told in several films:
Inside "Predatory Capitalism" - where anyone can 'make it big'!
Two 'must see' films:
Wall Street (1887), followed by Wall Street: Money Never Sleeps, (2010). Both films were directed by Oliver Stone and co-written by Oliver Stone and Stanley Weiser, who claim that the lead character, Gordon Gekko (played by Michael Doublas), is based on a composite of real-life financiers - corporate raider Carl Icahn, disgraced stock trader Ivan Boesky, and investor Michael Ovitz.
“Money never sleeps, pal” ... "greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind." - Gordon Gekko, played by Michael Douglas (More quotes here)
Equally powerful 'insider dramas':
Too Big to Fail (2011); Margin Call (2011); Inside Job (2010);
99 Homes (2014); The Big Short (2015); Miss Sloane (2016); Vice (2018);
Too Big to Fail (2011) is an adaptation of the 2009 book by New York Times journalist Andrew Ross Sorkin, "Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System--and Themselves".
Oct. 2016 BBC Radio features an interview with Andrew Ross Sorkin, A Natural History of the Banker tracing the reputation of bankers on both sides of the Atlantic. …from the mysterious stockbrokers of late 17th century London to the shock crashes of 1929 and 2008… He asks if we have always been ambivalent about the financial world and those who make it tick...
The Big Short (2010)
Based on the 2010 book by Michael Lewis “I would read an 800-page history of the stapler if he wrote it.”
— John Williams, New York Times Book Review)
Lead character, Mark Baum, played by Steve Carell portraying famed investor Steve Eisman, who profited on the 2008 housing crisis by shorting subprime mortgage loans, and now sees opportunity in large US banks. >>>more
The global financial crisis of 2008, which economists estimate could result in several trillion dollars of losses and which has already cost American taxpayers billions of dollars in government bailouts, was triggered not by war or recession but by a crazy, man-made money machine, built on flawed mathematical models that most financial executives did not really understand themselves. Greedy and heedless, Wall Street firms had been turning subprime mortgages loans made to people with low credit worthiness or little documentation into exotic, toxic financial products that they made a fortune laundering and reselling, and they were enabled in doing so by the very ratings agencies that were supposed to police risk. >>> more
IMDB: Storyline: Three separate but parallel stories of the U.S mortgage housing crisis of 2005 are told:
-
Michael Burry, an eccentric ex-physician ... believes that the US housing market is built on a bubble that will burst within the next few years.…
"Four denizens of the world of high-finance predict the credit and housing bubble collapse of the mid-2000s, and decide to take on the big banks for their greed and lack of foresight."
Summary: The Big Short (2015)
The GFC was announced on September 8, 2008 with news that Bear Stearns and Lehman Bros had collapsed due tomarket volatility in world economy.
In the USA, 5 Trillion dollars in pension money, real estate value – GONE –
401K, savings and bonds had disappeared.
8 million people lost their jobs.
6 million lost their homes.
Michael Burry, MD, the medical doctor who was the first to 'see' "the hedge fund opportunity" has since been audited 4 times and questioned by the FBI. He now invests in WATER!
Banking on spin: In 2015, several banks started selling billions in "bespoke tranche opportunities" aka CDO (Bloomsberg News)
Selected excerpts:
"It's possible that we're in a completely fraudulent system."
– Mark Baum, (aka Steve Eisman) played by Steve Carell
Mark Baum's conference lecture, presented at the moment the collapse, was beginning to unfold: "We live in an era of fraud in America -- not just in banking, but in government, education, religion, food - even baseball. What bothers me isn't that fraud is not nice or that fraud is mean. It's that for 15,000 years fraud and shortsighted thinking has never ever worked -- not once. Eventually, people get caught. Things go south. When the hell did we forget all that? I thought we were better than this. I really did. And the fact that we're not doesn't make me feel all right and superior. It makes me feel sad. And as fun as it is to watch pompous dumb Wall Streeters be wildly wrong -- and you are wrong, Sir. I just know that at the end of the day average people are going to be the ones that are going to have to pay for all this because they always, always do.
Conference co speaker's immediate response to Mark Baum's comment:
"... in the entire history of Wall St. no investment bank has ever failed, unless caught in criminal activities. So, yes, I stand by my Bear Stearns optimism."
...
Closing line:
Mark Baum: "Paulson and Bernanke just left the Whitehouse. There's going to be a bail-out. They knew. They knew the taxpayers would bail them out. They weren't being stupid. They just didn't care."
The Global Financial Collapse (GFC) 2007-2008
Australia's newly elected Labor Party Treasurer Wayne Swan revealed, in page 2 of his autobiography (2014), that US Treasurer Paulson telephoned him the week he took office, in January 2008, to recommend he keep the real estate market UP. Swan launched the 'open door' policy for wealthy property investors; The Minerals Council of AU 'protected' the mining industry boom, while 'offshoring' tax evaders continued their lies.
American investment 'vulnerability' came to my attention at the peak of the "Celtic music wave" when, in response to 9/11, banks introduced a short-term fixed interest strategy to encourage "Boomer" homeowners to re-enter the market, led by the ‘Bush-push':“Support the economy! Take a holiday! Build an extension! Buy a boat!” Several personal friends, well-educated 'professionals’ took out a 2nd mortgage on their fully owned homes and had their mortgages ‘foreclosed’ when the 3-year fixed interest rates expired and variable rates were introduced: Their homes were taken from them, while first-time mortgage owners lost their home and their deposit, and were held to the contract.
Banks tranfer title deed:
Banks claim it isn’t their fault that they lost their 'business income' - their monthly mortgage payments - due to foreclosure. "They go through the legal process of getting the borrower off the title to the property and putting themselves on the title deed as the owner of the property" – Domnique Grubisa, Sept. 2020
In the lead-up to the GFC, in the US, Investment Bankers created a national crisis by gambling and loosing depositors savings due to the Stock Market Crash of August 2007. Consequently, US Treasury Secretary, 2006-2009, Henry "Hank" Paulson, (former Goldman Sachs CEO/Chairman), and Federal Reserve chairman Ben Bernake held secret meetings with Government regulators to negotiate federal intervention - to be “bailed out" by taxpayers.
Closing line from the 2015 movie, The Big Short,
referring to 2008/9 US government bank bailout:
"Paulson and Bernanke just left the Whitehouse.
There's going to be a bail-out. They knew.
They knew the taxpayers would bail them out.
They weren't being stupid. They just didn't care."
Introduction Has a generation been shut out of the Great Australian Dream?
It used to be that Australians would spend 3 or 4 times their annual income on a house. Now it's 10, 20, even 30 times, putting home ownership out of reach for many, and especially for young people. The tax breaks that have helped fuel the unprecedented housing boom will be a big issue in the coming election campaign. Taken together, Negative Gearing and Capital Gains tax breaks cost the public purse 11.7 Billion dollars each year. Labor has promised to wind-back the concessions. But despite criticism of Negative Gearing from some Liberal politicians, including former Treasurer Joe Hockey, PM Malcolm Turnbull has ruled out any changes to the system. In tonight's program, experts say that Australia's housing market is already cooling. Economists are divided over whether we're seeing the start of a soft-landing, a correction, or a crash. For many in the Millennial generation, a crash is what they're waiting and hoping for.
Excerpt: (38:00) If the banks show the international investment community that they're lending to very, very credible borrowers -- credit-worthy borrowers -- then it's very, very easy for the banks to tap into very cheap debt and to be able to sell-off residential mortgage-backed securities with a triple-A rating. . . .
Preparing for The Next "Great Recession" - in Australia "Covid-19 will have an unpredicted impact!" On 18 March 2021, we heard from Roger Montgomery, Founder and Chief Investment Officer of Montgomery Investment Management, Australia: "Why I Think House Prices Will Keep Going UP"
This is what he said, in full - followed by readers comments:
“Australia is in the grip of its biggest property price boom in more than a decade. The boom is motivated in no small part by a fear of missing out. But there are also other important factors at play, leading me to believe that this trend could continue for some time.
Last year I outlined my bullish thesis for Australian property: cheap rates, a lack of stock and COVID losing its grip on the economy. But these all pale into insignificance compared to the impact of the easing of credit by banks if the government’s legislation relaxing responsible lending rules goes through.”
3 Comments
1.
These trillions of fiscal dollars are quite different to the FED QE that only increased bank reserves. This is real money from nothing pumped into the community. The bond traders are onto it. I would not be so sanguine about interest rates.
2.
I think the last point on post covid migration will see this boom continue for many years to come…….50 year loans are just around the corner, that in my opinion, is one of the only ways (unfortunately) that our kids and grandkids will be able to afford to pay a mortgage into the future……
the bust, which will come eventually will be horrific!!!!
3.
A little off topic but recently my neighbours property sold by auction. As per normal operating procedure, the agent’s estimated guide wasn’t in the same solar system as the eventual sale price. Anyway, surely someone is working on disrupting this industry. How can they charge close to $70,000 to unlock a door 4 times? The wage increase of the beloved real estate agent must be 20% per year. I look forward to the day that the cost of selling a house isn’t so prohibitive. To which, the author replied: "if the strong real estate prices persist there will be another agent ‘oversupply’ and most will be competing again for business."
Before the 2008 GFC
Not much fizz left in the global economy
by Stephen Roach, Chief Economist of US investment bank Morgan Stanley
Financial Times, August 14, 2006
Excerpt:
There is nothing like the seduction of a boom. The recent vigour of global economic growth is a siren song. By International Monetary Fund metrics, world gross domestic product growth probably averaged 4.8 per cent over 2003-06, the strongest four years since the early 1970s. As tempting as it is to extrapolate this into the future, that may be a serious mistake. There is a much better chance that global growth has peaked and the boom is about to fizzle.
The world’s main growth engine, the US, is slowing. That is the verdict from the labour market, with job growth in the past four months running 35 per cent below average since early 2004. It is the verdict from the housing market, where an emerging downturn in residential construction activity is knocking at least 1 percentage point off the GDP growth trend of the past three years. And, notwithstanding July’s temporary bounce-back in retail sales, it is a message from the consumer, whose inflation-adjusted spending growth fell to 2.5 per cent in the spring period – one percentage point below the heady trend of the past decade.
The US Federal Reserve is under fire - again. CNBC Business News' Rising Risks reporter Diana Olick shares her comprehensively informative overview.
KEY POINTS
• Home prices nationally in January were up 11.2% year over year, according to the latest S&P CoreLogic Case-Shiller Index. That is the largest annual gain in nearly 15 years.
• As of last week the Federal Reserve held $2.2 trillion of agency mortgage-backed securities.
• "They've continued on autopilot. I don't think there's been any discussion within the Fed," said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Home price gains are accelerating at an alarming pace, fueled by Covid pandemic-related inflation, which some claim is not getting enough attention from the Federal Reserve.
Home prices nationally in January rose 11.2% year over year, according to the latest S&P CoreLogic Case-Shiller Index. That is the largest annual gain in nearly 15 years.>>>more
"The world’s worst downturns are always preceded by land speculation (the chasing of the economic rent) fuelled by misguided credit creation courtesy of the banks." – Phil Anderson, 2012
The Complete History Of US Real Estate Bubbles Since 1800 ERIC GOLDSCHEIN
JAN 11, 2012 The most recent economic crash should come as no surprise to history buffs. Reader and financial blogger Philip J. Anderson sent us an illuminating analysis of real estate bubbles through U.S. history.
“For the first 144 years of real estate enclosure in the U.S., land sales and/or real estate construction peaked almost consistently, every 18 years,” Anderson writes. “The world’s worst downturns are always preceded by land speculation (the chasing of the economic rent) fuelled by misguided credit creation courtesy of the banks.”
First, the big picture: The U.S. federal government began selling off land in the year 1800. Since then, there have been peaks and valleys of land sales and speculation roughly every 18 years. >>> more
If you don't tax that value that attaches to land, arising from
the general wealth of the economy, the banks get it. Professor Michael Hudson
Governments can align their policies with people's private goals
by abolishing anti-social taxes,
argues Bard University
Associate Professor of Economics Kris Feder.
Re-aligning behaviour to flow with the grain of both nature
and our human nature is achieved by removing the financial bias
against those who work for their living.
"Nations are governed by a culture that was incubated in Europe in the 16th century. England played the leading role in enabling that culture of greed to mutate into a statecraft that propagated chaos through its laws of the land. The statecraft manages the anarchy that was embedded in traditional communities as a result of the violent transformation of people’s rights of access to the commons. Understanding that history is the pre-condition for addressing what the CIA calls the mega-trends that threaten all our futures."
– Fred Harrison >>> more
FILM SCRIPT Ricardo's Law ~ House Prices and the Great Tax Clawback Scam
Written and Narrated by Fred Harrison
I accuse governments of running a scam against the people who elect them. I know this is a serious charge. But governments use the tax system to milk the poor. Why do they do it? To enrich people who own land.
The scam began centuries ago here in the Palace of Westminster. It is operated by all democratic governments around the world. The biggest winners are those who own the best locations, such as homes overlooking Hyde Park, here in London, or with a view of Central Park in New York or across the harbour in Sydney.
The taxmen operating out of the Treasury – this building behind me – work with a doctrine called “progressive taxation”. This is supposed to transfer income from the rich to the poor.
That sounds fair, doesn’t it? But I have discovered that progressive taxes are a cover up for a cruel hoax played on people with low incomes.
This is how the scam works. The people who live in these apartments are tenants. Britain has 4m of them in the public sector. They pay rent to their landlord, and they pay taxes to the government.
The homes in this street in Knightsbridge, near the famous Harrods store, are worth millions of pounds. The people who live here are in the top 20% income bracket. On average, they pay about £1.25m in taxes over their working lives. That’s about $2.5m American or nearly $3m Australian.
The people who rent their homes tend to be in the lowest 20% of incomes. Over their working lives, they pay – on average – about £250,000 in taxes. That’s fair, isn’t it? The rich pay five times more than the poor in taxes.
I explain in my book, Ricardo’s Law, that progressive taxes have the opposite effect.
People who rent their homes pay taxes to fund schools, hospitals and police protection. They pay for what they receive. But what happens down the road in Knightsbridge? Let’s go and find out.
(Long shot of FH walking away from camera, towards Knightsbridge)
The rich who live here pay a lot in taxes, but the government gives the money back to them. How do they do this?
Government spends our taxes on infrastructure such as highways and railways. That increases the productivity of the economy. Now, because of the way the market economy works, those gains in productivity are transformed into land values. That value appears as ‘windfalls’ or ‘capital gains’.
Those capital gains are not shared out equally, among all of us. Taxpayers who rent their homes are excluded. The windfalls are pocketed by people who own land. The rise in property values more than offsets the taxes they pay into the public purse.
So who pays for the public services that the rich people use? The people on the lowest incomes.
Families on the lowest incomes subsidise the lives of the rich. Is that fair? There’s only one way to make the tax system fair. Parliament has to tell the taxman to stop collecting taxes from people’s earned incomes. We need the kind of tax reform that Winston Churchill and the Liberal government nearly achieved 100 years ago. But the landlords blocked them.
If we cancel taxes on people’s wages, how do we pay for public services? By levying a charge on the value of land. People who live in valuable locations, like the families who live at the back of Buckingham Palace, will pay much more than those who live in less expensive properties. That’s fair. And it also happens to be the best way to fund the services we share in common.
April 2021 Land Lines Magazine, Lincoln Institute of Land Policy China’s Property Tax Reform: Progress and Challenges Joyce Yanyun Man
Excerpt:
China has experienced rapid economic growth since 1978, when it adopted a policy of opening up to the world and instituting economic reform. It has become the second largest economy measured by the country’s GDP, and its tax revenue has experienced an average annual growth of about 20 percent since the fiscal reform of 1994.
However, many subnational governments in China have experienced fiscal stress and incurred large local debt in recent years because of numerous unfunded central mandates and the large fiscal gap between expenditure responsibilities and revenue capacity. For example, in 2008 subnational government in China accounted for 79 percent of total government expenditure, but only 47 percent of total government revenues (Man 2011).
Unlike many developed countries, China’s local governments (provincial, prefecture, county, and township) have not been granted any legal authority for taxing or borrowing, and the property tax plays a very limited role in the local public finance structure. As a result, many local governments turn to extra-budgetary revenue sources, fees for leasing land use rights, other fees and surcharges, and indirect borrowing from banks to finance infrastructure investment and local economic development.
During the period from 1991 to 2008, the land leasing fees (also known as land transfer fees) increased from 5.7 percent of total local budgetary revenue to 43.5 percent. The overreliance on land leasing fees has been criticized as an important factor in pushing up housing prices and in the growth of corruption cases and land disputes in China.
“As China’s economic recovery still faces pressure from various uncertainties including the United States’ stimulus and a resurgence of the epidemic, policymakers attach greater importance to the stability of the real estate market,” said Lu Wenxi, chief analyst with property agency Centaline.
…
The Chinese government and the National People’s Congress said in 2019 that the country would advance steadily towards the drafting of a property tax, which is widely seen as the most powerful tool to deter speculators.
The property tax legislation is still part of the plan for this term of the Standing Committee of the National People’s Congress, whose tenure ends in 2023, Li said, adding that substantial progress on the issue would be seen in the next two years.
The Chinese government said on Friday in its development plan for 2021-2025 that it would push for the property tax legislation over next five years.
18 June 2019
Lincoln Institute of Land Policy
Zhi Liu (2019) Land-based finance and property tax in China
Area Development and Policy, Vol. 4/4, 2019 Pages 367-381
doi.org/10.1080/23792949.2019.1610333
ABSTRACT
Over the last two decades, cities in China have relied heavily on the revenues from public land leasing to finance urban development. This source of revenue is not sustainable. To address this issue and a distorted housing market, the current municipal finance reform agenda aims to introduce a property tax on the ownership of private residential properties. However, significant hurdles exist as a majority of urban households have purchased housing properties in the absence of a property tax. This paper proposes a few measures to help pave the way for property tax implementation. These include adopting a low tax rate in the early stage, allowing time for the adjustment of household housing investment portfolios, allowing ready cities to implement a property tax first, as well as reforming the price structure of public land leasing.
One thing that stands out from my interaction with professionals who work on Russia, ranging from corporate executives to financial analysts, is this: most commit the mistake of treating Russia as a single unit of analysis. But Russia is a federation composed of more than 80 diverse regions. ...
Myth 1: Russia’s regional disparities can be compared with those in Australia and Canada ...
Myth 2: Moscow and St. Petersburg are “too big” ...
Myth 3: Russian regions are diverging in terms of income and poverty ...
Myth 4: Most of Russia’s poor live in poor regions ...
Myth 5: High potential regions are limited to Moscow and St. Petersburg ...
Myth 6: Isolated regions are isolated because of poor physical (transport) connectivity ...
Myth 7: Reducing regional disparities is the job of either the federal or regional governments ...
Myth 8: Third party actors are not all that important ...
President Vladimir Putin said that Russia had canceled the debt of African countries in excess of $20 billion.
To help the African continent overcome poverty, Russia has decided to cancel more than $20 billion in debt contracted by African countries.
“As part of the initiative to help the poorest and most heavily indebted countries, we have canceled more than $20 billion in debt for the benefit of different African countries,” Putin said. Russian media.
The Russian leader announced the initiative following a meeting with Guinean President Alpha Condé.
Vladimir Putin added that in 2016, Russia had allocated $ 5 million to the African countries through the Organisation of African Unity The United Nations Food and Agriculture Organization.
Before 1990, there was no investment banking in Russia. It all began after 1990 when Gazprom went public. The year was 1996 when the investment banking industry in Russia found its first route...
Part 7 The Law of Rent - classical political economic solutions Back to top
20 Dec. 2020 What is Rent Seeking?
A Hard Look at Rent and Rent Seeking
with Professor Michael Hudson and International journalist Pepe Escobar
An interactive discussion on wealth inequality and the “Great Game” on the control of natural resources. In this webinar, Michael Hudson and Pepe Escobar unpack one of the most destructive features of our economic system and the many different ways it drives wealth inequality.
They also focus on China – US relations and their understanding of the “Great Game” regarding control of the world’s resources.
"If you don't tax that value that attaches to land, arising from the general wealth of the economy, the banks get it."
– Professor Michael Hudson
"What to do now? A strong dose of Georgist tax policy will revive the private sector of any city, and the surrounding rural areas too... [we need] a tax system that will compensate the losers from the gains of the winners."
– Professor Mason Gaffney
Excerpt (Relevant paragraphs):
Historians have obsessed over the quake and fire but blanked out the recovery. We do know, though, that in 1907 San Francisco elected a reform mayor, Edward Robeson Taylor, with a uniquely relevant background: he had helped Henry George, more than anyone else, write Progress and Poverty in 1879. George, of course, is the one who wrote and campaigned for the cause of raising most revenues from a tax on the value of land, exempting labor and sales and buildings. (See "A Primer on Henry George's Single Tax.")
In 1907, single-tax was in the air, and it was natural to go along with Cleveland (Mayors Tom Johnson and Newton Baker), Detroit (Mayor and later Governor Hazen Pingree), Toledo (Mayors Samuel "Golden Rule" Jones and Brand Whitlock), Milwaukee (the "sewer socialists" and Mayor Dan Hoan), Chicago (Mayor Edward F. Dunne, ex-Governor J.P. Altgeld, muckrakers Ida Tarbell and Henry D. Lloyd, editor Louis F. Post, Nobelist-to-be Jane Addams, Councilman Clarence Darrow, et al.), Vancouver (six-time Mayor Louis Denison "Single-tax" Taylor), Houston (Assessor J.J. Pastoriza), many smaller cities, and doubtless other big cities yet to be researched, that chose to tax buildings less and land more. It was the golden age of American cities when they grew like fury, and also with the grace of the popular "City Beautiful" motif.
San Francisco bounced back so fast its population grew by 22% from 1900 to 1910, in the very wake of its destruction; it grew another 22% from 1910 to 1920 and another 25% from 1920 to 1930, becoming the tenth largest American city. It did this without expanding its land base, as rival Los Angeles did, and without stinting its parks. On its steep gradients it housed, and linked with publicly-owned mass transit, a denser population than any city except the Manhattan borough of New York. It is these people and their good works that made San Francisco so famously livable, the cynosure of so many eyes, and gave it the massed economic power later to bridge the Bay and the Golden Gate, grab water from the High Sierra, finance the fabulous growth of intensive irrigated farming in the Central Valley, and become the financial, cultural, and tourism center of the Pacific coast.
Mayor Nagin of New Orleans tells the world that Katrina wiped out most of his tax base, so he is impotent. By contrast, in 1907 Mayor Taylor's Committee on Assessment, Revenue, and Taxation reported sanguinely that revenues were still adequate. How could that be? Because before the quake and fire razed the city, land value already comprised 75% of its real estate tax base. San Francisco also taxed "personal" (movable) property, but it was much less than real estate, and secured by a lien on land. The coterminous county and school district used the same tax base. They also made extensive use of special assessments on lands benefited by specific public works. In other words, San Francisco had adopted most of Henry George's single tax program de facto, whether or not they said so publicly.
It was a jolt to replace the lost part of the tax base by taxing land value more, but small enough to be doable. This firm tax base also sustained the city's credit, allowing it to finance the great burst of civic works that was to follow. Taylor supported the next mayor but one, James Rolph (1911-1930), who oversaw a long period of civic unity and public works. "Sunny Jim" Rolph expanded city enterprise into water supply, planning, municipally owned mass transit, the Panama-Pacific International Exposition, and the matchless Civic Center. Good fiscal policy did not turn all the knaves into saints: Rolph eventually fell into bad company with venal bankers and imperialist engineers. But San Francisco rose and thrived. ...
Australian Tax Office Land Valuer (Ret.) Bryan Kavanagh:
"Although the facts are quite clear, economists sidestep this analysis, claiming that real estate bubbles are a factor of the under supply of land. Inadequate suitably zoned land explains these bubbles, they say, but they have no explanation for what caused land price bubbles before town planning and zoning came into existence, not all that long ago."
"Could it be that economists are ignorant of the Theory of Real Estate Valuation? i.e. that the phenomenon of land price is simply the capitalisation of its net annual rent? And, therefore, greater public capture of land rent via municipal rates and state land tax would keep the lid on recurrent land price bubbles? [...] The utter economic stupidity, hidden not only by neo-classical economists but also by the crass diversions in Australian political life, could of course be rectified by putting into place the recommendations of Ken Henry’s inquiry into the Australian tax system."
See full report, including illlustrative graphs here.
Warnings issued by Bryan Kavanagh - before the 2008 GFC:
1. Resource Rents Hold the Property Key, Analysts and policymakers may learn a valuable lesson from the history of Ireland by Bryan Kavanagh published in The Age, June 15, 2005, Excerpt:
. . .
Both Cromwell and Petty saw the need to know the annual value of Ireland's natural resources, but the modern neo-classical economist is all but clueless on the quantum of resource rent within the economy, or for that matter to where it disappears. . . . The Kondratieff Wave explained
"The Russian economist Nikolai Kondratieff did not have any explanation for the cause of the 50 to 60-year-long wave cycles he discovered in his studies of 140 years of the economies of the US, Britain, France and Germany. However, cycles of boom and bust seem to be inextricably linked to the failure of economies to capture the national rent for their coffers, and to the consequent escalation in land prices and taxes levied on productive work. Where most modern economic analysts don't like to acknowledge the existence of the Kondratieff wave because it is suggestive of their impotence during its deflationary decline, it is possible to clearly show the inflationary, then deflationary, courses of the fourth Kondratieff wave within the economies of Australia, the US and Britain. The end of each of the three preceding long waves was defined by economic depression."
– Bryan Kavanagh, Land Valuer (Ret.), Australian Tax Office See the full article, Resource Rents Hold the Property Key, published in The Age, June 15, 2005, and shared here.
2. Property Bubble Leads to Crash Landing
by Bryan Kavanagh
Featured in Business Age and The Sydney Morning Herald
Friday, March 28th, 2008
Excerpt:
Here is an unyielding truth. A country cannot go into recession unless there has been a real estate bubble.
US land economist Homer Hoyt documented the fact back at the beginning of the 19th century. The Land Values Research Group recently defined and studied the effects of property bubbles in Unlocking the Riches of Oz: A Case Study of the Social and Economic Costs of Real Estate Bubbles, 1972 to 2006, which is freely available at www.lvrg.org.au. It concludes that the current residential bubble has hyper-inflated since 1999 and is about to burst, despite sophisticated financial derivatives, hedge funds, collateralised debt obligations, credit default swaps, all brought into existence to “insure” that it not burst. The failure of derivatives will compound the upcoming financial threat. >>>more
Australia's Land Value Research Group Founded in 1943, the LVRG published world-leading empirical studies demonstrating that site-value rating — that is, the imposition of municipal Rates on land values alone, exempting the values of buildings — is more conducive to economic growth than alternative systems that include buildings in the tax base. Expressed in qualitative terms, that conclusion should be obvious: taxing buildings deters construction and consequently impedes the industries that lie upstream or downstream of construction or require accommodation for workplaces and workers — in other words, it impedes the whole local economy — whereas taxing the value of land cannot reduce the supply of land, because neither the land nor its value is produced by the owner. Excerpt:
In 1943 the Canadian land economist H. Bronson Cowan, director of the International Research Institute on Real Estate Taxation, visited Melbourne to conduct research in the municipalities of Brunswick and Camberwell. His techniques inspired a number of local professionals to form the Land Values Research Group (LVRG). Under its founding director, Allan R. Hutchinson BSc MIEAust (1907–1988), the LVRG published 37 major documents.>>> more
Stupid Property Owners By Gavin Putland, Director Land Value Research Group January 2009 "The “taxes” that property owners hate most are the ones that hurt them least and are most likely to be spent for their benefit."
Excerpt:
Land and taxes In any tax jurisdiction, the supply of land is fixed. From the viewpoint of the taxpayer, the supply of land zoned for any particular purpose is also fixed, as is the supply of land within acceptable distance of any particular services, infrastructure, or markets. Yet access to suitably located land is essential to economic participation. Therefore land values, expressed as rent or as interest on purchase prices, are competed upward until they absorb the economy's capacity to pay. As that capacity increases — as it usually does — so do land values [1]. That's why economic growth doesn't make housing more affordable. That's why we load ourselves with debt in order to “own” our homes as soon as possible. This much is obvious even to the unschooled; they may not know anything about economics, but they know where their money goes.
Most taxes target transactions (or the results thereof), causing otherwise viable transactions, hence otherwise viable enterprises and industries, to become unviable. In this way, most taxes take far more money out of the private sector than they deliver to the Treasury (and thence back to the private sector through public spending). The margin by which the cost to the private sector exceeds the benefit to the Treasury is what economists call the excess burden or deadweight cost of taxation. In simple terms, most taxes take more than they give.>>> more
Housing is a cost of living for wage earners In a private email exchange, quoted here with permission, Raymond Makewell, author of The Science of Economics (2013), stated: "Land only has a value (price) because the full economic rent is not being collected. The more economic rent (or land tax) that is collected the lower the price of the land. If the whole economic rent is collected the price of the land would be zero. The price (value) of improvements, though, could be negative. E.g. a site with a house on it that is approved for a block of flats: The existence of the house is a cost to any potential investor, not a benefit (i.e. the cost of removing the house). ...In a fully enclosed system, where wages are forced to the bottom, all taxation revenue comes from the economic rent. There is nowhere else for it to come from. If workers are taxed they demand higher wages or more government subsidies.
"Housing is a cost of living to wage earners. All outgoings associated with housing, including land taxes, are an attack on their cost of living. In the medium to long term collecting more economic rent on housing sites would reduce the price of land, but the immediate effect will be to increase wage demands, or government subsidies. The most effective action would be to concentrate on collecting taxation based on the economic rent from commercial sites, and reducing the overheads associated with employing people (income tax e.g.). The latter is intended to be provocative, but helpful."
"The cost to construct a given house is
roughly the same in any region or metropolitan area of the United States. Yet, in the places were economic activity is robust and population dense, the land component of a residential property can equal 50 percent or more of the purchase price of a property. This occurs because the rent of land is lightly taxed and is therefore capitalized by market forces into a selling price, a selling price driven upward by speculation, hoarding and liberal access to credit. Henry George rightly observed that the rent of land should be fully collected by society to pay for public goods and services, leaving capital goods (e.g., buildings, homes, machinery) unburdened by taxation. If this was done, he felt confident there would be no need to tax income or commerce."
– Edward Dodson, economist and political scientist, and curator at The School of Cooperative Individualism.
UK House of Commons seminar on land value April 2009: Organised by The Coalition for Economic Justice
The seminar was aimed at parliamentarians and policymakers and examined the advantages of land value taxation, how it might be introduced and how transitional problems could be dealt with.
Hosted by Vince Cable MP
Panel of Speakers:
Prof Iain McLean, Professor of Politics, Oxford University
Ashley Seager, The Guardian
Molly Scott Cato, Green Party Economics speaker
David Triggs, Henry George Foundation
Sir Sam Brittan, Financial Times
Fred Harrison, Land Research Trust
Read the full report here
Excerpts:
As Sir Sam Brittan saw it, the case for LVT was clear and simple. But perversely, people find this difficult to grasp; they expect complexity in taxes. Being a tax on unearned value increment, LVT was no disincentive to Labour or Capital. As a temporary expedient, pending the full introduction of LVT, he advocated the auctioning of planning permissions.
Ashley Seager of The Guardian cited instances where public expenditure had led to massive increases in property (i.e., land) prices. In one case, the building of a school had led to such a big increase in local property prices that teachers in the school could not afford to live in the area. As the land of this country is provided free of charge by nature, “rising property prices do not raise national wealth one single penny”. They serve no useful economic purpose and are an obvious target for taxation.
Professor Iain McLean explained how, as a member of the independent expert group set up by the Calman Commission, he was looking at LVT as a way of financing public services in Scotland and Wales. LVT would replace council tax, business rates and stamp duty.
From a Green perspective (Molly Scott Cato), land is a trust for the people, its life-giving properties to be preserved from one generation to the next. LVT, which aims to curb private profiteering from the nation’s patrimony, was seen as a valuable tool in this connection.
The groundwork for the panel discussions was set out by David Triggs in his opening address. “The challenge that confronts those interested in establishing a just and equitable division of the fruits of production lies essentially in recognising that land values impound that part of the value created which is attributable to factors external to the individual, e.g., the country’s infrastructure, the system of governance, law and order and the density of population. It is manifestly unfair to tax the individual on what he produces while those community-created values are provided tax-free to the benefit of the landowner. These land values, arising essentially from location, should be the primary source of taxation.”
Fred Harrison reinforced this message. He showed how failure to collect location value led to diminished opportunity and life expectancy at the marginal location.
James Black (a sixth-former) said LVT made common sense to the young and the opportunity should not be missed. >>> more
Triguboff told the audience he was able to pay “very little tax”: “I keep a lot of my properties. And if you keep them and there’s capital gain it’s beautiful,” he said. “You don’t pay tax. I don’t lease them so I don’t pay tax on the rent, but I get depreciation.” He paid tax on apartment sales but that’s where the land banking came in. “You have to buy lots of empty land,” he said. “You keep the land and it brings you no income, so you claim it against your tax.” 
"The cost to construct a given house is 