Fed balance sheet hits another record size as ...
A nobleman and an editor for taxing land
| As the Fed keeps printing money, nevertheless land prices keep heading toward affordability. We trim, blend, and append five 2011 articles from: (1) Reuters, May 26, on the Fed; (2) AP, May 31, on home prices by Derek Kravitz; (3) USA Today, May 31, on farms by Adam Belz; (4) House of Lords debates, May 23, on taxes by Lord Palmer of Childs Hill (Liberal Democrat); and (5) USA Today, May 30, on tax breaks by the Editors. |
by Reuters, by Derek Kravitz, by Adam Belz, by Lord Palmer, and by USA Today Editors
- Fed balance sheet hits another record size
The Federal Reserve's balance sheet expanded to a record size -- to $2.759 trillion in the week ended May 25 from $2.742 trillion the prior week.
The central bank bought more bonds, part of its $600 billion program, dubbed QE2.
The central bank's holding of US government securities grew to $1.519 trillion from last week's $1.495 trillion total.
To see the whole article, click here .
JJS: They say “bought” but the money did not exist until received by the seller. The Fed did not have the money. It just made the money up, which is legal for them but illegal counterfeiting for you or me.
The central government and big banks crave such bailouts during recessions, and recessions follow the burst of land bubbles, mistakenly called “real estate” bubbles. Prices for land must fall until people can again afford to buy land (plus house). The present price bottom is deeper and longer-lasting than average, but the previous bubble was bigger than average.
- Home-price index falls to lowest point since 2002
An index of home prices in big metro areas has reached its lowest level since 2002, driven down by foreclosures, a glut of unsold homes, and the reluctance or inability of many to buy.
Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor's/Case-Shiller 20-city index. And prices in a dozen markets have reached their lowest points since the housing bubble burst in late 2006.
The nationwide index fell for the eighth straight month. Prices have now fallen further since the bubble burst than they did during the Great Depression. It took 19 years for the housing market to regain its losses after the Depression ended.
Prices rose last summer, fueled by a temporary federal home-buying tax credit. But they've plunged since then. Across much of the nation, home prices are in a double dip.
After adjusting for inflation, the home-price index has sunk to a level not seen since 1999.
Homes in foreclosure sell for, on average, 20% discounts. Many foreclosure sales have been delayed while federal regulators and state attorneys general review how those foreclosures were carried out over the past two years. Once those homes are foreclosed upon, they will trigger a further price drop in many markets.
Some of the sharpest price declines have occurred [where the bubble was biggest] in cities hit hardest by unemployment and foreclosures, such as Phoenix, Tampa, and Las Vegas. They are flooded with homes sitting vacant, awaiting buyers. Many banks have agreed to allow homes at risk of foreclosure to be sold for less than what is owed on their mortgages. That trend has pulled down prices.
Coastal areas, such as San Francisco, San Diego, Los Angeles, Washington, and Boston [places where most people prefer to live have already passed bottom]. They have been aided by desirable city centers, limited space for new housing, and low unemployment.
In the seven years before its peak in July 2006, the home-price index surged 155%. Since then, it's fallen 33%.
Prices aren't likely to stop falling until the glut of foreclosures for sale is reduced, employers start hiring in greater force, banks ease lending rules, and would-be buyers regain confidence that a home purchase is a wise investment.
To see the whole article, click here .
JJS: While sites for homes make up the biggest part of the land market, there’s still fields for farms, and while absentee owners are rolling in clover, the little guy isn’t.
- Farm boom missing Main Street
Farmers can lock in about $6.73 a bushel on the Chicago Mercantile Exchange for corn they will deliver to market in December, nearly twice the price a year ago.
The sustained surge in corn prices has driven the average value of an acre of Iowa farmland to $5,708. That's up 19.7% from the previous six months and up from $1,865 in March 2001.
American farmers who grow everything from rice to sugar beets have enjoyed a year of historically high prices. But the boom has done little to reverse the gradual decline of small farm-area towns across the Corn Belt.
Most farmers no longer buy cars, clothes, and farm equipment in towns near them. Most young people who leave for college don't move back. Small town population is shrinking and getting older.
Some 6.4 million fewer people live in the rural United States than in 1990 -- a 10% decline over two decades.
It's not just towns surrounded by farming that have declined amid high commodity prices. In heavily forested west central Alabama, towns lost population, despite steadily climbing timber prices since the middle of 2009, as the timber industry consolidated.
High land prices may actually exacerbate the problem. A family that figures land prices can't go higher might decide to cash out of farming for good, and move away.
To see the whole article, click here .
JJS: As farmland comes on market, remaining owners and absentee owners consolidate their holdings. Yet country people can prosper if their region recovers and shares the value of land. Location values are highest in city centers and lowest in rural areas; and there fresh food costs less, too. So country folk would pay the lowest “land dues” and their “rent share” would cover many costs of living. Plus, the land dues or land taxes would keep down land prices. Surprisingly, a traditional landowner asked about this possibility for his nation of highly concentrated land ownership.
- House of Lords debate -- Housing: Market Stability
My Lords, as the Joseph Rowntree report says, the main reason for the problem is the shortage of land. Would my noble friend comment on whether the Government will look at how to encourage the release of unused land, such as in land auctions or the taxation of unused land, to encourage the owners and developers of land to bring it into use even when its value might be lower than they expect?
To see the whole article, click here .
JJS: As Milton Friedman noted, a tax on land is about as good as a tax can get. Yet current policy heads the opposite way and not only fails to recover land rents but even exempts that socially-generated value from taxation. At least some mainstream media urge the closing of that loophole among others.
- Editorial: 10 terrible tax breaks
The 70,000-page IRS code requires 7.6 billion hours per year of preparation time. That is the equivalent 3.8 million people working full-time all year. [From their top ten, a few]:
2. Ethanol, the fuel made from corn, does not even come close to competing with traditional gasoline on price. So taxpayers give farming businesses up to 45 cents per gallon in subsidies. (Cost: $5.7 billion.) [The subsidies also inflate farmland prices; see above.]
7. The mortgage interest deduction goes all the way up to $1 million loans. Ending the deduction entirely would help prevent future bubbles. Canada manages to have a stable housing market and high homeownership rates without a mortgage interest deduction. (Cost: $92 billion.)
10. Radically simplify the corporate income tax code. It is so riddled with credits, deductions, exemptions, allowances, and exclusions that these breaks are its substance, while the income it raises is its exception. By doing away with all such breaks, Congress could lower the top rate of 35% to the low 20s without losing any revenue. This would put US rates more in line with those of other countries.
Ideally, tax reform would go much further, cutting out virtually all breaks in a realization that once Congress starts down the road of rewarding and discouraging behavior, it won't stop.
To see the whole article, click here .
JJS: Reducing tax rates is at least a step in the right direction. Not as good as abolishing taxes and instituting dues, but progress.
Imagine if we had separation of economy and state just as we in the West have separation of church and state. Then politicians could not tax and subsidize according to the influence of insiders. Instead, government could only recover the socially-generated values, the commonwealth, which is mainly our spending for land and resources, and use the lion’s share of that revenue not for gifting insiders but for paying all citizens a dividend.
No more money issues to argue about. Just recover social surplus then share it. And doing that would flatten the business cycle so that recessions -- one excuse for government intervention -- would never arise. Then we all could breathe so much easier!
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Editor Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Let's add Land Speculators to the list, too
Mainstream Media Promote Real Land Rights
Brown wins big Commons victory for vote reform |
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