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This 2014 excerpt of Aeon, Jun 23, is by Andrew Crumey.
In nearly every era there arises, in some form, nearly every idea of which humans are capable. Certainly, there is the emergence of new ideas. However, the vast majority of ideas are recycled.
It is not hard to find fossilised ideas all around us. We still say that the sun rises and sets, or that we cast a glance over a page, though we know that the Earth rotates and rays come into our eyes, not out of them.
There are an awful lot of present-day theoretical physicists whose untestable ideas about superstrings or multiverses possibly put them in the same category as the jocular British pop-astrologer Russell Grant.
Intuition, however, could be considered revelation by a more secular name. We willingly attribute it to discoverers and innovators of all kinds – as long as their guesses are right.
The standard model of elementary particles grew out of studies of ‘symmetry groups’, an area of mathematics related to Kepler’s geometrical exercises. In each case, the idea was the same: start with a concept of mathematical symmetry and try to make it match reality.
The harmony of the spheres also has its counterpart in modern-day superstring theory, which supposes particles to correspond to those same vibrations that captivated the Pythagoreans, though, after more than 30 years of intensive study, the theory has yet to make a single prediction borne out by experiment.
An ‘occult force’, in Newton’s terms, was any hidden principle not directly observable in phenomena, and his opponents claimed that his version of gravitation was itself an occult force since it assumed some mysterious ‘action at a distance’. An analogous situation was thought by some to arise in quantum theory, leading to what Albert Einstein allegedly disparaged as ‘spooky action at a distance’.
Newton sought the original unit of length. In a different way, so do today’s physicists, though rather than cubits they speak of the ‘Planck length’, a unit determined by some juggling with fundamental values such as the speed of light and the gravitational constant.
The recurrence of ideas over the course of history is something that Jung or Pauli would have attributed to archetypes in the collective unconscious. An alternative would be the finiteness of human imagination, and susceptibility to cultural influence. While scientific theories can become increasingly technical and abstract, the brains that struggle to interpret their meaning haven’t evolved much in the past 50,000 years. If our own brain is a kind of living fossil, it’s hardly surprising that so much of what we do with it is metaphorically fossilised too.
Ed. Notes: So what’s new under the sun? Not much. Some ideas re-occur — as if they were behind their times — just as other ideas first appear, often without being accepted — as if they are ahead of their time. At least the re-occurence of good old ideas gives them another chance of being accepted, just as at last geonomics is gaining ground, over a century after Georgism, which which was over a century after phyiocracy, which was a century after Locke, Spinoza, William Penn, etc, and all of them were millennia after Confucius and Mencius.
This 2014 excerpt of BBC, May 15, by Jonathan Webb.
Researchers have developed a collection of new plastics that are recyclable and adaptable – and the discovery began with a laboratory mistake.
They include strong, stiff plastics and flexible gels that can mend themselves if torn.
Dr Jeanette Garcia, from IBM’s Almaden Research Center in San Jose, stumbled upon the first new class of thermosets in many years when she accidentally left one of three components out of a reaction.
That chunk of plastic, produced from unexpectedly simple ingredients, proved to be tremendously hard and stable. Crucially, it could be digested in acid, reverting to its original components. This digestion reaction allows the chemical building blocks, or monomers, to be reused.
All previous “thermosets”, like the Bakelite found in old telephones and radios, were not recyclable.
Because they are strong and light-weight, thermosets are used throughout modern cars and aircraft, often mixed with carbon fibres to form composites. The new plastics could reduce waste from aircraft materials. When a large or expensive component is damaged or reaches the end of its useful life, it could be repaired or recycled instead of thrown away.
As well as very hard and durable plastics, the researchers adapted their procedure to a different monomer and produced flexible, self-healing gels. These could be useful in anything from cosmetics, to paint, to the design of drug capsules, because of their particular solubility properties.
Ed. Notes: Industry catches up to kindergartners who know to clean up after themselves. As the environment becomes more livable again, it will cost more to live in it. Hence we better have progress in social policy to match the progress in materials technology. That is, we should make the higher land values into a boon for everyone by recovering and sharing them, in lieu of taxation and wasteful spending. It’s called geonomics and aligns the needs of Earth with those of humanity.
This 2014 excerpt of Daily Kos, Jun 20, is by Hunter, a blogger there.
According to a new poll 47 percent of us aren’t monsters.
In 1995, in the midst of a raging political debate about welfare and poverty, less than a third of poll respondents said people were in poverty because of issues beyond their control. At that time, a majority said that poverty was caused by character flaws, by “people not doing enough.” Now, nearly half of respondents, 47 percent, attribute poverty to factors other than individual initiative.
In hard economic times, people become more sympathetic to the poor. About half us recognize that there are things that can make you poor —- from simple lack of opportunity to medical crises to local economic conditions to a not-very-long string of bad luck —- that do not stem from a simple case of insufficient bootstrap-pulling.
Ed. Notes: Perhaps next, a majority of Americans will accept the cure for poverty, which is distributing the common wealth fairly, rather than let a 1% hog most of it. To accomplish that, we’d all pay in land dues and get back rent dividends, swollen by the values of locations downtown, oil fields, the EM spectrum, etc. The land dues could replaces counterproductive taxes, the dividends could replace wasteful subsidies. Most people would come out way ahead. We’d be free to work as much as we want, at what we love, and to deveop our talents in anyway we want.
These two 2014 excerpts on LVT, Jun 26, are of NICVA by Elizabeth Hendron and of The Guardian by Simon Goodley and Leila Haddou.
Tax Land, Not Houses
NICVA’s Centre for Economic Empowerment has launched a new report into the feasibility of introducing a land value tax in Northern Ireland.
Under the current system of taxation, charges are levied on land and the improvements – typically buildings – together, with no distinction made between the two.
Under a system of Land Value Tax, the charges would be levied on the land only, with improvements subject to zero or minimal taxation. If introduced it could mean that land bought by developers but not developed, and agricultural land could be taxed for the first time.
This would shift the burden of real estate taxation towards less productive activities, particularly speculation on land, which is a major source of property bubbles. LVT would be a progressive tax, with the most deprived paying least.
Seamus McAleavey, chief executive of NICVA said, “House prices in Northern Ireland are on the rise again. As before, this has been widely welcomed as an indication of economic progress. It is important to ensure that any price rises are a sustainable result of real economic growth, rather than speculation. In this context, this report is crucial reading.”
Inflated property values merely increase indebtedness and reduce economic output.
People who have low incomes and modest homes should continue to receive rates relief, as currently applied. People with low incomes but with expensive properties could defer payment until the property is sold.
Tesco, the UK’s largest supermarket chain, is hoarding land and buildings covering an area big enough to build 15,000 homes, a Guardian analysis has revealed.
While the aggregate size of Tesco’s land bank could theoretically be used to build many homes, it is distributed across Britain, with some plots likely to be unsuitable for housing.
Some of the portfolio is residential property or rented to other retailers, but the majority is undeveloped. Tesco last year said its UK property empire was worth £20bn.
The hoarding of development land for long periods has also drawn criticism in the house building sector – which owns far larger plots of land than the supermarkets.
Fred Harrison, an economist who has called for land to be taxed as if the sites were in use, added: “Given there is a market demand for it and we know the value, you can charge the owners for the public services that make the land valuable. Then they lose money if they just sit on it with no revenue”.
This 2014 excerpt of Lebanon’s Alakhbar, Jun 17, by Alain Tabourian, industrialist, Minister of Energy and Water from 2008 to 2009, and graduate of the Harvard Business School.
I do not see any future for industry in Lebanon, and definitely not a world-class industry.
Private investors who enter into partnership with the public sector in an unstable region of the world assume a Weighted Average Cost Of Capital (WACC) of 15 to 20 percent.
Still, a major international company reached out to us for collaboration on establishing a world-class production unit in the food industry, which would have employed 1,000 people. It was found not to be feasible due to the high price of agricultural land, which was about 10 to 20 times the global average.
High land prices here have no corresponding economic justifications. Who could believe that our locations produce 10 to 20 times more than elsewhere?
High hotel room rates keeps Lebanon off the global tourism market.
Everything has high prices because of excess liquidity that has no room to be invested productively except in inflating bank deposits or buying up real estate. Acquisition of real estate does not result in any cost. A person may keep a piece of land for 30 or 40 years without paying any fees, then sell it at a huge profit without paying any tax.
Investors in the real economy bear many risks even as they employ people. If these investors profit, they pay taxes, first on profits, and second on distribution. Is that fair? Does this encourage productive investments?
The solution is not to increase tariffs. Doing so would reduce the consumers’ purchasing power, reducing their demand for the rest of goods and services, and subsequently, cause the entire economy to contract.
The rentier economy is also directly responsible for the migration of our young people. The Lebanese economy does not create enough value-added jobs that can accommodate the capacities of educated young people.
These young people send remittances to support their families. Meanwhile, we import low-wage workers for simple jobs, and these workers in turn send a large part of their incomes to their home countries.
We had a war that caused widespread destruction, and we had to rebuild. We benefited from external cash inflows, which drove consumption up. At the same time, oil prices rose, and the incomes of Lebanese expatriates improved, increasing the size of their remittances to Lebanon. Of course, the energy bill skyrocketed, but money was available to pay it thanks to remittances. We also benefited from the global debt crisis of 2008, which reduced interests to zero in the major economies, reducing the cost of our debt and increasing the flow of capital. However, all these factors are precarious.
Ed. Notes: It is painfully ironic that economic troubles are easy to solve logically and hard to solve politically. Imagine if Lebanon taxed land or instituted land dues; there goes speculation and the inflated price for locations. Imagine if Lebanon repealed taxes on wages and on profits from actual output; there goes the scarcity of capital as domestic savings and investments from outside pile up. Imagine if Lebanon did not subsidize any industry or product, not even fuel for heating homes; there goes waste to be replaced by upgrading the means of production. Make these geonomic reforms and maybe Lebanon could lead the Middle East to peace and prosperity.
This 2014 excerpt of the New York Times, Jun 17, is by Michael Forsythe.
President Xi Jinping of China has been pushing his own family to sell hundreds of millions of dollars in investments. If he doesn’t do this, it is very hard for him to convince other elite families to be more self-disciplined.
Xi’s sister Qi Qiaoqiao and brother-in-law Deng Jiagui sold investments in at least 10 companies worth hundreds of millions of dollars, including their 50 percent stake in a Beijing investment company they had set up in partnership with a state-owned bank.
Even while Mr. Xi’s relatives were selling off assets, those calling publicly for more disclosure have been jailed. The websites of The Times and Bloomberg, which have both reported on elite shareholdings, have been blocked in China for many months.
Relatives of the Politburo elite are deeply enmeshed in the state-driven business culture of the country. They have accumulated billions of dollars in assets, including company shares and real estate, in the past decade as China’s economy has boomed. Many of the investments are in areas such as mining, infrastructure, and property that involve the privatization of formerly state-owned assets.
At least four families among the nine-man Politburo Standing Committee that ruled the country from 2007 to 2012 each owned or controlled documented assets in excess of $150 million, including relatives of Xi, former Prime Minister Wen Jiabao, Zhou, and Jia Qinglin (the former fourth-ranked party member).
Deng through a Shanghai holding company owned more than one-sixth of a rare-earth mining company that reported assets of about $2.1 billion. Rare earths go into critical components in electric cars and wind turbines.
Qinchuan was set up in the weeks after Xi ascended to the Politburo Standing Committee in 2007 with $2.7 million in investments, ballooning to $156 million four years later. Deng and Qi did not sell three of its most valuable assets held by Qinchuan, including two infrastructure companies in the city of Xiangyang in Hubei Province. The three assets are together worth at least $234 million.
On Oct. 8, ownership of Qinchuan itself was transferred out of the family and into the hands of a longtime business associate, Xu Zaisheng. Qi, her husband Deng, and her daughter Zhang Yannan still hold tens of millions of dollars in company shares and real estate, including a villa overlooking Hong Kong’s exclusive Repulse Bay.
Surging income inequality in China is among the highest in the world and far greater than in Japan, South Korea, and Taiwan: neighbors that, unlike China, do not have Communist roots.
Ed. Notes: These details from China show how government creates fortunes, a universal process, that happens in all times and places, even in so-called market economies. In the US, investors and politicians both got rich off railroads. Oil companies, thru their lobbyists and the banks they spun off, enriched helpful politicians along with the businessmen. Governments paid for paving roads which made it possible to sell millions of cars. Governments bought millions of desktop computers and developed the internet, paving the way for fortunes to be made in Silicon Valley. If government is to have a role in industry, then the resultant profit should go to the public. Or better yet, politicians should not give or receive favor from any players in the business world.
This 2014 excerpt of Wired, Jun 12, is by Jordan Golson.
Tesla CEO Elon Musk announced that his company will not “initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” In plain English, that means that if other car companies want to produce electric cars, they can use Tesla’s technology to do it.
Of course, Tesla wants to make and sell electric cars (it exists to make a profit, theoretically), but in order to do that on a large scale, the company needs to move past the niche markets that the Model S currently plays in. They need the public to stop thinking of them as electric cars and to start thinking of them simply as cars.
“They need to see Americans … at least be open to switching to an electric vehicle lifestyle,” Kelly Blue Book analyst Karl Brauer said. By themselves, “they’re never going to convert the average American into an electric car fan, even with great press and great publicity.” A $90,000 electric car for celebrities and the Silicon Valley elite isn’t going to save the world.
At the moment, the Model S is the only electric car that acts as a true replacement for a more traditional gasoline-powered automobile, with its 200+ mile range and network of rapid charging stations that stretches from coast-to-coast across 96 stations in the US, with dozens more coming in North America, Europe and Asia. Not enough people are interested in electric cars with 70-100 miles of range, as Nissan and others are discovering.
If other automakers begin using Tesla’s technology, it increases the value of the company and its inventions. Tesla has hundreds of patents, but if the company goes bust because not enough people buying electric cars, they’re all meaningless. Tesla needs widespread adoption of electric cars and the easiest way to do that is to get other automakers to sell them too.
Ed. Notes: This is not the only time that it’s not a good idea for an inventor to hoard his discovered knowledge. Actually, it’s rarely a good idea. Patents and copyrights don’t protect inventors so much as they benefit corporations who use the legalisms to post “no trespassing” signs on the field of knowledge, hampering the spread of good ideas.
Competition and cooperation work best together, not apart. More beneficial to inventors is getting a head-start in business, establishing a brand identity, and capturing huge market share (see Apple).
Of course, inventors deserve to be rewarded for their useful creations. But is owning and hoarding knowledge the best way to do that? Preventing everyone else from using a good idea when they’re not the first to realize it?
Should ownership go on forever? Should the descendants of Newton be paid every time somebody uses calculus? Should no one ever repeat a joke without paying the person who first told it?
Does the first person who stepped on the moon own the moon? Nope. Not unless they compensate everyone else who also wants to and can visit the moon. That’s what makes owning land — or ideas — proper … or “property”, and that is compensating those excluded. Pay the rental value of land, or of knowledge, to society and it is yours … for as long as you keep paying your neighbors (as they’ll be paying you in your harmonious geonomy).
This 2014 excerpt of Fortune, Jun 10, is by Chris Matthews.
When we think of government corruption, our biased minds often gravitate to thoughts of military juntas and third world governments. But corruption is everywhere, in one form or another. And it’s costing U.S. citizens big time.
Corruption on the state level is costing Americans in the 10 most corrupt states an average of $1,308 per year, or 5.2% of those states’ average expenditures per year.
Between 1976 and 2008, there have been more than 25,000 convictions of public officials for violation of federal corruption laws. Further, state spending reveals patterns of corruption.
Based on these data, the the most corrupt states are:
8. South Dakota
Mississippi and Louisiana are some of the least economically developed states in the country. Illinois and Pennsylvania are part of the Rust Belt. Alaska is resource rich.
For 9 out of the 10 of the most corrupt states, overall state spending was higher than in less corrupt states (South Dakota was the only exception). Attacking corruption could bring down state spending without hurting programs that benefit people.
Spending in these states was different than their less corrupt counterparts; it favors construction, salaries, borrowing, correction, and police protection at the expense of schools and hospitals.
Construction spending, especially on big infrastructure projects, is particularly susceptible to corruption because the industry is dominated by a few monopolistic, well-connected firms. Corrupt states also have more and better paid public employees, including police and correctional officers, who may have more to do where residents are kept poor.
The least corrupt states are: Oregon, Washington, Minnesota, Nebraska, Iowa, Vermont, Utah, New Hampshire, Colorado, and Kansas. All are in the North, are either mountainous or prairie, and several are play states.
Ed. Notes: Government officials can’t be corrupt if they can’t spend public money. There is no good reason to continue to allow them to enjoy this ppwer. The budget could be put on the ballot and bonds could be offered for sale for infrastructure projects; if they don’t sell, the project dies. If we could clean up public spending, then next we could correct taxation. And once we straighten out the state and local governments, then we could shape up the federal government … and finally live in a citizen-friendly nation — a geocracy!
This 2014 excerpt of Weekly Wastebasket, Jun 06, is by Taxpayers for Common Sense.
With the near-trillion dollar farm bill now law, the U.S. Department of Agriculture (USDA) shovels out cash for at least 55 new programs, reports, and studies for everything from catfish inspection and cotton trust funds to studying the marketability of U.S. Atlantic Spiny Dogfish and conservation of the Lesser Prairie Chicken.
Instead of eliminating wasteful, outdated, and ineffective programs, the farm bill created a whole new alphabet soup of agribusiness income entitlement programs – Agriculture Risk Coverage (ARC), Supplemental Coverage Option (SCO), Price Loss Coverage (PLC), and Stacked Income Protection (STAX) to name a few.
These programs only add more waste to highly subsidized crop insurance for more than 120 crops; this number will soon balloon as Congressional mandates for “priorities” such as sugarcane, swine, and sorghum (used as a bioenergy crop).
USDA just dispensed $6 million to universities, extension offices, and even a crop insurance consultant to create “decision tools and educational materials” designed to tell producers [who mainly now are not families but corporations] to squeeze the most money out of the programs.
USDA is delaying enrollment until spring 2015 so producers will be picking their “safety net” for their 2014 crops after they’ve already harvested and sold them. It’s like being able to make your poker bet after you’ve seen everyone else’s cards.
Ed. Notes: You really must rein in your politicians if ever you’re to save money and save land. Real farmers don’t need subsidies. All they need is zero taxes and fines upon fake farmers who ruin land and raise crops of low nutritional value.
Farmers, by living in the country, enjoy one huge advantage over others — the land rent they pay is much less per acre than that paid by people leasing city land. If everyone paid land rent into the public treasury and got a rent share back, country folk would come out way ahead, compared to urban dwellers.
Then maybe farmland could catch a long needed rest.
This 2014 excerpt of the New Economics Party, Jun 6, is by Deirdre Kent.
Like the formation of a river from the small streams to the river to the sea, create a new national currency at Local Board level and pass it up the line. Then the monetary authority, in conjunction with the monetary authorities of the supercities and the government, would make sure the local board did not issue more money than it was allowed, as inflation must be kept strictly under control.
We aim to move to a tax system that taxes the monopoly use of the commons rather than labour and sales. Some revenue will be distributed as a Citizens Dividend to all citizens who have lived there for a year or more, the rest will be shared by all levels of government.
Government pays you for your land, and the title of your property then bears a covenant, an obligation to pay a ground rent from then on, whoever owns the land. The tenure is for a lifetime, with rights that your descendants can get the next lease.
Land rents are stable over time. When there is a major event like an earthquake they decline or when a railway is put in or a labour intensive business arrives they rise more than just a tiny bit.
Councils and Government should never sell land. They should keep it and auction the leases to the highest bidder, then share that revenue with the public (via a Citizens Dividend) and the central government. This should be entrenched in law.
This 2014 excerpt of Dirt Diggers Digest, May 29, is by Phil Mattera.
More than half of corporate miscreants (146 of 269, or 54 percent) have received state and local subsidies. These include cases in which the awards went to the firm’s parent or a “sibling” firm. The total value of the awards comes to more than $25 billion.
A large portion of that total ($13 billion) comes from a single company — Boeing, which is not only the largest recipient of subsidies among corporate miscreants but is also the largest recipient among all firms. Boeing made the Justice Department list by virtue of a 2006 non-prosecution agreement under which it paid $615 million to settle criminal and civil charges that it improperly used competitors’ information to procure contracts for launch services worth billions of dollars from the U.S. Air Force and NASA.
Not all the subsidies came after that case was announced. In the period since 2006, Boeing has received “only” about $9.8 billion.
The other biggest subsidy recipients on the list are as follows:
Fiat (parent of Chrysler): $2.1 billion
Royal Dutch Shell (parent of Shell Nigeria): $2.0 billion
Toyota: $1.1 billion
Google: $751 million
JPMorgan Chase: $653 million
Altogether, there are 26 parents on the DOJ list that have received $100 million or more in subsidies. As with Boeing’s $13 billion figure, the amounts for many of the companies include subsidies received before as well as after their settlement.
Ed. Notes: Soon’s you get tired of such corruption, let’s put a stop to it. Quit letting politicians subsidize anybody. And quit fining the corporation but instead punish the CEOs and managers making the decisions.
If not subsidizing, government could save so much public revenue it could climb out of the red. The biggest “subsidy” is letting corporations keep “rents” (society’s payments for land, resources, etc). Once government recovers those socially-generated values, it could not just end counterproductive taxes but even pay citizens a dividend!
If corporations can’t profit when not getting taxed on creating value and when people are endowed handsomely in order to become customers, then the corporation deserves to go broke.
This 2014 excerpt of CalTech, Jun 5, is by Cynthia Eller.
If you’re trying to outwit the competition, it might be better to have been born a chimpanzee. The study involved a simple game called the Inspection Game. To win repeatedly, players have to accurately predict what their opponent will do next.
The game is common in everyday lives. An employee may want to work only when her employer is watching and prefers to play video games when unobserved.
However cleverly you play the Inspection Game, if your opponent is also playing strategically, there is a limit to how often you can win. Unlike humans, chimps learned the game rapidly and nearly attained the predictions for optimal play. They continued to do so even as researchers introduced changes into the game.
Chimpanzees excel at short-term memory; humans find it much more challenging. Further, wherever humans sit on the cooperative/competitive scale, common chimpanzees are more competitive. They continuously update status and dominance hierarchy.
The “cognitive tradeoff” is probably a key. Acquiring capacities such as language and categorization caused human brains to lose other capacities, such as intuiting another’s strategy. In the experiments, humans were not allowed to speak with one another.
Ed. Notes: When humans got TV, they quit reading. When they got literacy, they quit story-telling. So when they got language, what did they quit? ESP? That’s my theory, which did not make me very highly regarded in grad schools decades ago. But guess what? Now the cutting-edge linguists at last agree! So if linguists can open up to “intersubjectivity”, can economists finally open up to the role of rent about which so many of us are in denial?
This 2014 excerpt of the Korea Herald, Jun 5, is by the editors.
Following the Sewol ferry tragedy, uprooting the so-called “bureaucratic mafia” has emerged as an urgent national task. Last month, President Park Geun-hye unveiled plans to prevent retired public officials from pursuing rent-seeking in cahoots with officials on active duty.
While all government agencies are supposed to join this drive, the ethics committee of the executive branch approved the employment of a former director-general of the Ministry of Trade, Industry and Energy at the steelmaking company POSCO. He had been retired for less than two months.
Under the Public Service Ethics Act, high-ranking public officials cannot land a job for two years after retirement with private companies closely connected with the business of the departments to which they belonged for five years before retirement.
The corrupt symbiosis between incumbent and retired public officials is pervasive and deeply entrenched. The government should toughen the penalties for those who breach it.
Currently, retired officials who find jobs at companies in violation of the law are subject to imprisonment for up to a year or a maximum penalty of 10 million won. But the severest punishment meted out so far was a penalty of 4 million won. This is nothing more than a slap on the wrist for officials who make several hundreds of millions of won per year.
Ed. Notes: A more thorough and effective reform — that is, radical — is to quit letting politicians decide how to spend public money. Limit their spending to police and military. But for infrastructure, social programs, and corporate welfare, forget it. Abolish spending on the rich. Pay citizens a dividend, enabling them to hire teachers and doctors. And sell geo-bonds to fund any newly needed road or bridge, etc. If politicians and bureaucrats can no longer stick their sticky fingers into the public till, then no lobbyist or business will try to bribe them. Problem solved.
Central banks such as the Federal Reserve have obtained their income from interest on the bonds they hold. But with interest rates so low now, the central banks, like other bond holders, are receiving little revenue. So now, central banks are buying shares of stock to get higher income from dividends and capital gains.
It’s a bad idea!
First of all, the reason interest is so low now is because central banks around the world have been pushing rates down. The low income from savings accounts and bonds has hurt retired folks and have distorted stock markets. The U.S. stock market averages have been making new highs to a great extent because bonds yields are so low, and also because US companies are borrowing funds at low rates to buy back their stocks.
Secondly, when central banks buy up shares of stock, they, as agents of government, socialize the ownership of otherwise private companies. Government already taxes and regulates the economy, and they own industries such as education and much of medical care, and now they want to own more of the whole economy. Even if a central bank buys shares in an index fund, they artificially raise share prices, and they do it with money they create. Moreover, what happens when the price of stocks has a large drop? Will the central banks contribute to the selling, or buy more?
According to a report to be published this week by the Official Monetary and Financial Institutions Forum, governments and their agencies have already made twenty-nine trillion dollars of market investments. The largest governmental investor is China. The Swiss and Danish central banks have also been buying substantial equities. Central banks have also been buying real estate. Ever more financial and real assets are being acquired by central banks, and thus also by the governments that own and control them.
The ownership of the economy is not what the founders of central banks had in mind. When the Federal Reserve was established in 1913 in response to the banking panic of 1907, its role was to stabilize the banking system as a lender of last resort. For a long time, the Fed purchased US treasury bonds to expand the money supply, as it created the funds it used to buy bonds. But after the recession of 2008, the Fed also bought mortgage-backed securities as well as shares in companies it wanted to bail out.
But now central banks are not buying shares to bail out failing companies, but to increase their income. Ultimately this buying is self-defeating for central banks and all investors, because such massive purchases raise the ratio of share prices to yields, reducing the rates of return.
The pension funds of government employees have, of course, been investing in the stock markets, as well as in bonds and real estate, but these funds can be regarded as belonging to the employees rather than to governments. Governments with surpluses such as from exports or oil sales have set up “sovereign wealth funds” that invest in financial markets, with the potential to manipulate and distort markets. There should be a global treaty to confine sovereign funds to government bonds and global index funds.
It is even worse for central banks to invest in private financial markets because they are creating the money they use for these purchases. This inflation of the money supply is not for stabilizing the currency or helping the banking system, but just to get stock market yield. That monetary inflation will eventually cause price inflation and fuel an even bigger real estate bubble than that which ended in the Crash of 2008.
The ultimate remedy for such asset distortion is the elimination of all central banks. Since that’s not about to happen, we will have to witness a coming financial tragic horror. Just as in the years prior to 2008, we are sitting in boats on a river whose current will take us ever faster the financial waterfall. The most likely year of the next crash will be in 2026, as the 18-year real estate cycle has been the leading cause of the business or interventionist cycle for the past two centuries.
Last time around, government-sponsored enterprises such as Fannie Mae helped stoke the boom by packaging and selling real estate mortgages. The financial reforms after 2007 did nothing to stop the basic causes of the real estate cycle. Now, the massive purchases of stocks, in addition to bonds and real-estate related assets, will help make the Crash of 2026 the biggest ever.
This 2014 excerpt of the New York Times, Jun 5, is by Carl Zimmer.
Billion-dollar levees aren’t the only things that protect coasts from storm damage. Nature offers protection, too. Coastal marshes absorb the wind energy and waves of storms, weakening their impact farther inland, and rebuild themselves.
Protection from storms is one of many services that ecosystems provide us — services that we’d otherwise have to pay for. In 1997, a team of scientists estimated they are worth, worldwide, $33 trillion — equivalent to $48.7 trillion in today’s dollars. Put another way, the services ecosystems provide us were twice as valuable as the gross national product of every country on Earth in 1997.
Robert Costanza, a professor at Australian National University who led the study, has concluded that ecosystems do more for us than researchers could appreciate in 1997.
Coral reefs, for instance, have proved to be much more important for storm protection than previously recognized. They also protect against soil erosion by weakening waves before they reach land. Each acre of reef provides $995,000 in services each year for a total of $11 trillion worldwide.
The global figure for all services is $142.7 trillion a year (in 2014 dollars).
Deforestation and other damage we’ve inflicted on the natural world has wiped out $23 trillion a year in ecosystem services. The gross domestic product of the United States is “only” $16.2 trillion.
Yet ecosystems don’t simply provide us with good things. Ecosystems can also harbor diseases and harm us in other ways.
Ed. Notes: We can’t pay Nature so whom would we pay? And who would do the paying? And who would determine exactly how much? For the last question, if we reformed limited liability, then businesses would buy insurance, and insurance companies, not just armchair academics, would also calculate ecosystem values.
We could look at our species’ damage of ecosystems totally differently. Instead of play brain dead and accept it as the price of progress, we could make polluters and depleters pay. We could auction off emission permits and extraction leases. We could require those who own land to set aside an Ecology Security Deposit, like tenants do when moving into an apartment. We could require those who use the environment to buy Restoration Insurance, like drivers must have insurance. And we’d fine those who exceed emission standards.
Something else to do is to charge owners land dues. Having to pay, they won’t want their precious land to get ruined and will provide better care. And with all these collected revenues we could pay dividends to the citizenry. Where land is healthier, its value is higher, so the dividend would be fatter, and everyone would have a financial reason, too, to go with love, to conserve resources and be better stewards.
a study of Earth’s economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land’s value and deserve compensation for keeping off ours, as they’d pay us for keeping off theirs. It’s mutual compensation: we’d replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.
what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, including the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.
a POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.
close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)
an answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”
Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.
the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.
more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.
about the money we spend on the nature we use. It flows torrentially yet invisibly, often submerged in the price of housing, food, fuel, and everything else. Flowing from the many to the few, natural rent distorts prices and rewards unjust and unsustainable choices. Redirected via dues and dividends to flow from each to all, “rent” payments would level the playing field and empower neighbors to shrink their workweek and expand their horizons. Modeled on nature’s feedback loops, earlier proposals to redirect rent found favor with Paine, Tolstoy, and Einstein. Wherever tried, to the degree tried, redirecting rent worked. One of today’s versions, the green tax shift, spreads out of Europe. Another, the Property Tax Shift, activists can win at the local level, building a world that works right for everyone.
a neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heri-tage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a divi-dend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jeffer-son suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
the annoying habit of seeing the hand of land in almost all transactions. In geonomics we maintain the distinction between the items bearing exchange value that come into being via human effort — wealth — and those that don’t — land. Keeping this distinction in the forefront makes it obvious that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that much so-called “interest” is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit is from real estate (Urban Land Institute, 1999). Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology.