The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hudson

[FRED]

http://www.itulip.com/images/61JunkyardDog300.jpgThe Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems

by Michael Hudson

It looks like bookstores are about to be swamped this summer and fall by a forest of advice for which publishers gave respectable advances a year ago as the economy was going off the rails. Seeking to minimize the risk of cognitive dissonance, the marketing strategy seems to be to offer advice by well-placed or celebrity insiders on how to recover the kind of free lunch that American pension plans – and popular hopes for easy wealth – have long assumed to be part of the natural law of economic growth, if only it can be better managed. The fantasy that people want to buy is that the happy 1981-2007 era of debt-leveraged price gains for real estate, stocks and bonds can be brought back. But the Bubble Economy was so debt-leveraged that it cannot reasonably be restored. This means that publishers have achieved the marketer’s dream of planned obsolescence: Readers a year or so from now will have to buy a new slew of books as they feel hungry again from the lack of intellectual protein.

For the time being we are being fed Wall Street defenses of the Bush-Obama (Paulson-Geithner) attempt to re-inflate the bubble by a bailout giveaway that has tripled America’s national debt in the hope of getting bank credit (that is, more debt) growing again. The problem is that debt leveraging is what caused our economic collapse. A third of U.S. real estate is now estimated to be in negative equity, with foreclosure rates still rising. So publishers have only a short time frame to sell the current spate of books before people wake up to the fact that attempts to renew the Bubble Economy will make the financial overhead heavier.

In the face of this stultifying financial trend, the book-buying public is being fed appetizers pretending that economic recovery simply requires more “incentives” (a euphemism for special tax breaks for the rich) to encourage more “saving,” as if savings automatically finance new capital investment and hiring rather than what really happens: Money is being lent out to create yet more debt owed by the bottom 90 percent to the economy’s top 10 percent. Publishers evidently believe that the way to attract readers – and certainly to get reviews in the major media – is to propose easy solutions. The theme of most of this year’s bubble books therefore is how we could have avoided the bubble “if only…” If only there had been better regulation, for instance.

But to what aim? After blaming Alan Greenspan for playing the role of “useful idiot” by promoting deregulation and blocking prosecution of financial fraud, most writers trot out the approved panaceas: federal regulation of derivatives (or even banning them altogether), a Tobin tax on securities transactions, closure of offshore banking centers and ending their tax-avoidance stratagems. But no one is going so far as to suggest going to the root of the financial problem by removing the general tax deductibility of interest that has subsidized debt leveraging, taxing “capital” gains at the same rate as wages and profits, or closing the notorious tax loopholes for the finance, insurance and real estate (FIRE) sectors.

Right-wing publishers are re-warming the usual panaceas such as giving more tax incentives to “savers” (another euphemism for more giveaways to high finance) and a re-balanced federal budget to avoid “crowding out” private finance. Wall Street’s dream is to privatize Social Security to create yet a new bubble to feed off of. (Fortunately, such proposals failed during the Republican-controlled Bush administration as a result of a reality check in the form of taxpayer outrage after the dot.com bubble burst in 2000.)

What is not heard is a call to finance Social Security and Medicare out of the general budget instead of keeping their funding as a special regressive tax on labor and its employers, available for plunder by Congress to finance tax cuts for the upper wealth brackets. Yet how can America achieve industrial competitiveness in global markets with this pre-saving retirement tax and privatized health insurance, debt-leveraged housing costs and related personal and corporate debt overhead? The rest of the world provides much lower-cost housing, health care and related costs of employee budgets – or simply keeps labor near subsistence levels. This is a major problem with today’s dreams of a renewed Bubble Economy: They leave out the international dimension.

The latest panacea being offered is to rebuild America’s depleted infrastructure. Alas, Wall Street plans to do this Tony Blair-style, by public-private partnerships that incorporate enormous flows of interest payments into the price structure while providing underwriting and management fees to Wall Street. Falling employment and property prices have squeezed public finances so that new infrastructure investment will take the form of installing privatized tollbooths over the economy’s most critical access points such as roads and other hitherto public transportation, communications and clean water.

Surprisingly, one does not hear even an echo of calls to restore state and local property taxes to their Progressive Era levels so as to collect the “free lunch” of land rent and use its gains over time as the main fiscal base. This would hold down land prices (and hence, mortgage debt) by preventing rising location values from being capitalized and paid out as interest to the banks. It would have the additional advantage of shifting the fiscal burden off income and sales (a policy that raises the price of labor, goods and services). Instead, most reforms today call for further cutting property taxes to promote more “wealth creation” in the form of higher debt-leveraged property price inflation. The idea is to leave more rental income to be capitalized into yet larger mortgages and paid out as interest to the financial sector. Instead of housing prices falling and income and sales taxes being reduced, rising site values merely will be paid to the banks, not to the local tax authorities. The latter are forced to shift the fiscal burden onto consumers and business.

The problem is that this new wave of reformist books advocates merely marginal changes to deep structural problems. There are the usual pro forma calls to re-industrialize America, but not to address the financial debt dynamic that has undercut industrial capitalism in this country and abroad. How will these timid “reforms” look in retrospect a decade from now? The Bush-Obama bailout pretends that banks “too-big-to-fail” only face a liquidity problem, not a bad debt problem in the face of the economy’s widening inability to pay. The reason why past bubbles cannot be recovered is that they have reached their debt limit, not only domestically, but also the international political limit of global Dollar Hegemony.

What needs to be written about is what the marginalists leave out of account and what academic jargon calls “exogenous” considerations, which turn out to be what economics really is all about: the debt overhead; financial fraud and crime in general (one of the economy’s highest-paying sectors); military spending (a key to the U.S. balance-of-payments deficit and hence to the buildup of central bank dollar reserves throughout the world); the proliferation of unearned income and insider political dealing. These are the core phenomena that “free market” idea strippers have relegated to the “institutionalist” basement of the academic economics curriculum.

For example, the press keeps on parroting the Washington line that Asians “save” too much, causing them to lend their money to America. But the “Asians” saving these dollars are the central banks. Individuals and companies save in yuan and yen, not dollars. It is not these domestic savings that China and Japan have placed in U.S. Treasury securities to the tune of $3 trillion. It is America’s own spending – the trillions of dollars its payments deficit is pumping abroad, in excess of foreign demand for U.S. exports and purchases of U.S. companies, stocks and real estate. This payments deficit is not the result of U.S. consumers maxing out on their credit cards. What is being downplayed is the military spending that has underlain the U.S. balance-of-payments deficit ever since the Korean War. It is a trend that cannot continue much longer, now that foreign countries are starting to push back.

Inasmuch as China’s central bank is now the largest holder of U.S. Government and other dollar securities, it has become the main subsidizer of the U.S. payments deficit – and also the domestic U.S. federal budget deficit. Half of the federal budget’s discretionary spending is military in character. This places China in the uncomfortable position of being the largest financier of U.S. military adventurism, including U.S. attempts to encircle China and Russia militarily to block their development as rivals over the past fifty years. That is not what China intended, but it is the effect of global dollar hegemony.

Another trend that cannot continue is “the miracle of compound interest.” It is called a “miracle” because it seems too good to be true, and it is – it cannot really go on for long. Heavily leveraged debts go bad in the end, because they accrue interest charges faster than the economy’s ability to pay. Basing national policy on dreams of paying the interest by borrowing money against steadily inflated asset prices has been a nightmare for homebuyers and consumers, as well as for companies targeted by financial raiders who use debt leverage to strip assets for themselves. This policy is now being applied to public infrastructure into the hands of absentee owners, who will build interest charges into the new service prices they charge, and be allowed to treat these charges as a tax-deductible expense. Banking lobbyists have shaped the tax system in a way that steers new absentee investment into debt rather than equity financing.

The irresponsible cheerleaders applauding a bubble economy as “wealth creation” (to use one of Alan Greenspan’s favorite phrases) would like us, their audience, to believe that they knew that there was a problem all along, but simply could not restrain the economy’s “irrational exuberance” and “animal spirits.” The idea is to blame the victims – homeowners forced into debt to afford access to housing, pension-fund savers forced to consign their wage set-asides to money managers for the large Wall Street firms, and companies seeking to stave off corporate raiders by taking “poison pills” in the form of debts large enough to block their being taken over. One looks in vain for an honest acknowledgment of how the financial sector turned into a Mafia-style gang more akin to post-Soviet kleptocrat insiders than to Schumpeterian innovators.

The cursorily reformist gaggle of post-bubble tomes assumes that we have reached “the end of history” as far as big problems are concerned. What is missing is a critique of the big picture – how Wall Street has financialized the public domain to inaugurate a neo-feudal tollbooth economy while privatizing the government itself, headed by the Treasury and Federal Reserve. Left untouched is the story how industrial capitalism has succumbed to an insatiable and unsustainable finance capitalism, whose newest “final stage” seems to be a zero-sum game of casino capitalism based on derivative swaps and kindred hedge fund gambling innovations.

What have been lost are the Progressive Era’s two great reforms. First, minimizing the economy’s free lunch of unearned income (e.g., monopolistic privilege and privatization of the public domain in contrast to one’s own labor and enterprise) by taxing absentee property rent and asset-price (“capital”) gains, keeping natural monopolies in the public domain, and anti-trust regulation. The aim of progressive economic justice was to prevent exploitation – e.g., charging more than the technologically necessary costs of production and reasonable profits warranted. This aim had a fortuitous byproduct that made the Progressive Era reforms seem likely to conquer the world in a Darwinian evolutionary manner: Minimization of the free lunch enabled economies such as the United States to out-compete others that didn’t enact progressive fiscal and financial policy.

A second Progressive Era aim was to steer the financial sector so as to fund capital formation. Industrial credit was best achieved in Germany and Central Europe in the decades prior to World War I. But the Allied victory led to the dominance of Anglo-American banking practice based on loans against property or income streams already in place. Today’s bank credit has become decoupled from capital formation, taking the form mainly of mortgage credit (80%), and loans secured by corporate stock (for mergers, acquisitions and corporate raids) as well as for speculation. The effect is to spur asset-price inflation on credit, in ways that benefit the few at the expense of the economy at large.

The problem of debt-leveraged asset-price inflation is clearest in the post-Soviet “Baltic syndrome,” to which Britain’s economy is now succumbing. Debts are run up in foreign currency (real estate mortgages in the Baltics, tax-avoidance funds and flight capital in Britain), without exports having any prospect of covering their carrying charges as far as the eye can see. The result is a debt trap – chronic austerity for the domestic market, causing lower capital investment and living standards without hope of recovery.

These problems illustrate the extent to which the world economy as a whole has pursued the wrong course since World War I. This long detour has been facilitated by the failure of socialism to provide a viable alternative. Although Russia’s bureaucratic Stalinism got rid of the post-feudal free lunch of land rent, monopoly rent, interest and financial or property-price gains, its bureaucratic overhead overpowered the economy in the end. Russia fell. The question is whether the Anglo-American brand of finance capitalism will follow suit from its own internal contradictions.

The flaws in the U.S. economy are tragic because they are so intractable, embedded as they are in the very core of post-feudal Western economies. This is what Greek tragedy is about: a tragic flaw that dooms the hero from the outset. The main flaw embedded in our own economy is rising debt in excess of the ability to pay is part of a larger flaw: the financial free lunch that property and financial claims extract in excess of a corresponding cost as measured in labor effort or an equitably shared tax burden (the classical theory of economic rent). Like land seizure and insider privatization deals, such wealth increasingly can be inherited, stolen or obtained by political corruption. Wealth and revenue extracted via today’s finance capitalism avoids taxation, thereby receiving an actual fiscal subsidy as compared to tangible industrial investment and operating profit. Yet academics and the popular media treat these core flaws as “exogenous,” that is, outside the realm of economics analysis.

Unfortunately for us – and for reformers trying to rescue our post-bubble economy – the history of economic thought has been suppressed to give an impression that today’s stripped-down, largely trivialized junk economics is the apex of Western social history. One would not realize from the present discussion that for the past few centuries a different canon of logic existed. Classical economists distinguished between earned income (wages and profits) and unearned income (land rent, monopoly rent and interest). The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains. But even the Progressive Era did not go much beyond seeking to purify industrial capitalism from the carry-overs of feudalism: land rent and monopoly rent stemming from military conquest, and financial exploitation by banks and (in America) Wall Street as the “mother of trusts.”

What makes today’s bubble different from previous ones is that instead of being organized by governments as a stratagem to dispose of their public debt by creating or privatizing monopolies to sell off for payment in government bonds, the United States and other nations today are going deeply into debt simply to pay bankers for bad loans. The economy is being sacrificed to reward finance, instead of finance subordinating and channeling finance to promote economic growth and lower the economy-wide cost structure to remain viable. Interest-bearing debt is weighing down the economy and causing debt deflation by diverting saving into debt payments instead of capital investment. Under this condition “saving” is not the solution to today’s economic shrinkage; it is part of the problem. In contrast to the personal hoarding of Keynes’s day, the problem is the financial sector’s extractive power as creditor instead of clear the slate by wiping out the economy’s bad-debt overhang in the historically normal way, by a wave of bankruptcy.

Today, the financial sector is translating its affluence (at taxpayer expense), into the political power to pry yet more public infrastructure away from state and local communities and from the public domain at the national level, Thatcher- and Blair-style as it is sold off to absentee buyers-on-credit to pay off public debt (while cutting taxes on wealth yet further). No one remembers the cry for what Keynes called “euthanasia of the rentier.” We have entered the most oppressive rentier epoch since feudal European times. Instead of providing basic infrastructure services at cost or subsidized rates to lower the national cost structure and thus make it more affordable – and internationally competitive – the economy is being turned into a collection of tollbooths. How strange that this year’s transitory wave of post-bubble books fails to place the financialization of the U.S. and global economies in this long-term context.

(Art credit: Peter Tyla (http://petertytla.com/gallery/pages/61%20Junkyard%20Dog.html))

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[raja]

Hudson is an economic god.

It's time to Eat the Rich, before they turn us into slaves . . . . :eek:

[marvenger]

This piece is going to be my condensed bible for a while I think. Good on ya Michael.

[LargoWinch]

After reading this great commentary, I cannot help to think: What if Dr. Hudson has an iTulip account? :eek:

From now on, I shall think at least trice before I write!

[GeraldRiggs]

Hussman did a good job of describing what is happening in the global economy and why. Unfortunately, I don't see any way out of this mess. I've read hundreds of different times over the past two years on many websites including this one, Mish, Denninger, RGE, CR, et al.....the same thing. Transparency, let the insolvent banks fail, clean up the debt, haircuts to the bondholders.....etc etc...blah blah blah........yada yada yada......
we need to understand one thing........The USA is controlled and run by the banking system. Why in the hell would they do ANYTHING that cuts into their profits? Answer......They won't. GS, JPM, and MS pretty much are propping the stock market up right now so the banks can sell equity to rebuild capital ....all with the US governments blessing! It's complete fraud on a grand scale out in the open and NOTHING will ever be done about it. Why?????.......because...........you guessed it!........The banksters run the country.
God Help us all!

[due_indigence]

"These problems illustrate the extent to which the world economy as a whole has pursued the wrong course since World War I."

The Federal Reserve was established in 1913 in part to draw the US into WWI. 1913 was a watershed year no doubt.

"The flaws in the U.S. economy are tragic because they are so intractable, embedded as they are in the very core of post-feudal Western economies."

Bingo. Only a revolution will the overthrow western Ponzi 'growth at all costs' model in favor of a sustainability model. Peak oil will help.

[BuckarooBanzai]

Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.

-- Property taxes. This guy loves property taxes. Unfortunately, property taxes directly undermine one of the bedrock principles of a free society-- Private Property. (the others being Life and Liberty). When the state taxes your property, they OWN your property. This assertion can be easily tested by simply not paying your property tax, and seeing what happens next. That's why the founding fathers made direct taxes unconstitutional. People forget they did this for a very, very good reason.

-- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?

-- Reverence for anti-trust legislation. Another progressive "reform" that is simply a crude attempt to treat a symptom, and not the disease. What is the disease? The stultifying "dead hand" of the modern corporation. Corporations (or more accurately, agents of Corporations) have hijacked our legal system over the last 150 years, such that today artificial corporate persons are treated in preference to natural human persons. Combine this legal preference with corporations' unnatural advantages over natural human persons (i.e. perpetual existence) and its "game over". The sad fact is, Corporations raped the world so badly in the 17th and 18th centuries (viz, British East India Company, etc.) in such a morally outrageous way that English law deliberately and aggressively hamstrung the corporate legal form in the late 18th century... only, people have short memories it seems, and corporations got their mojo back by the time the War Between the States rolled around. Read "Gangs of America" by Ted Nace; in fact, put down whatever you are reading and pick up that book immediately. If not sooner.

--Apologist for Communism. "Although Russia’s bureaucratic Stalinism got rid of the post-feudal free lunch of land rent, monopoly rent, interest and financial or property-price gains, its bureaucratic overhead overpowered the economy in the end. Russia fell." Good grief. Communism is nihilistic and the economic embodiment of pure evil. Hudson references his own ridiculous notions about land rent and property tax as something Stalin got right; that should be a gigantic klaxon horn showing him how completely wrong he is about that.

--Holy crap. Do I smell "Labor Theory of Value" here? Maybe a little Class Warfare, too? "The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains." Hmmmmmmmmmmmmmmm.

Hudson defines some of the problems correctly, but the solutions? I don't like where any of his ideas are going with respect to the solutions. Not one bit.

[marvenger]

these corporate problems you are talking about they are the result of concentration of power and writing the rules to suit yourself. Regulation is needed to prevent concentration of power, ie Hudson pointing out how unfair concentration of power has been achieved in the past through accumulation of property and achieving monopoly rents and there is a need to regulate against this. Coz once the power is there the power to create new rules like perpetual person companies is there. Pesonally I think you've bought into all this liberty stuff as its used as the excuse for the concentration of power. Ask 50,000 people what liberty means and you're likely to get 50,000 different answers, ask a wall street banker and he's likely to say property rights.

[marvenger]

maybe I should clarify, that there needs to be some regulation on property rights, other wise they can be abused. Try to maximise the benefits minimise the negatives kind of thing

[charliebrown]

good points made
#1 agree with proptery tax. my tax this year $8000 bucks on a 2000 sq ft house. I fear being layed off and having to come up with 8000 a year. I can take a year or two but may force me to move.

#2 each country is made up of different cultures, have a different history etc. yes we have some common goals, but not all cultures want and value the same things. I am an happy to be an american, to have religious freedom, upward social mobility, rights to travel, freedom for women. I dont want to be a Saudi, Taliban etc.

#3 its all about money. Our political system is awash in it. Unless you have access to money you really have limited justice.

#4 Stalin killed how many? Evil bastard

#5 Que??

[ASH]

-- Property taxes. This guy loves property taxes. Unfortunately, property taxes directly undermine one of the bedrock principles of a free society-- Private Property. (the others being Life and Liberty). When the state taxes your property, they OWN your property. This assertion can be easily tested by simply not paying your property tax, and seeing what happens next. That's why the founding fathers made direct taxes unconstitutional. People forget they did this for a very, very good reason.

I strongly agree with this objection...

maybe I should clarify, that there needs to be some regulation on property rights, other wise they can be abused. Try to maximise the benefits minimise the negatives kind of thing

... but perhaps Hudson phrased the issue too broadly. I gather from some of his other writings that he objects to the concentration of capital in the hands of the wealthy, and the extraction of passive economic rent from laborers by capitalists. Perhaps he'd be agreeable to a "progressive" system of property taxation with a very high rate for investment properties but a very low or non-existent rate for primary residences...

#1 agree with proptery tax. my tax this year $8000 bucks on a 2000 sq ft house. I fear being layed off and having to come up with 8000 a year. I can take a year or two but may force me to move.

... because the most offensive thing about property taxes is that you can never be secure in "ownership" of your home if it can be taxed out from under you.

====

I don't share Hudson's ideological tilt or even agree with him as to what constitutes justice, but in the main, I think his analysis is valuable.

[ASH]

What is not heard is a call to finance Social Security and Medicare out of the general budget instead of keeping their funding as a special regressive tax on labor and its employers, available for plunder by Congress to finance tax cuts for the upper wealth brackets.

Well, thanks to the trust funds, an increasing portion of these programs will be financed out of the general budget! Hooray!

What is being downplayed is the military spending that has underlain the U.S. balance-of-payments deficit ever since the Korean War. It is a trend that cannot continue much longer, now that foreign countries are starting to push back.

Inasmuch as China’s central bank is now the largest holder of U.S. Government and other dollar securities, it has become the main subsidizer of the U.S. payments deficit – and also the domestic U.S. federal budget deficit. Half of the federal budget’s discretionary spending is military in character.

I don't think this is a balanced perspective. Those who favor spending on butter over guns tend to win the argument about the budget by making some expenditures a matter of standing law (mandatory) while leaving the rest subject to annual appropriation (discretionary). By making social spending mandatory, those who think expansive social programs are a proper core function of government -- but military hegemony is not -- control the terms of the debate. This is the kind of obfuscation-by-classification game that I would think Hudson would normally decry if employed by his ideological opponents. At the end of the day, there is no manditory and discretionary spending any more than there are entitlement trust funds. There are only inputs and outputs; revenue and expenditures; surplus and deficit. There is only government spending. Period. "Surplus" FICA isn't being plundered by Congress to fund tax cuts for the wealthy; it's just being plundered to fund the entirety of current expenditures. The US balance of payments deficit isn't the result of military spending, it is the result of spending. It's especially unfortunate that Hudson references the impact of military spending since the Korean War, given how much military expenditures have fallen as a percentage of federal outlays since then.

What we spend on, how much we spend, and how much we tax are very proper subjects for debate -- maybe we should spend less on the military and tax more progressively. But it isn't honest for Hudson to assume that mandatory entitlement spending is justified, and therefore any accumulation of debt can be blamed on adjustment of the tax code or discretionary spending. For that matter, laws can be changed. Are not the tax rates a matter of law? Why is "mandatory" spending sacrosanct but tax policy falls into the same category as "discretionary" spending. It's all discretionary.

The main problem I have with Hudson is that he presents extremely insightful analysis buried inside a very subjective and ideological framework. I wish he'd play it a bit more straight. The heart of the matter is that we spend on guns and we spend on butter and we don't tax enough to cover what we spend, so we borrow.

What have been lost are the Progressive Era’s two great reforms. First, minimizing the economy’s free lunch of unearned income (e.g., monopolistic privilege and privatization of the public domain in contrast to one’s own labor and enterprise) by taxing absentee property rent and asset-price (“capital”) gains, keeping natural monopolies in the public domain, and anti-trust regulation. The aim of progressive economic justice was to prevent exploitation – e.g., charging more than the technologically necessary costs of production and reasonable profits warranted.

Anyone know how Hudson feels about intellectual property? Like, after I invent something, am I allowed to get rich off of passive income generated by licensing the use of my idea? Does he collect royalties for his books? Do intellectual property rights constitute "monopolistic privilege"?

[marvenger]

... but perhaps Hudson phrased the issue too broadly. I gather from some of his other writings that he objects to the concentration of capital in the hands of the wealthy, and the extraction of passive economic rent from laborers by capitalists. Perhaps he'd be agreeable to a "progressive" system of property taxation with a very high rate for investment properties but a very low or non-existent rate for primary residences...




I agree, property up to a certian size should have minimal tax if its owner occupied.

[Sharky]

Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.

. . .

Hudson defines some of the problems correctly, but the solutions? I don't like where any of his ideas are going with respect to the solutions. Not one bit.

Buckaroo, thanks for that great post. I had the exact same reactions to Hudson's article. Yet another thinly-veiled socialist.

[marvenger]

The main problem I have with Hudson is that he presents extremely insightful analysis buried inside a very subjective and ideological framework. I wish he'd play it a bit more straight. The heart of the matter is that we spend on guns and we spend on butter and we don't tax enough to cover what we spend, so we borrow.

Yes he's ideologically opposed to free lunches and proud of it.



Anyone know how Hudson feels about intellectual property? Like, after I invent something, am I allowed to get rich off of passive income generated by licensing the use of my idea? Does he collect royalties for his books? Do intellectual property rights constitute "monopolistic privilege"?

intellectual property rights are particularly abused in my mind. seems like its usually a 30k year salaried scientist doing the inventing and corporations taking the profits and often the 30k scientists is subsidied by tax payer in the military industrial complex too. what a rort! and they get developing countries to agree to 20 year patents in WTO negotions where astronomical profits are made, while millions die who can't afford patented technology. System is chronically rigged, and hudson does well in describing the obvious as this job is made hard by ingrained neoliberal ideology.

[Sharky]

Here's another quote from the OP that grates on me:

The aim of progressive economic justice was to prevent exploitation – e.g., charging more than the technologically necessary costs of production and reasonable profits warranted. This aim had a fortuitous byproduct that made the Progressive Era reforms seem likely to conquer the world in a Darwinian evolutionary manner: Minimization of the free lunch enabled economies such as the United States to out-compete others that didn’t enact progressive fiscal and financial policy.

Who determines what's "reasonable"? Why should the cost of production have anything to do with the profit anyone makes? What about compensation for the risks that were taken in bringing a product to market? What about compensation for ingenuity?

Hudson does see some of the causes of the problems of today, but he misses their common theme. The issue is not taxation in the wrong way, or some kind of different regulation, or not enough progressive (socialist) values. The system we have today is not Capitalism; it's Fascism. Corporations are in bed with government, and government is being used as an tool for companies to wage economic war against the public and against each other. The only viable long-term solution is to break that tie. Here's a start: Corporate and government criminals need to be prosecuted, and illegally-obtained gains should be clawed-back.

[marvenger]

you're almost there from my point of view. I think you're right that we're closer to fascism at the moment, even though that word is hard to define lets just say its people with too much power. When people have too much power they get free luches, their profits are too high, democratic processes need to be in place to help determine a more reasonable rate of profit. I don't understand how you can be so worried about who determines profits when clearly at the moment its a small group of people who got there through lack of regulation. Taxing land, which is not really a commodity as supply is fixed, if not owner occupied and over a certain size, is a way to prevent monopoly profits, and those who don't have monopoly access to land should be in favour of this unless brainwashed by those with a shit load of land.

[Chris Coles]

The main problem I have with Hudson is that he presents extremely insightful analysis buried inside a very subjective and ideological framework. I wish he'd play it a bit more straight. The heart of the matter is that we spend on guns and we spend on butter and we don't tax enough to cover what we spend, so we borrow.

ASH, as I see it your viewpoint is coloured by your close intellectual proximity to the military industrial complex, (and I do not meant that in any way to disparage you), simply that you seem to forget that all the primary tax income has to originate from equity capital investment that is outside of any government; something once called free enterprise. As such, the problem from my viewpoint is that, instead of spending relative to that free enterprise taxation income, governments of all shades spend relative to how much they can borrow and that has been and remains the primary problem. Neither increasing tax income, nor borrowing will bring the ship of state back to equilibrium. Without additional investment in free enterprise, nothing will change.

[marvenger]

when you've got oligarchy the last thing they want is competition. So if you want a system based on competition, you also need to control those who become too successfull (usually by suspect means). Its a contradiction that most just can't seem to handle.

[Thailandnotes]

-- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?

My wife and I, both American, have lived in Asia for over 20 years. I'm here to tell you that the quality of housing and health care in America is inferior to many many places. Colonoscopy in the US? Colonoscopy in Thailand? I've had both. I'll choose Thailand any day. The hospitals are more efficient. The record keeping is state of the art. The paperwork for insurance claims is minimal. The doctors are excellent.

There have been many people on this site who have complained that after returning to America and experiencing the poor health care, internet service, phone choices, poor banking service, rip-off charges for every this and that, find themselves using all their self control to avoid shaking their stateside friends and saying, "We are being clobbered!"

[*T*]

-- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?

*ahembullshitahem*

With respect, have you actually been outside North America?

Q: Why are Americans so unhealthy? Q: Why is the cost of my travel insurance so much higher to go to the US vs anywhere else in the world? Q: Why do so many Americans not have health insurance?
A: Because healthcare is SO DAMN EXPENSIVE in the US.

Great healthcare is available, but not at a price people can afford. You are not getting value for money.

[unlucky]

intellectual property rights are particularly abused in my mind. seems like its usually a 30k year salaried scientist doing the inventing and corporations taking the profits and often the 30k scientists is subsidied by tax payer in the military industrial complex too. what a rort! and they get developing countries to agree to 20 year patents in WTO negotions where astronomical profits are made, while millions die who can't afford patented technology. System is chronically rigged, and hudson does well in describing the obvious as this job is made hard by ingrained neoliberal ideology.

There is a clear quid pro quo involved in patent law - "you tell us about your invention by publishing a patent that explains how it works, and in return you get exclusivity for a limited period of 20 years".

The inventor not only does the work of creating the invention, but also explains it to everyone else. And the inventor does not get to passively extract rent forever thereafter (as in the case of land, for example).

In the case where the inventor works for a public institution (such as a university or a miltiary lab), the patent is generally owned by that institution and it must be licensed or acquired by anyone else who wishes to obtain exclusivity. In practice technology is largely useless unless you also have the people with the right expertise working for you, so any private company wishing to develop a new product based on a new patent would want to employ the inventors.

Patents can become a problem if large companies start using their broad portfolios to stifle invention - by threatening to sue anyone who attempts to compete with them. This would directly counter the original intention of the law (but would probably be supported by today's politicians).

So far there doesn't seem to be wide evidence of that happening. Large companies build up broad portfolios primarily to prevent upstarts from suing them. Elephants don't often sue midgets, but midgets can make a lot of money by successfully suing elephants.

In the case of patented drugs - the inventors are in a quandary because they need to charge a high price to recoup their extremely high development costs, whereas once the patent is published anyone else can manufacture the drug at very low cost. Society has an interest in wide availability but nevertheless, the development costs have to be paid by someone. There is an obvious solution:bodies that have a mandate to provide access should pay to buy up a stockpile and then distribute to folks who can't afford to pay. This is what has been done in the case of Tamiflu for example in the developed countries.

In the developing world, the bodies that have relevant mandates are the national governments and others such as the WHO - but they don't have the resources to pay. Note that these countries also have difficulty accessing food, which is not yet subject to intellectual property rights. Taxpayers in the developed world could of course volunteer to make the resources available.

[flintlock]

Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.

-- Property taxes. This guy loves property taxes. Unfortunately, property taxes directly undermine one of the bedrock principles of a free society-- Private Property. (the others being Life and Liberty). When the state taxes your property, they OWN your property. This assertion can be easily tested by simply not paying your property tax, and seeing what happens next. That's why the founding fathers made direct taxes unconstitutional. People forget they did this for a very, very good reason.

-- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?

-- Reverence for anti-trust legislation. Another progressive "reform" that is simply a crude attempt to treat a symptom, and not the disease. What is the disease? The stultifying "dead hand" of the modern corporation. Corporations (or more accurately, agents of Corporations) have hijacked our legal system over the last 150 years, such that today artificial corporate persons are treated in preference to natural human persons. Combine this legal preference with corporations' unnatural advantages over natural human persons (i.e. perpetual existence) and its "game over". The sad fact is, Corporations raped the world so badly in the 17th and 18th centuries (viz, British East India Company, etc.) in such a morally outrageous way that English law deliberately and aggressively hamstrung the corporate legal form in the late 18th century... only, people have short memories it seems, and corporations got their mojo back by the time the War Between the States rolled around. Read "Gangs of America" by Ted Nace; in fact, put down whatever you are reading and pick up that book immediately. If not sooner.

--Apologist for Communism. "Although Russia’s bureaucratic Stalinism got rid of the post-feudal free lunch of land rent, monopoly rent, interest and financial or property-price gains, its bureaucratic overhead overpowered the economy in the end. Russia fell." Good grief. Communism is nihilistic and the economic embodiment of pure evil. Hudson references his own ridiculous notions about land rent and property tax as something Stalin got right; that should be a gigantic klaxon horn showing him how completely wrong he is about that.

--Holy crap. Do I smell "Labor Theory of Value" here? Maybe a little Class Warfare, too? "The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains." Hmmmmmmmmmmmmmmm.

Hudson defines some of the problems correctly, but the solutions? I don't like where any of his ideas are going with respect to the solutions. Not one bit.


x2.

Hudson has some good ideas, but takes it too far and mixes in class warfare. He acts as if every rich person in America got that way by being part of a corrupt corporation.

His solution seems to be higher taxes. tax tax tax. How come nobody ever wants to push for lower spending? I mean, the lower half of the population pays very little in income taxes anyway, so he can hardly claim a "free lunch" for corporations and the evil rich. Perhaps they still don't pay enough, but its certainly not free.

The problem with guys like Hudson is that they want to have their cake and eat it too. They want vast social programs. But these programs mean large bloated government to run the programs. Big government spending means someone will always be trying to get "a piece of the action". So you end up with the corrupt mess we have now.

I think the real answer is for the US to downsize its government, reduce its military presence overseas, and disentangle itself from this "global" economy that primarily benefits multi-national corporations at the expense of US citizens. The US has been hijacked by corporations no doubt. But Hudson wants to simply tax them higher and keep going with the same game. We are never going to be able to tax our way out of deficit spending. And that is the real problem.

[Chris Coles]

We are never going to be able to tax our way out of deficit spending. And that is the real problem.

Absolutely spot on.

[marvenger]

Note that these countries also have difficulty accessing food, which is not yet subject to intellectual property rights. Taxpayers in the developed world could of course volunteer to make the resources available.

The developed world doesn't want the developing to have access to resources, thats why they subsidise the hell out of their farmers to undercut developing countries. And you're wrong about food not being subject to intellectual property rights, GM foods are and Multinationals have been flogging the seeds to subsistance farmers particularly in India and getting them into debt to sell supposedly cash crops. They then undercut them buy the crop for less than cost of production process the foods and sell at a high margin. You get your labour to pay you, its one hell of a good business until your laborers start killing themselves to get out of debt.

[jimmygu3]

After reading this great commentary, I cannot help to think: What if Dr. Hudson has an iTulip account? :eek:

From now on, I shall think at least trice before I write!

He's under deep cover: VancouverGoinUp.

[c1ue]

All of you attacking Dr. Michael Hudson's views on property taxes - have you actually studied any of his work?

His underlying assertion behind higher property taxes is as follows:

1) Government at the state and local level requires some type of income in order to function. No income, no lots of other things like schools, firemen, etc.

2) In the past, this income was largely based on property taxes (more than 2/3rds in the 1920s)

3) Since the '40s, this has been eroded via FIRE interests. I believe it is less than 1/3 now, and possibly lower.

4) The reason for this erosion is because the cash flow used to pay property taxes can be (and is) diverted by FIRE into higher property prices. Loans and loan sizes for banks, amount of insured property for insurance, and real estate net for realtors, builders, etc.

5) Since the states and local governments cannot then get their revenue from a reliable source - property values being the most stable of all possible income streams (i.e. income taxes, capital gains taxes, sales taxes, and property taxes), the revenue is obtained via other means.

As we can see with the California (and other state budgets), the first 3 taxation streams can vary 30% or more. California April 2009 vs. April 2008 is a 40.3% drop.

Even the worst case property tax revenues are looking at 5% drops max.

6) The supposed 'freedom' of low or no property taxes is an illusion and sham. Corporate real estate shows the ultimate example: the net total value of all commercial real estate (from an IRS standpoint) is a negative number. The illusion is that commercial buildings fall in value every year when in reality they increase due to inflation.

The reason this legislation exists is so that the rentiers can get tax writeoffs on other income streams even while accumulating value in the existing buildings.

7) If you look at the 50 states, there is a fairly stable average AMOUNT of property taxes paid. The delta is no more than around 2x. On the other hand, the RATES vary by 3x or more - because the PRICES vary so much. It is quite clear that higher property tax RATES equal lower property PRICES. So the supposed benefit reaped by low or nonexistent property taxes is actually exactly what Hudson says: skimmed off by the banks.

So the screams of higher taxes being "UnAmerican" or "Socialist" is simply the defense of those early in the property tax Ponzi scheme: I've got my inflation protected investment for which I pay low property taxes - go get your own.

Furthermore note that Hudson is not saying that taxes should be raised overall. What he is saying is that taxes need to come from a consistent revenue stream, and furthermore that these taxes also ultimately benefit property owners in the form of lower prices.

Having a FAIR and BALANCED and EQUALLY SHARED tax burden means lower income, capital gains, and sales taxes. The bite comes primarily out of the rentiers - those with MANY properties who presently are getting a free ride: high property price = high rent. Low property tax = low expense. You do the math.

[ASH]

ASH, as I see it your viewpoint is coloured by your close intellectual proximity to the military industrial complex, (and I do not meant that in any way to disparage you), simply that you seem to forget that all the primary tax income has to originate from equity capital investment that is outside of any government; something once called free enterprise. As such, the problem from my viewpoint is that, instead of spending relative to that free enterprise taxation income, governments of all shades spend relative to how much they can borrow and that has been and remains the primary problem. Neither increasing tax income, nor borrowing will bring the ship of state back to equilibrium. Without additional investment in free enterprise, nothing will change.

I guess I don't follow you, Chris. I don't perceive any incompatibility between my observation and yours.

[marvenger]

I heard Hudson give a stat once that the property in new york, it might have been just manhattan actually, was worth more than all the plant and equipment in the US. Take that statistic with your stat "the net total value of all commercial real estate (from an IRS standpoint) is a negative number", and you've got a pretty clear idea of the thickness of the wool FIRE interests have pulled over the publics eyes.

[ASH]

seems like its usually a 30k year salaried scientist doing the inventing and corporations taking the profits and often the 30k scientists is subsidied by tax payer in the military industrial complex too. what a rort!

Most of the salaried scientists I know who are productive of original IP earn 3x or 4x that salary... higher in high cost of living areas (assuming we're talking US dollars). I assume that compensation models must vary by industry and organization, but I don't have broad knowledge of what is common. My impression is that scientists/engineers who work for companies set up as old school manufacturing organizations tend to be exploited (base pay, no incentives, no additional compensation for generating IP), whereas technical staff of "high tech" companies are often offered some form of profit sharing (stock options, bounties for generating patents, etc.).

[WDCRob]

Hudson's most interesting point (to me) is that the Progressive Era reforms that led to property taxes as the main form of taxation were a reaction to our Fuedal past and that 'free markets' originally referred not to lack of government regulation, but government regulation of a specific type that kept rentiers and corporations from exerting undue influence in the markets or on policy-making.

If anyone's got a book title that deals with these specific issues (particularly the history) I'd love to know what it is.

[c1ue]

Don't forget that the reason stock options were granted so freely - not just to the 'scientists' - in tech companies was because of the tax benefit.

I'd have to dredge to find it, but I believe the statistic was that from 1994 to 1999, the top 6 tech companies (Microsoft, Intel, Cisco, etc etc) had earnings of tens of billions, but paid less than $50M in total corporate taxes due to tax writeoffs from exercised options.

Yet another example of shareholders getting it from all sides - of course they didn't care as the stock prices were rising.

As for IP patents being an indicator of innovation: IBM is one of the largest generators of patents. Are they an innovator?

What about the Rambus IP patent troll situation?

Qualcomm?

I have no issues with any individual or company creating something new and reaping the benefits.

However, sneaking a patent around a common architecture - that's just a legalistic form of monopoly. Understandable why businesses want to do it - not understandable why people don't get that it is bad.

[metalman]

My wife and I, both American, have lived in Asia for over 20 years. I'm here to tell you that the quality of housing and health care in America is inferior to many many places. Colonoscopy in the US? Colonoscopy in Thailand? I've had both. I'll choose Thailand any day. The hospitals are more efficient. The record keeping is state of the art. The paperwork for insurance claims is minimal. The doctors are excellent.

There have been many people on this site who have complained that after returning to America and experiencing the poor health care, internet service, phone choices, poor banking service, rip-off charges for every this and that, find themselves using all their self control to avoid shaking their stateside friends and saying, "We are being clobbered!"

ssssh! don't tell them. they wanna believe everything's great in am-er-ri-ca. re healthcare, the usa invents the best molecules. else, sucks. housing? a joke. have to go to 3rd world countries for worse.

[allenjs]

Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.

-- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?



Yes, he gets some important things right, and then blows it with such obvious intellectual dishonesty.

I love the way that he argues that "more than half of discretionary federal spending is military", as if military spending is even a hair on a gnat's ass of our current balance of payments crisis. I suppose he categorizes trillions of dollars of bailouts to attempt to revive the dead and rotting FIRE patient as "non-discretionary".

Furthermore, not a single person speaking of the foreign reserves has claimed that the "excess savings" in China is caused by individual Confucian values, so the author is just setting up a straw man. The point being made by the people he claims to be rebutting is that the debt accumulation was a direct result of the Chinese government's industrial policy, a fact which the author doesn't seem to dispute.

In fact, it's no different from saying that the bankers are equally as culpable as the single mother when they gave her a loan on a house she couldn't afford, and she defaulted. In fact, the bankers are more to blame, because they should have known better -- risk management is their job. Likewise, China purchased American debt willfully and purposely out of a set of central government policies. The only difference here is that America has a fiat currency and the world's strongest currency -- it would be as if the single mother were allowed to print money at will, and controlled the police force.

Seriously, why would the author destroy his own credibility with such paranoid ranting about such a tenuous theory? He acts as if America borrowed the money to pay for guns (since we apparently like to murder people for fun, and can't afford guns?). It never occurs to him that perhaps we simply accepted what was being given to us for free, since we like to enjoy ourselves, and since we knew that we had sufficient guns to protect ourselves from any accusation of theft.

[allenjs]

doh! meant to say, "fiat currency and the world's strongest *military*"

[metalman]

said it once and i'll say it again... hudson gives a world class critique but has horrid solutions. but hasn't that always been the case with the left? starting with das kapital...

[mcgurme]

good points made
#1 agree with proptery tax. my tax this year $8000 bucks on a 2000 sq ft house. I fear being layed off and having to come up with 8000 a year. I can take a year or two but may force me to move.



On the surface, I agree with this point. There can be no true "freedom" if one is forced to pay a tax just to live on the land. But the problem is, there are scant few people who would just live on the land and not use or benefit from any any of the services provided by society, which include roads, fire, police, education, etc.

Basically, property taxes trade some freedom for some security. When I think about it, though I'd like to live on the land "freely", if I had no police protection, I wouldn't be able to live freely. I would be subject to gangs, criminals, whatever - and my freedom wouldn't be so free after all. If I went and lived somewhere where there are no other people, then, sure, I wouldn't need much in the way of services (but, I wouldn't be paying much property tax, either). Society has decided on whole that the charging of taxes on property is a fair trade for the services provided for people living there. We could go back to a "toll" system for things like roads and public education, but would that really enhance freedom? I strongly doubt it. My freedom to move about would be dramatically curtailed by various toll operators charging me arbitrary amounts to get where I want to go. That doesn't sound free to me (and in fact, that's why the US moved away from such a toll-road system in the 1800's). People in the US today still have quite extensive freedom to move about and become educated, but that freedom doesn't come "for free". Nothing in life is.

And there's one bigger point I want to raise. That is, we don't own the land. Ownership is an illusion. Let's consider a hypothetical discussion between Joe, the ultimate libertarian who believes in unfettered "ownership", and his great grandkid Jeannie from the future.

Jeannie: (pops into the room next to Joe, watching TV) Hey great granddad, I came back in time to talk to you about some things that you are doing, that will cause us terrible problems in the future. I want to especially talk to you about how you treat the land.

Joe: (Startled) Wow, where did you come from? you're from the future? Get real. And anyway, what I do with my land is my prerogative. It is my land, nobody can tell me what to do with it. Get outta here.

Jeannie: Great Grandad, look at me, I am your descendent. Anyway Joe, when you dump all your used oil from your cars all over, that leeches into the stream for years, killing all the fish. Then nobody else can fish there.

Joe: Well, I don't know who you are. But anyway, I'm not worried about the fish in the stream, I'll just grow fish in my pond and I can charge other people to come fish for healthy fish there. I don't dump oil in that, because I want to preserve its future value.

Jeannie: But Joe, in 120 years, fish won't grow there. They won't grow anywhere. All the fish died off. Because too many people contaminated too much of the land, there are toxic plumes and radiation everywhere.

Joe: Yeah, well, thats in the future, I don't have to worry about it.

Jeannie: So, great granddad, you're telling me that you don't care that the world has become a deforested wasteland? That we live horrible lives in cramped quarters underground, eating mostly what soy and algae protein we can get by with?

Joe: Well, you do look a little pale ... what year did you say you were from?

Jeannie: The year 2133, in an underground dwelling near here. Earth is a miserable place. And one of the reasons it became that way because during the height of the great depression of 2010-2020, populist sentiment threw off all government controls on people's lives. People decided they could just do whatever they wanted with the land to overcome their economic misery. This produced a rush to exploit what was left of the land and resources in the name of "recovery". What was left, was all trashed in 30 years. The destruction that during the early part of that century was confined to places like Sudan and Rwanda spread everywhere. After 30 years, the planet was left destitute, with only small roving bands wandering around looking for scraps.

Joe:Wow, sounds like quite a story you've made up there. But, hey, even if I did believe you, there's not much I could do about it. I own this land, and I need to survive.

Jeannie: But Joe, you don't own the land. All of humanity, past and future, owns it. In the past people exploited the land in ignorance of its future impact. But you can't claim ignorance, I'm here to educate you. And besides, there's plenty of information on your so-called primitive "internet" about the impact. In fact, I think that your county has an ordinance against dumping oil...

Joe: Don't get me started on them damn county bureaucrats, all they wanna do is take away my freedoms to do what I want on MY land.

Jeannie: Great Granddad, did you ever think, there may actually be a reason they want to control some things, aside from their own petty bureaucratic power struggles? That there are sometimes legitimate reasons to limit what you can do with the land? Not all governmental interference is inherently bad - sometimes it can be good.

Joe: I ain't never seen a good bureaucrat in my life...

Jeannie: Look, Great granddad, I inherited this land we are standing on. I'm the sole remaining great grandchild (of 35). This land is MY LAND too, and it is useless. Less than useless. It will be useless for hundreds of years. Its degradation started before you, but you were the one who really started it down the path of irretrievability. Especially when you volunteered to host a nuclear dump here for some pittance of rent, that allowed you to buy a fast car (that you only got to drive a few years before gas got too expensive - I inherited the car too, and it's useless junk).

Joe: Hey, I get a fast car out of the deal? Just for hosting a nuclear dump? I read on some website, something having to do with tulips, about this other guy, Starving Steve, who wanted to do that.

Jeannie: Yes, they never resolved the situation with waste storage in Nevada, so instead, they just found landowners around the country willing to host the nuclear waste, in shallow burial, for cheap. Starving Steve was the first one, but he was followed by many, including you. Local governments, desperate for tax revenues, and intimidated by the anti-government forces, okayed it. You were promised that the waste would be put in safe containers for 700 years. But the company that made the containers went out of business after 10 years, after the containers had already started leaking and they got sued. The result? "My" land, inherited from you, is useless. It will not support life in my time, and it won't for hundreds of years. And what's worse, much of the planet is like that now.

Joe: Well, that's kinda sad, Jeannie. But, that don't mean I'm gonna listen to no darn bureacrat about what I can do with MY land.

Jeannie: (Exasperated) But you've missed the point! It is not really YOUR land, it is OURS, and you are going to single handedly destroy it for all of us! That's why I came back here to stop you.

Joe: Hey, but what's the alternative?

Jeannie: It's simple. Realize that "your" land is actually just borrowed while you're here on the planet, and that someday it will be borrowed by future generations, like mine. If you don't treat it with respect, we won't have a future worth living (it isn't). Anyway, I've got to go, before I mess with the spatio-temporal continuum too much... (fades away)

Joe: (Shakes head) Was that real? Man, maybe I shouldnna had so much whiskey last night. But it sure seemed real. Man, I'm gonna haveta think about this one. Maybe she's right. Maybe this isn't about them stupid power hungry bureacrats. Maybe this is about something deeper, like giving my future grandkids and their kids a decent life. I wish it weren't so darn hard to change my habits, but gosh darn it, I'm gonna try.

Moral of the story: despite the fact that most of us hate government interference in "our" land (I speak truthfully, I have strongly objected to such interference in the past), that interference has at its roots a need to preserve the land's value. Sometimes that interference goes overboard (as in over-aggressive bureaucrats that take away property for growing a few plants with THC in them, and homeowners' associations that won't let people do things like put up laundry lines), but such cases don't warrant the view that "we own the land and can do what we want with it." No, in reality it is more like having a long-term lease on the land. I just wish everyone was clear about this fact - that it is not true ownership - and it would make such discussions much simpler and more honest.

[Gnosis]

said it once and i'll say it again... hudson gives a world class critique but has horrid solutions. but hasn't that always been the case with the left? starting with das kapital...

Too True. It's a case of the "left" fist fighting with the "right" fist on the same man. Guess who is getting beat to a pulp? Yep. I live in California and believe me, I feel the swelling head to toe.

[Munger]

Here's another quote from the OP that grates on me:



Who determines what's "reasonable"? Why should the cost of production have anything to do with the profit anyone makes? What about compensation for the risks that were taken in bringing a product to market? What about compensation for ingenuity?


I take him as referring to monopolistic practices that extract more than the value of production.

In the libertarian wet dream, competition should cause profits to decrease until equilibrium is reached, eventually bringing prices down to the cost of production plus risk costs. Monopolies successfully stack the deck to extract more than this amount by restricting competition.

One example - text messaging. The technological cost? $0. Not just close to zero, but actually zero, because they use control channels of the networks that are not being used for other purposes. It's like scribbling in the margins of a document you are finished using.

Around two years ago the telecoms were charging ten cents per text message - in spite of that they cost nothing. One would think that in this free-market economy an innovative telecom would cut their text-messaging prices to siphon business away from their competitors. Like the prisoner's dilemma, all should rush to this and prices should come down to nothing.

Instead, all 5 major telecoms doubled their text-messaging rates to 20 cents within weeks of each other. Now they got 40 cents per message - a message that has zero production cost (40 cents because they charge for sending AND receiving).

Being fleeced by these sorts of practices constantly is the dystopia that awaits you if you successfully achieve your libertarian fantasies. And, in this future libertarian dreamland, when Justice, Inc. merges with Police Corp, then will you know what tyranny is.

[Master Shake]

Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.

-- Property taxes. This guy loves property taxes. Unfortunately, property taxes directly undermine one of the bedrock principles of a free society-- Private Property. (the others being Life and Liberty). When the state taxes your property, they OWN your property. This assertion can be easily tested by simply not paying your property tax, and seeing what happens next. That's why the founding fathers made direct taxes unconstitutional. People forget they did this for a very, very good reason.

-- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?

-- Reverence for anti-trust legislation. Another progressive "reform" that is simply a crude attempt to treat a symptom, and not the disease. What is the disease? The stultifying "dead hand" of the modern corporation. Corporations (or more accurately, agents of Corporations) have hijacked our legal system over the last 150 years, such that today artificial corporate persons are treated in preference to natural human persons. Combine this legal preference with corporations' unnatural advantages over natural human persons (i.e. perpetual existence) and its "game over". The sad fact is, Corporations raped the world so badly in the 17th and 18th centuries (viz, British East India Company, etc.) in such a morally outrageous way that English law deliberately and aggressively hamstrung the corporate legal form in the late 18th century... only, people have short memories it seems, and corporations got their mojo back by the time the War Between the States rolled around. Read "Gangs of America" by Ted Nace; in fact, put down whatever you are reading and pick up that book immediately. If not sooner.

--Apologist for Communism. "Although Russia’s bureaucratic Stalinism got rid of the post-feudal free lunch of land rent, monopoly rent, interest and financial or property-price gains, its bureaucratic overhead overpowered the economy in the end. Russia fell." Good grief. Communism is nihilistic and the economic embodiment of pure evil. Hudson references his own ridiculous notions about land rent and property tax as something Stalin got right; that should be a gigantic klaxon horn showing him how completely wrong he is about that.

--Holy crap. Do I smell "Labor Theory of Value" here? Maybe a little Class Warfare, too? "The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains." Hmmmmmmmmmmmmmmm.

Hudson defines some of the problems correctly, but the solutions? I don't like where any of his ideas are going with respect to the solutions. Not one bit.

Thanks. Hudson's probably my favorite socialist, but he's still a f-ing socialist.

[Master Shake]

On the surface, I agree with this point. There can be no true "freedom" if one is forced to pay a tax just to live on the land. But the problem is, there are scant few people who would just live on the land and not use or benefit from any any of the services provided by society, which include roads, fire, police, education, etc.

Basically, property taxes trade some freedom for some security. When I think about it, though I'd like to live on the land "freely", if I had no police protection, I wouldn't be able to live freely. I would be subject to gangs, criminals, whatever - and my freedom wouldn't be so free after all. If I went and lived somewhere where there are no other people, then, sure, I wouldn't need much in the way of services (but, I wouldn't be paying much property tax, either). Society has decided on whole that the charging of taxes on property is a fair trade for the services provided for people living there. We could go back to a "toll" system for things like roads and public education, but would that really enhance freedom? I strongly doubt it. My freedom to move about would be dramatically curtailed by various toll operators charging me arbitrary amounts to get where I want to go. That doesn't sound free to me (and in fact, that's why the US moved away from such a toll-road system in the 1800's). People in the US today still have quite extensive freedom to move about and become educated, but that freedom doesn't come "for free". Nothing in life is.

And there's one bigger point I want to raise. That is, we don't own the land. Ownership is an illusion. Let's consider a hypothetical discussion between Joe, the ultimate libertarian who believes in unfettered "ownership", and his great grandkid Jeannie from the future.

Jeannie: (pops into the room next to Joe, watching TV) Hey great granddad, I came back in time to talk to you about some things that you are doing, that will cause us terrible problems in the future. I want to especially talk to you about how you treat the land.

Joe: (Startled) Wow, where did you come from? you're from the future? Get real. And anyway, what I do with my land is my prerogative. It is my land, nobody can tell me what to do with it. Get outta here.

Jeannie: Great Grandad, look at me, I am your descendent. Anyway Joe, when you dump all your used oil from your cars all over, that leeches into the stream for years, killing all the fish. Then nobody else can fish there.

Joe: Well, I don't know who you are. But anyway, I'm not worried about the fish in the stream, I'll just grow fish in my pond and I can charge other people to come fish for healthy fish there. I don't dump oil in that, because I want to preserve its future value.

Jeannie: But Joe, in 120 years, fish won't grow there. They won't grow anywhere. All the fish died off. Because too many people contaminated too much of the land, there are toxic plumes and radiation everywhere.

Joe: Yeah, well, thats in the future, I don't have to worry about it.

Jeannie: So, great granddad, you're telling me that you don't care that the world has become a deforested wasteland? That we live horrible lives in cramped quarters underground, eating mostly what soy and algae protein we can get by with?

Joe: Well, you do look a little pale ... what year did you say you were from?

Jeannie: The year 2133, in an underground dwelling near here. Earth is a miserable place. And one of the reasons it became that way because during the height of the great depression of 2010-2020, populist sentiment threw off all government controls on people's lives. People decided they could just do whatever they wanted with the land to overcome their economic misery. This produced a rush to exploit what was left of the land and resources in the name of "recovery". What was left, was all trashed in 30 years. The destruction that during the early part of that century was confined to places like Sudan and Rwanda spread everywhere. After 30 years, the planet was left destitute, with only small roving bands wandering around looking for scraps.

Joe:Wow, sounds like quite a story you've made up there. But, hey, even if I did believe you, there's not much I could do about it. I own this land, and I need to survive.

Jeannie: But Joe, you don't own the land. All of humanity, past and future, owns it. In the past people exploited the land in ignorance of its future impact. But you can't claim ignorance, I'm here to educate you. And besides, there's plenty of information on your so-called primitive "internet" about the impact. In fact, I think that your county has an ordinance against dumping oil...

Joe: Don't get me started on them damn county bureaucrats, all they wanna do is take away my freedoms to do what I want on MY land.

Jeannie: Great Granddad, did you ever think, there may actually be a reason they want to control some things, aside from their own petty bureaucratic power struggles? That there are sometimes legitimate reasons to limit what you can do with the land? Not all governmental interference is inherently bad - sometimes it can be good.

Joe: I ain't never seen a good bureaucrat in my life...

Jeannie: Look, Great granddad, I inherited this land we are standing on. I'm the sole remaining great grandchild (of 35). This land is MY LAND too, and it is useless. Less than useless. It will be useless for hundreds of years. Its degradation started before you, but you were the one who really started it down the path of irretrievability. Especially when you volunteered to host a nuclear dump here for some pittance of rent, that allowed you to buy a fast car (that you only got to drive a few years before gas got too expensive - I inherited the car too, and it's useless junk).

Joe: Hey, I get a fast car out of the deal? Just for hosting a nuclear dump? I read on some website, something having to do with tulips, about this other guy, Starving Steve, who wanted to do that.

Jeannie: Yes, they never resolved the situation with waste storage in Nevada, so instead, they just found landowners around the country willing to host the nuclear waste, in shallow burial, for cheap. Starving Steve was the first one, but he was followed by many, including you. Local governments, desperate for tax revenues, and intimidated by the anti-government forces, okayed it. You were promised that the waste would be put in safe containers for 700 years. But the company that made the containers went out of business after 10 years, after the containers had already started leaking and they got sued. The result? "My" land, inherited from you, is useless. It will not support life in my time, and it won't for hundreds of years. And what's worse, much of the planet is like that now.

Joe: Well, that's kinda sad, Jeannie. But, that don't mean I'm gonna listen to no darn bureacrat about what I can do with MY land.

Jeannie: (Exasperated) But you've missed the point! It is not really YOUR land, it is OURS, and you are going to single handedly destroy it for all of us! That's why I came back here to stop you.

Joe: Hey, but what's the alternative?

Jeannie: It's simple. Realize that "your" land is actually just borrowed while you're here on the planet, and that someday it will be borrowed by future generations, like mine. If you don't treat it with respect, we won't have a future worth living (it isn't). Anyway, I've got to go, before I mess with the spatio-temporal continuum too much... (fades away)

Joe: (Shakes head) Was that real? Man, maybe I shouldnna had so much whiskey last night. But it sure seemed real. Man, I'm gonna haveta think about this one. Maybe she's right. Maybe this isn't about them stupid power hungry bureacrats. Maybe this is about something deeper, like giving my future grandkids and their kids a decent life. I wish it weren't so darn hard to change my habits, but gosh darn it, I'm gonna try.

Moral of the story: despite the fact that most of us hate government interference in "our" land (I speak truthfully, I have strongly objected to such interference in the past), that interference has at its roots a need to preserve the land's value. Sometimes that interference goes overboard (as in over-aggressive bureaucrats that take away property for growing a few plants with THC in them, and homeowners' associations that won't let people do things like put up laundry lines), but such cases don't warrant the view that "we own the land and can do what we want with it." No, in reality it is more like having a long-term lease on the land. I just wish everyone was clear about this fact - that it is not true ownership - and it would make such discussions much simpler and more honest.

Isn't setting up straw men to argue with fun?

[Mango]

I've been trying to understand Hudson for more than a year now. Your comment was the most helpful, and this thread has been the most interesting one I've read on iTulip

[flintlock]

All of you attacking Dr. Michael Hudson's views on property taxes - have you actually studied any of his work?

His underlying assertion behind higher property taxes is as follows:

1) Government at the state and local level requires some type of income in order to function. No income, no lots of other things like schools, firemen, etc.

2) In the past, this income was largely based on property taxes (more than 2/3rds in the 1920s)

3) Since the '40s, this has been eroded via FIRE interests. I believe it is less than 1/3 now, and possibly lower.

4) The reason for this erosion is because the cash flow used to pay property taxes can be (and is) diverted by FIRE into higher property prices. Loans and loan sizes for banks, amount of insured property for insurance, and real estate net for realtors, builders, etc.

5) Since the states and local governments cannot then get their revenue from a reliable source - property values being the most stable of all possible income streams (i.e. income taxes, capital gains taxes, sales taxes, and property taxes), the revenue is obtained via other means.

As we can see with the California (and other state budgets), the first 3 taxation streams can vary 30% or more. California April 2009 vs. April 2008 is a 40.3% drop.

Even the worst case property tax revenues are looking at 5% drops max.

6) The supposed 'freedom' of low or no property taxes is an illusion and sham. Corporate real estate shows the ultimate example: the net total value of all commercial real estate (from an IRS standpoint) is a negative number. The illusion is that commercial buildings fall in value every year when in reality they increase due to inflation.

The reason this legislation exists is so that the rentiers can get tax writeoffs on other income streams even while accumulating value in the existing buildings.

7) If you look at the 50 states, there is a fairly stable average AMOUNT of property taxes paid. The delta is no more than around 2x. On the other hand, the RATES vary by 3x or more - because the PRICES vary so much. It is quite clear that higher property tax RATES equal lower property PRICES. So the supposed benefit reaped by low or nonexistent property taxes is actually exactly what Hudson says: skimmed off by the banks.

So the screams of higher taxes being "UnAmerican" or "Socialist" is simply the defense of those early in the property tax Ponzi scheme: I've got my inflation protected investment for which I pay low property taxes - go get your own.

Furthermore note that Hudson is not saying that taxes should be raised overall. What he is saying is that taxes need to come from a consistent revenue stream, and furthermore that these taxes also ultimately benefit property owners in the form of lower prices

Having a FAIR and BALANCED and EQUALLY SHARED tax burden means lower income, capital gains, and sales taxes. The bite comes primarily out of the rentiers - those with MANY properties who presently are getting a free ride: high property price = high rent. Low property tax = low expense. You do the math.

Good summary thanks.

[HisHighnessDog]

Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.
...

-- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?.

BuckarooBanzai,
Over a ten-year period, I lived in 4 foreign nations and worked in more than a dozen others. The US health care system is pathetically inefficient and insanely overpriced by caparison to those I used anywhere else.

My "Best in Washington DC" K Street doctor requires at least a month's notice for an appointment. So last Christmas Eve, I walked into George Washington University Hospital center hoping to get a $12 prescription refilled. I was informed that the consultation visit would cost "between $450 and $650". You read that right. That was the price for the visit; no tests. In the end, I was charged $180 for a routine heart rate and blood pressure test which I neither asked for nor needed, but which they informed me were "mandatory".

Despite a lifetime of ideological conservatism, starting when I read Ayn Rand at 15, and an entire adulthood as a registered Republican, I want the health care system that lead to the above outcome destroyed... by any means possible.

PS: I didn't meet any mythical Canadians at GWUH. Have you seen them? Has anyone?

[rogermexico]

Here's another quote from the OP that grates on me:



.....Who determines what's "reasonable"? Why should the cost of production have anything to do with the profit anyone makes? What about compensation for the risks that were taken in bringing a product to market? What about compensation for ingenuity?

Hudson does see some of the causes of the problems of today, but he misses their common theme. The issue is not taxation in the wrong way, or some kind of different regulation, or not enough progressive (socialist) values. The system we have today is not Capitalism; it's Fascism. Corporations are in bed with government, and government is being used as an tool for companies to wage economic war against the public and against each other. The only viable long-term solution is to break that tie. Here's a start: Corporate and government criminals need to be prosecuted, and illegally-obtained gains should be clawed-back.

Time to re-post rogermexico's political quiz.

Where are you on the anarcho-capitalist - marxist spectrum?:

"Hudson's description of the FIRE economy as parasitical to the the P/c economy makes sense, but his Marxist theoretical framework requires him to posit only more omniscient central planning (by who?) as the fix. We can't prove the counterfactual that Trotsky would have been better than than Stalin, but I seriously doubt it. The idea that money exists only as an extension of government power is both repellent and false.

Fundamentally, the itulip crowd seems to be in two camps:

a) The FIRE economy represents a failure of central planning of the economy. We have had a fascist system of "usury" rather than the true socialism we need. The problem with the fed and the government controlling the money supply is that we have private bankers skimming off the profits for their own benefit. The government side of the fascist partnership is fine, we just need to have more regulation or discipline for the private side.

b) The FIRE economy only exists in its parasitical form because it essentially a fascist cartel, a goverment sponsored monopoly protected from competition by legal tender laws, central banking, and the legalized fraud of fractional reserve lending. The solution is not a more thoroughgoing socailism (the path we are on) but rather complete elimination of the governments role in creation of money. The free market should allow anyone to use and make contracts using any commodity money they choose, no matter what it is. As stability and indestructiblity are desirable in a store of value, gold or or rare commodity backed money would arise naturally as a commodity money."

Hudson's nodding in approval to Stalin's elimination of those nasty feudal rents makes me want to puke - Stalin managed to starve several million of the renters in the process. Too bad you can't enjoy the new egalitarian rent structure when you are dead.

Hudson imagines his "analysis" sophisticated and so outside the mainstream it's subversive. Because he used to be a wall streeter, it's "transgressive" to be a marxist, but it's transgressive the same way an allopathic physician, instead of just criticising the massively screwed-up health care industry, turns to homeopathy or phrenology as an alternative.

Marx himself had some interesting insights, but any economic analyst that hints at grounding anything on the labor theory of value, and keeps invoking the virtue of central planning, when every thing wrong today can be attributed precisely to an excess of Hamiltonian central planning, has zero credibilty with me.

Finally, I can't stop laughing every time he says property taxes are too low. What planet is he from? Does Hudson even know anyone who owns a business or who owns commercial real estate? The government pumps real estate with worthless paper money, artificially low interest rates and no reserve requirements, not with "too low real estate taxes".

Central banking, fiat money, and rent seeking appeals to a powerful central goverment - these are the problems

[rogermexico]

Anyone know how Hudson feels about intellectual property? Like, after I invent something, am I allowed to get rich off of passive income generated by licensing the use of my idea? Does he collect royalties for his books? Do intellectual property rights constitute "monopolistic privilege"?

Hello Ash - good post

One would think Hudson might treat it the same as all property under his ideology - as a rights granting that originates with goverment, who has the sovereign power to define it's value via how it is taxed. What else could you believe if you think there is no money without government taxation and issuance?

Hudson's value to me is mostly in reifying (to use lit-crit language) the nature of the crime we are witnessing.

Say you see someone snatch an old lady's purse, knock her down, and run. Say some trained social scientist says, "Here we have a manifestation of social injustice in whatever drove this poor man to steal the lady's purse" but most of the bystanders just attend to the lady's wounds, call the police, etc., ignoring the socialist theorizing as, at best, irrelevant to what they should do. When the police show up, the social scientist might even make a reliable witness.

The fact that an austro-libertarian and a marxist both see the same crime is valuable in that it tells you it is not all just in your head, but unless you think about it, not much more.

If you go to vonmises.org and read any number of austrian essays (many way older than itulip) there is plenty of desription of a FIRE economy borne of a fusion between rent -seeking financial interests and a central banking cartel, even if they don't use the admittedly catchy acronym of FIRE

(Actually, it should be FIREHE with health care and education in there as well.)

You don't need marxism to explain any of it, but it's nice to know they see the same crime the rest of us do.

[marvenger]

i think you need some democratically decided rules for the system, and you need some salaried and independent as possible people to implement these rules. I think gov is the best institution to do this, but its quite different to the current government.

[flintlock]

I take him as referring to monopolistic practices that extract more than the value of production.

In the libertarian wet dream, competition should cause profits to decrease until equilibrium is reached, eventually bringing prices down to the cost of production plus risk costs. Monopolies successfully stack the deck to extract more than this amount by restricting competition.

One example - text messaging. The technological cost? $0. Not just close to zero, but actually zero, because they use control channels of the networks that are not being used for other purposes. It's like scribbling in the margins of a document you are finished using.

Around two years ago the telecoms were charging ten cents per text message - in spite of that they cost nothing. One would think that in this free-market economy an innovative telecom would cut their text-messaging prices to siphon business away from their competitors. Like the prisoner's dilemma, all should rush to this and prices should come down to nothing.

Instead, all 5 major telecoms doubled their text-messaging rates to 20 cents within weeks of each other. Now they got 40 cents per message - a message that has zero production cost (40 cents because they charge for sending AND receiving).

Being fleeced by these sorts of practices constantly is the dystopia that awaits you if you successfully achieve your libertarian fantasies. And, in this future libertarian dreamland, when Justice, Inc. merges with Police Corp, then will you know what tyranny is.

Or... you could do like I do and don't text. :D

I've also wondered why the hell texting is so much and why the cost has gone UP!

[c1ue]

Rogermexico,

If you don't like nor agree with Hudson's description of how our present situation came to be and the prescription to fix it - what is your alternative?

EJ/iTulip's is to invest in infrastructure and new technologies to free up the capital otherwise consumed in energy and/or lower bandwidth communications.

However it is quite clear that the iTulip proposal is not going to be implemented - the money being spent is going elsewhere.

Dr. Hudson's proposal is different in that he is not advocating a massive investment (i.e. borrowing to spend) in new growth enabling capabilities, but rather a reorientation of taxation to penalize rentiers and restrain FIRE bad habits.

Certainly the idea of paying higher property taxes is anathema to most older Americans and almost all mid- to long term property owners.

Yet your complaints about Dr. Hudson's 'Commie-ness' and tarring him with the same brush as Stalin, as well as attacking Dr. Hudson's recommendations all fail to address the questions on what the fundamental level of taxation should be and where/how it should be derived from.

Unless you are saying no taxes are good taxes?

His point - to repeat again - is not "from each according to ability, to each according to need" but rather "tax the rentiers so that their bad practices won't hurt the rest of the people".

The failure to address the commercial property tax valuation point is also telling: what this is serving to illustrate is that our present system is not only not equitable, it is specifically skewed TOWARDS the rentiers.

While some may welcome the oppressors:

"I for one welcome our FIRE overlords so long as I can someday be one of them"

nonetheless any reasonable examination of facts shows that this is almost purely propaganda.

[Mashuri]

Strawman argument indeed! Mcgurem, it's historically proven, time and again, that privately owned property is much better managed than government "public" property. Why is that? I think the late great Murray Rothbard summed it up best:

"Finally, government ownership is often referred to as “public” ownership (the “public domain,” “public schools,” the “public sector”). The implication is that when government owns anything, every member of the public owns equal shares of that property. But we have seen that the important feature of ownership is not legal formality but actual rule, and under government ownership it is the government officialdom that controls and directs, and therefore “owns,” the property. Any member of the “public” who thinks he owns the property may test this theory by trying to appropriate for his own individual use his aliquot part of government property.

While rulers of government own “public” property, their ownership is not secure in the long run, since they may always be defeated in an election or deposed. Hence government officials will tend to regard themselves as only transitory owners of “public” resources. While a private owner, secure in his property and its capital value, may plan the use of his resource over a long period of time in the future, the government official must exploit “his” property as quickly as he can, since he has no security of tenure. And even the most securely entrenched civil servant must concentrate on present use, because government officials cannot usually sell the capitalized value of their property, as private owners can. In short, except in the case of the “private property” of a hereditary monarch, government officials own the current use of resources, but not their capital value. But if a resource itself cannot be owned, but only its current use, there will rapidly ensue an uneconomic exhaustion of the resource, since it will be to no one’s benefit to conserve it over a period of time, and yet to each owner’s advantage to use it up quickly. It is particularly curious, then, that almost all writers parrot the notion that private owners, possessing time preference, must take the “short view” in using their resources, while only government officials are properly equipped to exercise the “long view.” The truth is precisely the reverse. The private individual, secure in his capital ownership, can afford to take the long view because of his interest in maintaining the capital value of his resource. It is the government official who must take and run, who must exploit the property quickly while he is still in command."


On the surface, I agree with this point. There can be no true "freedom" if one is forced to pay a tax just to live on the land. But the problem is, there are scant few people who would just live on the land and not use or benefit from any any of the services provided by society, which include roads, fire, police, education, etc.

Basically, property taxes trade some freedom for some security. When I think about it, though I'd like to live on the land "freely", if I had no police protection, I wouldn't be able to live freely. I would be subject to gangs, criminals, whatever - and my freedom wouldn't be so free after all. If I went and lived somewhere where there are no other people, then, sure, I wouldn't need much in the way of services (but, I wouldn't be paying much property tax, either). Society has decided on whole that the charging of taxes on property is a fair trade for the services provided for people living there. We could go back to a "toll" system for things like roads and public education, but would that really enhance freedom? I strongly doubt it. My freedom to move about would be dramatically curtailed by various toll operators charging me arbitrary amounts to get where I want to go. That doesn't sound free to me (and in fact, that's why the US moved away from such a toll-road system in the 1800's). People in the US today still have quite extensive freedom to move about and become educated, but that freedom doesn't come "for free". Nothing in life is.

And there's one bigger point I want to raise. That is, we don't own the land. Ownership is an illusion. Let's consider a hypothetical discussion between Joe, the ultimate libertarian who believes in unfettered "ownership", and his great grandkid Jeannie from the future.

Jeannie: (pops into the room next to Joe, watching TV) Hey great granddad, I came back in time to talk to you about some things that you are doing, that will cause us terrible problems in the future. I want to especially talk to you about how you treat the land.

Joe: (Startled) Wow, where did you come from? you're from the future? Get real. And anyway, what I do with my land is my prerogative. It is my land, nobody can tell me what to do with it. Get outta here.

Jeannie: Great Grandad, look at me, I am your descendent. Anyway Joe, when you dump all your used oil from your cars all over, that leeches into the stream for years, killing all the fish. Then nobody else can fish there.

Joe: Well, I don't know who you are. But anyway, I'm not worried about the fish in the stream, I'll just grow fish in my pond and I can charge other people to come fish for healthy fish there. I don't dump oil in that, because I want to preserve its future value.

Jeannie: But Joe, in 120 years, fish won't grow there. They won't grow anywhere. All the fish died off. Because too many people contaminated too much of the land, there are toxic plumes and radiation everywhere.

Joe: Yeah, well, thats in the future, I don't have to worry about it.

Jeannie: So, great granddad, you're telling me that you don't care that the world has become a deforested wasteland? That we live horrible lives in cramped quarters underground, eating mostly what soy and algae protein we can get by with?

Joe: Well, you do look a little pale ... what year did you say you were from?

Jeannie: The year 2133, in an underground dwelling near here. Earth is a miserable place. And one of the reasons it became that way because during the height of the great depression of 2010-2020, populist sentiment threw off all government controls on people's lives. People decided they could just do whatever they wanted with the land to overcome their economic misery. This produced a rush to exploit what was left of the land and resources in the name of "recovery". What was left, was all trashed in 30 years. The destruction that during the early part of that century was confined to places like Sudan and Rwanda spread everywhere. After 30 years, the planet was left destitute, with only small roving bands wandering around looking for scraps.

Joe:Wow, sounds like quite a story you've made up there. But, hey, even if I did believe you, there's not much I could do about it. I own this land, and I need to survive.

Jeannie: But Joe, you don't own the land. All of humanity, past and future, owns it. In the past people exploited the land in ignorance of its future impact. But you can't claim ignorance, I'm here to educate you. And besides, there's plenty of information on your so-called primitive "internet" about the impact. In fact, I think that your county has an ordinance against dumping oil...

Joe: Don't get me started on them damn county bureaucrats, all they wanna do is take away my freedoms to do what I want on MY land.

Jeannie: Great Granddad, did you ever think, there may actually be a reason they want to control some things, aside from their own petty bureaucratic power struggles? That there are sometimes legitimate reasons to limit what you can do with the land? Not all governmental interference is inherently bad - sometimes it can be good.

Joe: I ain't never seen a good bureaucrat in my life...

Jeannie: Look, Great granddad, I inherited this land we are standing on. I'm the sole remaining great grandchild (of 35). This land is MY LAND too, and it is useless. Less than useless. It will be useless for hundreds of years. Its degradation started before you, but you were the one who really started it down the path of irretrievability. Especially when you volunteered to host a nuclear dump here for some pittance of rent, that allowed you to buy a fast car (that you only got to drive a few years before gas got too expensive - I inherited the car too, and it's useless junk).

Joe: Hey, I get a fast car out of the deal? Just for hosting a nuclear dump? I read on some website, something having to do with tulips, about this other guy, Starving Steve, who wanted to do that.

Jeannie: Yes, they never resolved the situation with waste storage in Nevada, so instead, they just found landowners around the country willing to host the nuclear waste, in shallow burial, for cheap. Starving Steve was the first one, but he was followed by many, including you. Local governments, desperate for tax revenues, and intimidated by the anti-government forces, okayed it. You were promised that the waste would be put in safe containers for 700 years. But the company that made the containers went out of business after 10 years, after the containers had already started leaking and they got sued. The result? "My" land, inherited from you, is useless. It will not support life in my time, and it won't for hundreds of years. And what's worse, much of the planet is like that now.

Joe: Well, that's kinda sad, Jeannie. But, that don't mean I'm gonna listen to no darn bureacrat about what I can do with MY land.

Jeannie: (Exasperated) But you've missed the point! It is not really YOUR land, it is OURS, and you are going to single handedly destroy it for all of us! That's why I came back here to stop you.

Joe: Hey, but what's the alternative?

Jeannie: It's simple. Realize that "your" land is actually just borrowed while you're here on the planet, and that someday it will be borrowed by future generations, like mine. If you don't treat it with respect, we won't have a future worth living (it isn't). Anyway, I've got to go, before I mess with the spatio-temporal continuum too much... (fades away)

Joe: (Shakes head) Was that real? Man, maybe I shouldnna had so much whiskey last night. But it sure seemed real. Man, I'm gonna haveta think about this one. Maybe she's right. Maybe this isn't about them stupid power hungry bureacrats. Maybe this is about something deeper, like giving my future grandkids and their kids a decent life. I wish it weren't so darn hard to change my habits, but gosh darn it, I'm gonna try.

Moral of the story: despite the fact that most of us hate government interference in "our" land (I speak truthfully, I have strongly objected to such interference in the past), that interference has at its roots a need to preserve the land's value. Sometimes that interference goes overboard (as in over-aggressive bureaucrats that take away property for growing a few plants with THC in them, and homeowners' associations that won't let people do things like put up laundry lines), but such cases don't warrant the view that "we own the land and can do what we want with it." No, in reality it is more like having a long-term lease on the land. I just wish everyone was clear about this fact - that it is not true ownership - and it would make such discussions much simpler and more honest.

[Mashuri]

Unless you are saying no taxes are good taxes?

Now you're getting on the right track. :)

[metalman]

rogermex reads my mind again.

[ThePythonicCow]

I've also wondered why the hell texting is so much and why the cost has gone UP!Maybe the cost has gone up because people are texting so much.

If you were a profit minded entepreneur, would you raise the price on the item everyone is buying like hot cakes, or raise the price on something hardly anyone uses?

[Scot]

Despite a lifetime of ideological conservatism, starting when I read Ayn Rand at 15, and an entire adulthood as a registered Republican, I want the health care system that lead to the above outcome destroyed... by any means possible.


You're writing as though the health care industry is some kind of free-market paradise. That's hardly the case.

The health insurance industry and the medical industry are already heavily regulated in the United States. And government spending on health care in the United States already amounts to about 6.6% of GDP, which is nearly the same as in Canada and Italy and amounts to about 45% of health care spending in the United States covering about 28% of the population.

We essentially have socialized medicine for seniors, veterans, disabled, children of the poor and lower middle-class, and emergency room users that can't pay.

And the state has given each of those groups tax dollars, that you provide, to compete against you for finite health care resources. And more you drive up prices trying to win access to a doctor, the more money the state will take from you to give to those special classes so that they don't lose out to you.

In the face of inelastic supply, of course prices are going to go up! Of course there's going to be waiting!

[cjppjc]

Quote:
<TABLE cellSpacing=0 cellPadding=6 width="100%" border=0><TBODY><TR><TD class=alt2 style="BORDER-RIGHT: 1px inset; BORDER-TOP: 1px inset; BORDER-LEFT: 1px inset; BORDER-BOTTOM: 1px inset">Originally Posted by c1ue http://www.itulip.com/forums/images/buttons/viewpost.gif (http://www.itulip.com/forums/showthread.php?p=99247#post99247)
Unless you are saying no taxes are good taxes?
</TD></TR></TBODY></TABLE>
Now you're getting on the right track. :)


Everyone wants to go to heaven. Nobody wants to die to get there.

[c1ue]

Mcgurem, it's historically proven, time and again, that privately owned property is much better managed than government "public" property. Why is that? I think the late great Murray Rothbard summed it up best:

Right, so how does the collapse of the privately owned and operated securitization scheme/housing bubble/credit bubble fall in your scheme of public vs. private?

Secondly how exactly does a privately owned property get managed better than public - when said property is a park, or a railroad station, or a road? How about a currency?

In England in the not so near past, the term 'tragedy of the commons' was created to describe the situation where common pasture land was misused because "no one owned it".

Of course you can then argue that fencing off said land led to better practices...for those who got ownership of the land.

For those who didn't, hardly a beneficial situation. And unless you're Citigroup, or Goldman Sachs, neither you nor I nor hardly anyone else is getting ownership right now.

Ultimately your argument is just a longer form of "I've got mine, go get yours"

All those so eager to live in places with full 'freedom' and 'no taxes' - there are plenty of them available: Somalia, Afghanistan, etc etc.

[Rajiv]

Tragedy of the Commons (http://en.wikipedia.org/wiki/Tragedy_of_the_commons)

"The Tragedy of the Commons" is an influential article written by Garrett Hardin and first published in the journal Science in 1968. The article describes a dilemma in which multiple individuals acting independently in their own self-interest can ultimately destroy a shared limited resource even when it is clear that it is not in anyone's long term interest for this to happen.

Central to Hardin's article is a metaphor of herders sharing a common parcel of land (the commons), on which they are all entitled to let their cows graze. In Hardin's view, it is in each herder's interest to put as many cows as possible onto the land, even if the commons are damaged as a result. The herder receives all of the benefits from the additional cows, while the damage to the commons is shared by the entire group. If all herders make this individually rational decision, however, the commons are destroyed and all herders suffer.

A similar alleged dilemma of the commons had previously been discussed by early agrarian reformers since the 18th century. The predecessors of Hardin used the alleged tragedy, as well as a variety of examples of the Greek Classics, to motivate the Enclosures. Radkau sees Garrett Hardin's writings as having a different aim. Hardin asks for a strict management of global common goods via increased government involvement or/and international regulation bodies.
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[flintlock]

Yes, but you'd think some upstart would come out with a cheaper plan and steal their business. I mean, how much does texting really cost to deliver on top of existing phone service? Some kind of collusion going on???

I was just checking into a plan for my family. I don't text, but with kids, you know. Unlimited texting adds $30 month, or basically half what I am currently paying for cell service! I guess the fact they offer unlimited means the kids go nuts and use it all day long. I hear stories of kids texting 100 times a day.

So sorry kids, no cell phones this year. :D

[BuckarooBanzai]

My wife and I, both American, have lived in Asia for over 20 years. I'm here to tell you that the quality of housing and health care in America is inferior to many many places. Colonoscopy in the US? Colonoscopy in Thailand? I've had both. I'll choose Thailand any day. The hospitals are more efficient. The record keeping is state of the art. The paperwork for insurance claims is minimal. The doctors are excellent.

There have been many people on this site who have complained that after returning to America and experiencing the poor health care, internet service, phone choices, poor banking service, rip-off charges for every this and that, find themselves using all their self control to avoid shaking their stateside friends and saying, "We are being clobbered!"

There are two health care systems in the US-- the socialistic insurance system, and the cash-only system. I have used both, and am here to tell you, the difference couldn't be more stark. Hidden from view from most americans is a system of healthcare where the doctors only accept cash. This healthcare is fantastic. Absolutely grade-A treatment. And the fact is, it isn't really that much more expensive. I mean, how much is your health worth?

It is a pain in the ass finding this network of doctors, but they are out there. Insurance has RUINED the health care system in this country.

[BuckarooBanzai]

All of you attacking Dr. Michael Hudson's views on property taxes - have you actually studied any of his work?
...

Having a FAIR and BALANCED and EQUALLY SHARED tax burden means lower income, capital gains, and sales taxes. The bite comes primarily out of the rentiers - those with MANY properties who presently are getting a free ride: high property price = high rent. Low property tax = low expense. You do the math.

Who gets to say what FAIR means? or BALANCED? Hudson is dead wrong because the principles that he bases his arguments on are dead wrong.

News flash: LIFE ISN'T FAIR. Tattoo that on the insides of your eyelids if you have to.

We're all equal when we're dead. When we are alive, we are BY DEFINITION un-equal. It is our inequalities that allow us to be of service to each other. It is precisely our inequalities that allow us to access the gigantic economic benefit of THE DIVISION OF LABOR.

Socialism's goal is to make us all dead inside-- spiritually dead-- so that life can become "Fair".

If you want to be a spiritually dead zombie, go live in England, or some similar graveyard of the human soul. Get out of America.

[Thailandnotes]

Hidden from view from most americans is a system of healthcare where the doctors only accept cash. This healthcare is fantastic. Absolutely grade-A treatment. And the fact is, it isn't really that much more expensive.

I know several people in the Washington area who are in your system of doctors who only accept cash, They have health care insurance and on top of that they are paying a yearly fee of 2,000 $ just to be seen by one GP doctor. 2,000 before they pay a bill or pay for insurance. They are rich and they can afford it.

Couldn't disagree more with this: "And the fact is, it isn't really that much more expensive."

Next time you need a root canal come on over. You can get one and fly here for the cost of one in the states.

[raja]

Right, so how does the collapse of the privately owned and operated securitization scheme/housing bubble/credit bubble fall in your scheme of public vs. private?

Secondly how exactly does a privately owned property get managed better than public - when said property is a park, or a railroad station, or a road? How about a currency?

In England in the not so near past, the term 'tragedy of the commons' was created to describe the situation where common pasture land was misused because "no one owned it".

Of course you can then argue that fencing off said land led to better practices...for those who got ownership of the land.

For those who didn't, hardly a beneficial situation. And unless you're Citigroup, or Goldman Sachs, neither you nor I nor hardly anyone else is getting ownership right now.

Ultimately your argument is just a longer form of "I've got mine, go get yours"

All those so eager to live in places with full 'freedom' and 'no taxes' - there are plenty of them available: Somalia, Afghanistan, etc etc.
c1ue,

I just want to say I agree with your comments on Hudson, and enjoy the way you always cut through to the quick of the issue. I'll be reading someone's post, and have a feeling of disagreement, but don't know why exactly. You respond to the post, and it becomes clear.

[Thailandnotes]

Rajiv wrote:

"Central to Hardin's article is a metaphor of herders sharing a common parcel of land (the commons), on which they are all entitled to let their cows graze. In Hardin's view, it is in each herder's interest to put as many cows as possible onto the land, even if the commons are damaged as a result. The herder receives all of the benefits from the additional cows, while the damage to the commons is shared by the entire group. If all herders make this individually rational decision, however, the commons are destroyed and all herders suffer."

Anyone from NZ want to chime in?

Clue wrote:

Ultimately your argument is just a longer form of "I've got mine, go get yours."

How do we head this off, locally or nationally?

[c1ue]

How do we head this off, locally or nationally?

My idealistic hope is that the present mess will cause enough energetic and activist individuals to push for fundamental changes.

Much as in war where the beancounters get booted in favor of the warriors in an army, so too could the politicians who offer the best overall solutions rise to the top.

Unfortunately the present political system is extremely well managed by those who tap into the sentiments expressed by:

If you want to be a spiritually dead zombie, go live in England, or some similar graveyard of the human soul. Get out of America.

This itself is a fascinating dichotomy of a response.

On the one hand, summarize the argument you disagree with by saying that life is unfair therefore the present system is just great - even though it doesn't seem to be working to anyone but a few elite bankers and wannabe rentier suckups :p.

On the other hand, attack some other nation (or group of people or lifestyle or whatever).

A beautiful reiteration of the combination of 'Look over there' and 'If you got religion (or climate change, or guns, or whatever hot button topic du jour), you got my vote'

[Mashuri]

Right, so how does the collapse of the privately owned and operated securitization scheme/housing bubble/credit bubble fall in your scheme of public vs. private?

You mean the heavily government distorted markets (80,000 pages in the Federal Register will tend to do that) that could not have formed these huge bubbles without the help of the State? Frankly, I'm surprised you even wrote this statement on iTulip. Do you disagree with EJ's conclusions that government intervention caused the trouble we're in?

Secondly how exactly does a privately owned property get managed better than public - when said property is a park, or a railroad station, or a road? How about a currency?I already stated above why it would get better managed. Private owners have a long term stake in the well being of their property. They also have a personal stake in providing what the public wants -- and the ones who provide the best turn a profit as a result. I rarely see a ranch, for example, that isn't a well-maintained piece of land. There are plenty of private forests in the south but you don't hear much in the way of deforestation problems there. Ever investigate why? Compare that to the grossly mismanaged Yellowstone, for example, that finally resulted in a good chunk of it becoming scorched earth. Michael Crighton's excellent speech on complexity theory (http://www.michaelcrichton.net/speech-complexity.html) fully illustrates what happened to Yellowstone as a result of the hubris of central planning. EDIT: Forgot to address your currency question. Do you honestly believe that the free market cannot adopt its own currency? Currency competition from non-government entities is exactly what we need right now rather than being forced to accept a rapidly debasing dollar, euro, or any other fiat scam.

In England in the not so near past, the term 'tragedy of the commons' was created to describe the situation where common pasture land was misused because "no one owned it".Now you've presented one of the strongest arguments in favor of private ownership. "Tragedy of the commons" applies to government owned property as well since its users have little stake in its long-term viability. A great example of this is the Open Range of the 19th century. Government did not allow any private ownership and thought they could manage it better. What was the end result? The Dust Bowl. Tragedy of the commons indeed.

Of course you can then argue that fencing off said land led to better practices...for those who got ownership of the land.

For those who didn't, hardly a beneficial situation. And unless you're Citigroup, or Goldman Sachs, neither you nor I nor hardly anyone else is getting ownership right now.

Ultimately your argument is just a longer form of "I've got mine, go get yours"Well, if that's your version of dystopia then you may as well kill yourself now because we're already there. There isn't a square inch of land in the U.S. that isn't owned by some entity, be it person, company or government. The question is, who do you think will best manage that land? Someone who has a full stake in it or someone who only has to worry about it for a few years? Funny how you bring up Goldman and Citigroup. Two entities that would not exist without the heavy hand of the State to grant them their privelaged status.

All those so eager to live in places with full 'freedom' and 'no taxes' - there are plenty of them available: Somalia, Afghanistan, etc etc.You, like most others, have been conditioned by our government sponsored education system to believe that a civilized society cannot exist without heavy government intervention. Common Law, for example, came about from "anarchy" and was later adopted by governments. Of course, it has now been thoroughly mangled in favor of said governments but that's to be expected, no?

[rogermexico]

You mean the heavily government distorted markets (80,000 pages in the Federal Register will tend to do that) that could not have formed these huge bubbles without the help of the State? Frankly, I'm surprised you even wrote this statement on iTulip. Do you disagree with EJ's conclusions that government intervention caused the trouble we're in?

I already stated above why it would get better managed. Private owners have a long term stake in the well being of their property. They also have a personal stake in providing what the public wants -- and the ones who provide the best turn a profit as a result. I rarely see a ranch, for example, that isn't a well-maintained piece of land. There are plenty of private forests in the south but you don't hear much in the way of deforestation problems there. Ever investigate why? Compare that to the grossly mismanaged Yellowstone, for example, that finally resulted in a good chunk of it becoming scorched earth. Michael Crighton's excellent speech on complexity theory (http://www.michaelcrichton.net/speech-complexity.html) fully illustrates what happened to Yellowstone as a result of the hubris of central planning. EDIT: Forgot to address your currency question. Do you honestly believe that the free market cannot adopt its own currency? Currency competition from non-government entities is exactly what we need right now rather than being forced to accept a rapidly debasing dollar, euro, or any other fiat scam.

Now you've presented one of the strongest arguments in favor of private ownership. "Tragedy of the commons" applies to government owned property as well since its users have little stake in its long-term viability. A great example of this is the Open Range of the 19th century. Government did not allow any private ownership and thought they could manage it better. What was the end result? The Dust Bowl. Tragedy of the commons indeed.

Well, if that's your version of dystopia then you may as well kill yourself now because we're already there. There isn't a square inch of land in the U.S. that isn't owned by some entity, be it person, company or government. The question is, who do you think will best manage that land? Someone who has a full stake in it or someone who only has to worry about it for a few years? Funny how you bring up Goldman and Citigroup. Two entities that would not exist without the heavy hand of the State to grant them their privelaged status.

You, like most others, have been conditioned by our government sponsored education system to believe that a civilized society cannot exist without heavy government intervention. Common Law, for example, came about from "anarchy" and was later adopted by governments. Of course, it has now been thoroughly mangled in favor of said governments but that's to be expected, no?

+ 1 Mashuri, you just saved me a lot of typing. You are spot-on.

Here is the core fallacy of Marx and by extension, Hudson: The idea that it is possible for "everyone' to own something, the idea that "we" can fix things, "we" can the guide the economy, "we" can determine which industries deserve our investment - its all nonsense. With power exercised by any government, the guiding of the economy or redressing of populist grievances can only be done by actual human beings whose agency can never be more robust for "we" than it is for themselves.

Central planning caused the inequalities and the massive debt, so therefore cannot be the solution to the inequalities and the massive debt.

I object strongly to the epithet "rentier wannabe suckup". Apart from the name-calling, the idea that because one opposes Hudson's analysis or his fix for it one must be a current or even an aspiring rentier is nonsense.

If you believe in the concept of private property, that your right to what you own orignates with self-ownership, that ownership of your self grants you inalienable rights to the fruits of your own labor and to retain the property you purchase, you cannot agree with Hudson's analysis, or his solution.

Arguing about what kinds of goverment theft are "better" is just choosing your method of execution. All taxes are immoral, some just worse than others and less is always better than more (Yes, I really do believe that - read Jan Narveson or Murray Rothbard and you might be radicalized in similar fashion)

Marx and Hudson think the value of your labor and ingenuity can be calculated scientifically. It cannot. It is 100% subjective, as it should be, and only a free market can give you a price that means anything as information.

Marx's and Hudson's very concept of the "rentier" is bogus. There is just property, period. Land and buildings are one class of property among many, and as a property right, no different from owning machine tools, sacks of grain to make into bread, cows to milk, trucks to transport goods, airplanes to fly passengers, etc. The idea that owning a building or farmland and renting it is some special class of economic activity is nonsensical. How about leasing airplanes or construction or medical equipment? Are the lessors of such rentiers?

If you believe there are rights in property, and these rights do not exist solely by government fiat (you know, that document by Thomas Jefferson and all that), then any of these should have secure title and their value not subject to capricious theft by goverment, whether for social engineering purposes or to satisfy some populist urge for redress.

Hudson is wrong about the cause of the bubble being lack of appropriate taxation and "too weak" central planning. He is married to a Marxist concept which lacks explanatory power, no matter how he tortures it. All you have to do is look at the history of central banking and see how we had booms and busts for about 100 years leading up to 1913, but no net inflation and no massive 25 year superbubble. In 1913 the bankers finally got us our third central bank, and the banking cartel has done nothing but debase our currency through credit expansion ever since (with a few minor interruptions).

(The part of Hudson's solution I do agree with is where we let all the debtholders, banksters and bondholders burn, and let real green shoots grow from the nitrogen rich soil left when our 370% of GDP debt load is destroyed. That's a more austrian than marxist solution, though, in my book. And I also see no need for any government guidance whatsoever in how to rebuild the economy, whether "green energy" or whatever. Private actors will figure out what to do best without central planning. They always have.)

Fraudulent fractional reserve lending leads to the business cycle, with booms and crashes. Booms and crashes are short and sharp and with money backed by specie, there is no net inflation over time. Adding a powerful central bank and government guarantees (deposit insurance) to fractional reserve lending creates a cartel that removes the market constraints to issue too much debt, as reserve requirements are lowered equally for all banks in the system. This allowed amplification of the first superbubble in the 1920's and combined with newer money substitutes (now also backed or outright monetized by the government) and the final insult of conversion to 100% fiat in 1971, gestated the mother of all bubbles which is only now popping. The current crash, and the superbubble that preceded it, are 100% creatures of central planning and government interference in the economy.

I highly recommend these two books for further reading:

http://www.amazon.com/What-Government-Money-Percent-Dollar/dp/0945466447/ref=sr_1_2?ie=UTF8&s=books&qid=1243368896&sr=8-2

http://www.amazon.com/History-Money-Banking-United-States/dp/0945466331/ref=pd_bxgy_b_img_c

Not only do you not need Marx to explain the crisis, it can't be explained at all without fiat money and central banking. Marx is mid-19th century, but his view is actually too parochial in this regard. Insofar as the idea that money is and should be an arbitrary creature of state power, Marxist thinking is what caused the current crisis, IMO.

Highest and best use of any property including money, should be left to the market, unless you trust governments more than markets. I don't.

[Mashuri]

http://www.amazon.com/What-Government-Money-Percent-Dollar/dp/0945466447/ref=sr_1_2?ie=UTF8&s=books&qid=1243368896&sr=8-2

http://www.amazon.com/History-Money-Banking-United-States/dp/0945466331/ref=pd_bxgy_b_img_c

Well said, RM. I want to add that, in true Libertarian fashion, Rothbard's books are also available for free online:

http://mises.org/books/historyofmoney.pdf

http://mises.org/money.asp

A third one I'd recommend, while much of the info is redundant to the former two, was the one that gave me my "blue pill" experience:

http://mises.org/Books/mysteryofbanking.pdf

[rogermexico]

Well said, RM. I want to add that, in true Libertarian fashion, Rothbard's books are also available for free online:

http://mises.org/books/historyofmoney.pdf

http://mises.org/money.asp

A third one I'd recommend, while much of the info is redundant to the former two, was the one that gave me my "blue pill" experience:

http://mises.org/Books/mysteryofbanking.pdf

LOL - I knew they had some for free but not all those.

Now no one has any excuse for thinking we need government to have money.

[c1ue]

You mean the heavily government distorted markets (80,000 pages in the Federal Register will tend to do that) that could not have formed these huge bubbles without the help of the State? Frankly, I'm surprised you even wrote this statement on iTulip. Do you disagree with EJ's conclusions that government intervention caused the trouble we're in?

Sorry, but your reading is clearly not the same as my reading on how the bubbles occurred.

My reading informed me that the bubbles occurred because the government ALLOWED it to occur. Because the environment was created which allowed those free marketeers you so rabidly espouse to do exactly what free marketeers are wont to do: whatever can be done to get more.

And if you say that this is still government's fault, then your entire existence to date similarly lacks 'capitalist freedom' from before this latest bubble period, and your conclusions that somehow the 'magical libertarian state is better' is similarly flawed because pre-bubble was just as government controlled as post bubble - and your evidence of 'free capitalism triumphing' exists only in your imagination.

Because you are then saying that government WAS restraining the 'free market' before, but then STOPPED. And here we are.

I already stated above why it would get better managed. Private owners have a long term stake in the well being of their property.

You assert so, but show some proof of this.

There are entire swaths of land in every continent on earth where private owners did NOT manage their land well.

For your Yellowstone example, I counter with the entire United States: how much farmland is covered with suburban McMansions? How many ancestral forests are now gone? How many coal tailing pits? Abandoned gold/silver mines?

What about the city of Detroit? Flint?

Even your "Open Range" example is flawed. Who used up the land? It was not the government that was raising 5M head of cattle there...it was the speculators:

http://www.britannica.com/EBchecked/topic/429703/Open-Range

In the mid-1880s, enormous amounts of British capital went to the United States (http://www.britannica.com/EBchecked/topic/616563/United-States) for investment in open-range ranching. Foreign enthusiasm infected American financiers and businessmen, who formed cattle companies to reap the big profits of raising beef for domestic consumption or overseas shipment.

So your example is better than you think but not in the way you think.

Would government do a better job? perhaps and perhaps not. There are examples of both.

But I CAN point to clear examples where government intervention WOULD have made a positive difference: mass transit and density. Do you argue that having effective mass transit is better resource utilization as well as better for the environment, etc etc? How can mass transit exist without both government sponsorship and regulations to ensure sufficient density to make it viable? Does the density have to be followed? no, but that's where regulation and appropriate taxation can be used to compensate for those who choose not to.

How can several dozen million single family homes such that the density is too low to sustain anything but the highway/WalMart model have come about except through so called private management - where each individual gets what they want (or think they want) but loses something overall?

Now you've presented one of the strongest arguments in favor of private ownership. "Tragedy of the commons" applies to government owned property as well since its users have little stake in its long-term viability.

Um, apparently you failed to read. The whole point of the 'Tragedy of the Commons' was that it was ultimately a way for private investors (aka rentiers) to take public property for themselves. Whether a better job was done to manage it - again implicitly depends on your definition of what an optimal result is: large tracts of land owned by a few people with lots of starving ex-middle class.

Well, if that's your version of dystopia then you may as well kill yourself now because we're already there. There isn't a square inch of land in the U.S. that isn't owned by some entity, be it person, company or government. The question is, who do you think will best manage that land? Someone who has a full stake in it or someone who only has to worry about it for a few years? Funny how you bring up Goldman and Citigroup. Two entities that would not exist without the heavy hand of the State to grant them their privelaged status.


Again you fail to grasp even the most basic concept.

What I have never said - nor has Dr. Hudson - is that ownership is bad.

What has been said is that government does have a function which can be beneficial, and that this function costs money.

What Dr. Hudson states and which I agree with is that

1) Property values and therefore taxes are the most stable of all the possible revenue sources

2) Property owners all derive benefit from government to some degree

3) Government needs money to provide its function

4) Affixing the payment for government services to owners of property is to both provide a stable tax revenue base and also serve to remove the free ride from rentier owners

So again I fail to see what your point is regarding ownership - other than 'taxes bad'.

You want to own, great. Pay your fair share.

As for RogerMexico: again you attack Dr. Hudson by linking him with Marx. Unlike Marx, Dr. Hudson is not advocating the destruction of the rentier class by government expropriation of all property. As Dr. Hudson himself CLEARLY stated in his article: Stalin fixed the rentier problem and replaced it with a bureaucratic one. If you cannot understand that this means Dr. Hudson does NOT advocate Marxism, then again I cannot fix your cognition or lack thereof.

Nowhere has Dr. Hudson stated that land should be taken by government.

So again I fail to see why your continued focus on anti-Bolshevikism has anything to do with what Dr. Hudson states.

As for your assertion that rentiers don't exist - well ok.

If you cannot recognize that having a property tax basis lower than the inflation rate exists primarily to benefit those who own the majority of the property - which by the way is VERY much true in this nation, then I cannot help you.

If you also refuse to acknowledge that the true extent of taxes in this nation is skewed towards those taxes paid by those who are not rentiers, again I cannot help you.

It is true that this ratio is lower here than in say, Britain, but equally true that the gap is shrinking every day.

Lastly as for taxation - again you seem to equate taxation with Marxism. But again you fail to understand what exactly you speak of.

Karl Marx advocated a progressive income tax, but of course property tax was irrelevant as all property ownership would be abolished (or owned by the state).

Dr. Hudson is not advocating a progressive property tax - in fact he is advocating a FLAT tax.

The system we have today in many states is actually a progressive tax - only the progression isn't income. It is inverse duration of ownership.

But I digress.

Taxes bad... Fine - so what is your idealistic world?

Where every highway has its toll booth? Every policeman has his credit card scanner? Where each wealthy individual would sponsor his Minuteman cohort or cohorts? Because that's EXACTLY what you find in the so called failed states.

[rogermexico]

Sorry, but your reading is clearly not the same as my reading on how the bubbles occurred.

My reading informed me that the bubbles occurred because the government ALLOWED it to occur.

If allowed means encouraged through fiat money creation, central banking and artifically low interest rates, then that is how they allowed it, yes. If you think credit can expand through fiat money and central banking, and the government can prevent humans from exploiting the inflationary system the govt created, no. How could the government "grow" the economy and capture an ever increasing share of it without willfully recruiting the finance sector to help out. You are confusing cause with effect.

Even your "Open Range" example is flawed. Who used up the land? It was not the government that was raising 5M head of cattle there...it was the speculators:

But that is precisely the point - the land was abused by those who didn't own it because they didn't own it. Yes, that would be the government's fault. This was just a public-private partnership akin to Geithner's today.

Would government do a better job? perhaps and perhaps not. There are examples of both.

It is honestly a bit hard to argue with someone who really thinks this question is a tossup. Having worked with and for both government and private entities in a variety of industries, the answer is obvious to me.


Um, apparently you failed to read. The whole point of the 'Tragedy of the Commons' was that it was ultimately a way for private investors (aka rentiers) to take public property for themselves. Whether a better job was done to manage it - again implicitly depends on your definition of what an optimal result is: large tracts of land owned by a few people with lots of starving ex-middle class.

The lesson of the tragedy is that it is held in common and should not be, not that there should not be any private entities that could exploit it. Homesteading in the US (40 acres and mule, etc.) was certainly not causing any starvation - it does not follow that the government gives or sells the land to an oligarch. Ever heard of the nature conservancy? A private conservation club that buys land


What has been said is that government does have a function which can be beneficial, and that this function costs money.

Most if not all of the ever-expanding "functions" of government that are not totally unnecessary, and these are legion, can be better and more ethically provided privately, with contractual agreements between private parties.
Requiring me to pay for your hip replacement or your in-vitro fertilization attempts is OK if I volunteered to do so by purchasing insurance, but immoral if you force me under threat of imprisonment. Taxation for wars and transfer payments and other entitlements are only slightly less distasteful than transfers to banksters.

What Dr. Hudson states and which I agree with is that

1) Property values and therefore taxes are the most stable of all the possible revenue sources

Tell that to the state of california

2) Property owners all derive benefit from government to some degree

Not more than government derives from them.

3) Government needs money to provide its function

All those wars and promises get expensive, yes.

As for RogerMexico: again you attack Dr. Hudson by linking him with Marx.

It seems to me Hudson has linked himself with Marx.

Unlike Marx, Dr. Hudson is not advocating the destruction of the rentier class by government expropriation of all property.

Well I guess we have got that going for us, he is going to take our property slowly and not all at once.


As Dr. Hudson himself CLEARLY stated in his article: Stalin fixed the rentier problem and replaced it with a bureaucratic one.

Again, the vision of Hudson nodding in approval at anything "fixed" by Stalin does not reassure me in the slightest.

If you cannot understand that this means Dr. Hudson does NOT advocate Marxism, then again I cannot fix your cognition or lack thereof.

Fair enough, there are lots of different Marxisms. I for one, am a big fan of Christopher Hitchens. He used to be a Trotskyite and also would not call himself a marxist. Shall we agree that Hudson is "Marxist flavored", at least.

Nowhere has Dr. Hudson stated that land should be taken by government.

They most certainly lake your land as punishment if the extortion by taxation fails. Does Hudson disavow this?

As for your assertion that rentiers don't exist - well ok.

Well, they exist in a way, but only by prejudicial definition.

If you cannot recognize that having a property tax basis lower than the inflation rate exists primarily to benefit those who own the majority of the property - which by the way is VERY much true in this nation, then I cannot help you.


Actually a non CPI adjusted basis plus the depreciation ( I agree that's bogus) means you pay more taxes when you sell it.

BTW, the same thing applies to stock and gold coins - you can't depreciate them but as long as you haven't sold them you pay no taxes. This "only benefits the holders of the majority of such property ", too. If you are going to tax anything, tax it all exactly the same. Why not just tax the gains on real estate and the gains on any asset you sell. Do you think we should tax the idle wealth in gold eagles unproductively sitting in your sock drawer?

If you must tax, tax all gains the same and the same as other income. Why tax any property at all - if you bought your property with income, haven't you already paid the tax when you earned the income? How is rental income form an apartment any different or more evil than the interest you get from corporate bond? Should your bond be taxed on an annual basis as a "free ride" too?

( BTW, Mark me down as predicting such federal wealth taxes right now)

The way to fix the real estate bubble problem is just to fix the bubble problem in general. The problem is fiat, credit and central banking.
The problem is a non- zero rise in prices over time.

Government creates inflation on purpose - no cap gains, no cap gains taxes. If there was a 100% commodity money baked currency, real estate would be relatively static in price unless improved, and gold coins would be a store of value but not an investment, and stocks and bonds would, appropriately, be speculative investments and you would only pay tax (if any) on real gains.

If you also refuse to acknowledge that the true extent of taxes in this nation is skewed towards those taxes paid by those who are not rentiers, again I cannot help you.

I know the fraction of US citizens who pay no federal income tax at all has now climbed to about 50%. I know that the biggest unfunded liabilites we are dealing with are promises to take ever more money from ever fewer people and pay it to ever more recipients

It is true that this ratio is lower here than in say, Britain, but equally true that the gap is shrinking every day.

Lastly as for taxation - again you seem to equate taxation with Marxism. But again you fail to understand what exactly you speak of.

Not really, I think all taxation is theft. I think I understand both Marx and the meaning of "taxation" pretty well.

Karl Marx advocated a progressive income tax, but of course property tax was irrelevant as all property ownership would be abolished (or owned by the state).

Dr. Hudson is not advocating a progressive property tax - in fact he is advocating a FLAT tax.

Flat income tax? what rate?

The system we have today in many states is actually a progressive tax - only the progression isn't income. It is inverse duration of ownership.

But I digress.

Taxes bad... Fine - so what is your idealistic world?

Where every highway has its toll booth? Every policeman has his credit card scanner? Where each wealthy individual would sponsor his Minuteman cohort or cohorts? Because that's EXACTLY what you find in the so called failed states.

You are assuming the rule of law can create a civil society, when it is the other way round. Read Rothbard's books before caricaturing the idea of a cooperative civil society.

[jk]

I already stated above why it would get better managed. Private owners have a long term stake in the well being of their property. They also have a personal stake in providing what the public wants -- and the ones who provide the best turn a profit as a result.
this is the precisely the belief that alan greenspan finally admitted was wrong: private ownership does NOT imply good stewardship. when the owner is intimately involved in the management as a long term livelihood, yes, this argument works. with modern corporate structures? 'fraid not. why are lehman and bear stearns gone? and, sans bailout, how many others would have joined them? why didn't the managers think about long term risk? because in modern corporate structures, mnagers do NOT have "a long term stake in providing" anything whatsoever. this is called the "agency problem." this was supposed to have been solved by giving the managers stock options, but lo and behold that just led to short term profit maximizing strategies to goose the stock price, at the cost of long term risk and throwing into doubt even the long term viability of the whole organization. where have you been the last couple of years? your free market fundamentalism doesn't work.

[Mashuri]

this is the precisely the belief that alan greenspan finally admitted was wrong: private ownership does NOT imply good stewardship. when the owner is intimately involved in the management as a long term livelihood, yes, this argument works. with modern corporate structures? 'fraid not. why are lehman and bear stearns gone? and, sans bailout, how many others would have joined them? why didn't the managers think about long term risk? because in modern corporate structures, mnagers do NOT have "a long term stake in providing" anything whatsoever. this is called the "agency problem." this was supposed to have been solved by giving the managers stock options, but lo and behold that just led to short term profit maximizing strategies to goose the stock price, at the cost of long term risk and throwing into doubt even the long term viability of the whole organization. where have you been the last couple of years? your free market fundamentalism doesn't work.

Ask yourself this: Who has had a heavy hand in shaping modern corporate structures? Who has granted them their limited liability from everyone, including those with whom they have not signed any contracts? Who has granted the corporation the equivalent status of an immortal person, giving them a very serious advantage over mortal people? You know the answer. The reality is your assumptions are faulty. In a true free market economy, today's corporate structure would not be able to exist. It has taken government intervention to remove them from full responsibility and ownership for their actions and to protect them from competition with red tape and regulations. In fact, many modern big corporations are very much like governments. Their "leaders" have little personal stake at risk and have incentive for short term gains. All this has to do with the State granting them privileges at the expense of our own personal and private property rights.

[marvenger]

chk chk boom

[jk]

Ask yourself this: Who has had a heavy hand in shaping modern corporate structures? Who has granted them their limited liability from everyone, including those with whom they have not signed any contracts? Who has granted the corporation the equivalent status of an immortal person, giving them a very serious advantage over mortal people? You know the answer. The reality is your assumptions are faulty. In a true free market economy, today's corporate structure would not be able to exist. It has taken government intervention to remove them from full responsibility and ownership for their actions and to protect them from competition with red tape and regulations. In fact, many modern big corporations are very much like governments. Their "leaders" have little personal stake at risk and have incentive for short term gains. All this has to do with the State granting them privileges at the expense of our own personal and private property rights.
i'm not willing to posit a counterfactual history of the world as a starting point for discussion. my own interest is in understanding how the world might unfold from this moment forward.

[cjppjc]

i'm not willing to posit a counterfactual history of the world as a starting point for discussion. my own interest is in understanding how the world might unfold from this moment forward.


The world will unfold the way it always has. Man has not changed. All these fine ideas with respect to who does a better job of X are illusory. Man is always and everywhere the same. Only the external conditions appear different. Progress, enlightenment, all words that give an appearance of change, when in fact none exists.

[metalman]

The world will unfold the way it always has. Man has not changed. All these fine ideas with respect to who does a better job of X are illusory. Man is always and everywhere the same. Only the external conditions appear different. Progress, enlightenment, all words that give an appearance of change, when in fact none exists.

truer words never spoken.

[jk]

The world will unfold the way it always has. Man has not changed. All these fine ideas with respect to who does a better job of X are illusory. Man is always and everywhere the same. Only the external conditions appear different. Progress, enlightenment, all words that give an appearance of change, when in fact none exists.
in some ways i agree. otoh, in my naive and concrete way, i count the abolition of slavery as a step forward.

[cjppjc]

in some ways i agree. otoh, in my naive and concrete way, i count the abolition of slavery as a step forward.


I'm sure Sapiens could post many links to current slavery. Real or metaphorical.

[metalman]

in some ways i agree. otoh, in my naive and concrete way, i count the abolition of slavery as a step forward.

of course, you are right about that. much is better for far more people. the past is romanticised, but the comments about human nature remain. individually... deep down... a bunch of apes, as you in your profession are no doubt well aware. have we triumphed over our nature? we shall see.

[Thailandnotes]

After reading the last 20 posts on this thread, I highly recommend Timothy Egan's (paperback)…

The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl

"The Dust Bowl was the product of reckless, market-driven farming that had so abused the land that, when dry weather came, the wind lifted up millions of acres of topsoil and whipped it around in "black blizzards," which blew as far east as New York."

I'd always thought the dust picked up and always went west.

Congressman pushing legislation in D.C. got round-the-clock forecasts and introduced legislation just as the dust hit outlying areas in Virginia. At noon in the nation's capital it was like midnight.

Out in Oklahoma, you couldn't touch or hug anyone. The static electricity would knock you to the ground.

[Mashuri]

i'm not willing to posit a counterfactual history of the world as a starting point for discussion. my own interest is in understanding how the world might unfold from this moment forward.

So, then you agree that government is responsible for distorting the corporate structure and markets into the mess they are now, but only want to focus on what you believe can realistically be done from this point onward, correct?

[Mashuri]

The world will unfold the way it always has. Man has not changed. All these fine ideas with respect to who does a better job of X are illusory. Man is always and everywhere the same. Only the external conditions appear different. Progress, enlightenment, all words that give an appearance of change, when in fact none exists.

Very true but the way man has organized himself has evolved throughout the centuries and continues to do so. In 1776, the idea of the United States was a radical new form of governance and had never been tried before. Unfortunately, it has regressed back into tyranny but, to be fair, this was a first attempt at something quite different. Today, we're approaching a crossroads again. The current environment of a collapsing economy and government trying to tighten its screws ever more onto the people is getting backlash. The Tea Parties, and recent vote in California, signify the rising dissatisfaction tax payers feel and we can safely call it the beginnings of a tax revolt. Whether this turns into a revolution in the form of third party candidates taking office or even a civil war remains to be seen. Revolution 2.0 may be upon us and, assuming we don't end up with an even more fascist regime (always a danger in these times) we may end up drafting a Constitution 2.0.

[ThePythonicCow]

Very true but the way man has organized himself has evolved throughout the centuries and continues to do so.Excellent point.

We're not just dealing with humans, who are relatively unchanged over the centuries, but also with human organizations, which have a life and structure of their own, and which are changing and evolving rather rapidly these last couple of centuries.

Trying to study human organizations as if they were just the sum of the actions of many individual humans acting each in their own interests is like studying how to teach your dog to fetch by studying the chemical properties of the various elements (carbon, oxygen, hydrogen, nitrogen, ...) that constitute a dog.

[c1ue]

In 1776, the idea of the United States was a radical new form of governance and had never been tried before.

Sorry, again your apparent lack of historical sense is asserting itself.

Democracy has been tried before and it failed. Democracy was not invented by America nor was the concept of a representational legislature. Greece, Rome, Britain, etc etc.

Similarly Republicanism (and in Republic, as opposed to Reagan) has also been tried before and has both failed and succeeded - depending on era, venue, and time frame.

Other concepts to consider: Jacobinism

I've always believed that the best point of the American system was that it is relatively difficult to do anything - as anyone who's ever tried to obtain a consensus among a large group of people can attest to. Therefore only the most important and urgent gets done quickly without ridiculous due process.

Similarly the free market concept works fine so long as there are relatively large numbers of equally competing entities.

But both systems are vulnerable to the same issue: bureaucratic/political accumulation of power to the point where urgency/common need (in the governmental sense) and competition (in the market sense) are lost.

[Mashuri]

Sorry, again your apparent lack of historical sense is asserting itself.

So, do you really not understand my point or are you just creating a strawman argument for the hell of it? What made the U.S. unique was not the fact that it was a democratic republic (NOT a democracy) but the framework of the Constitution, placing individual and private property rights over government. The Bill of Rights is unprecedented.

Democracy has been tried before and it failed. Democracy was not invented by America nor was the concept of a representational legislature. Greece, Rome, Britain, etc etc.Totally agree here. Democracy is tyranny through mob rule.

Similarly Republicanism (and in Republic, as opposed to Reagan) has also been tried before and has both failed and succeeded - depending on era, venue, and time frame.Agree here too. The State will always build upon its power and trample its subjects.

Other concepts to consider: JacobinismOk. Should I consider mercantilism and corporatism too? All are forms of centralized rule.

I've always believed that the best point of the American system was that it is relatively difficult to do anything - as anyone who's ever tried to obtain a consensus among a large group of people can attest to. Therefore only the most important and urgent gets done quickly without ridiculous due process.The goal of the Constitution was to keep government expansion in check and it did a pretty decent job at first. That's not been true for at least a century though.

Similarly the free market concept works fine so long as there are relatively large numbers of equally competing entities.The main way to supress competition is through coercion.

But both systems are vulnerable to the same issue: bureaucratic/political accumulation of power to the point where urgency/common need (in the governmental sense) and competition (in the market sense) are lost.Both systems are vulnerable to centralized monopolies in coercion, yes.

[jk]

So, then you agree that government is responsible for distorting the corporate structure and markets into the mess they are now, but only want to focus on what you believe can realistically be done from this point onward, correct?
no. not correct. i'm not going to waste time untangling the government from the private interests that dominate it, and will do so in any system. instead i will accept that the world is as it is, and then, yes, see what i believe can realistically be done from this point forward.

[Mashuri]

no. not correct. i'm not going to waste time untangling the government from the private interests that dominate it, and will do so in any system. instead i will accept that the world is as it is, and then, yes, see what i believe can realistically be done from this point forward.

Fair enough. I'll continue to strive for reducing government to the point that private interests stand to gain too little from entangling with them in the first place. ;)

[cjppjc]

Very true but the way man has organized himself has evolved throughout the centuries and continues to do so. In 1776, the idea of the United States was a radical new form of governance and had never been tried before. Unfortunately, it has regressed back into tyranny but, to be fair, this was a first attempt at something quite different. Today, we're approaching a crossroads again. The current environment of a collapsing economy and government trying to tighten its screws ever more onto the people is getting backlash. The Tea Parties, and recent vote in California, signify the rising dissatisfaction tax payers feel and we can safely call it the beginnings of a tax revolt. Whether this turns into a revolution in the form of third party candidates taking office or even a civil war remains to be seen. Revolution 2.0 may be upon us and, assuming we don't end up with an even more fascist regime (always a danger in these times) we may end up drafting a Constitution 2.0.

Yes man is the same. Outward forms change. The problems you speak of, are naturally occuring in nature. ALL THINGS lose their initial thrust, and begin to decay. It is a law. Whether they are ideas, organizations, religions, biological life. All things must move forward or they move backward. Look how far from their original intent are all the worlds religions. That is not to say something can't be restarted back to it's original arc.

[c1ue]

So, do you really not understand my point or are you just creating a strawman argument for the hell of it? What made the U.S. unique was not the fact that it was a democratic republic (NOT a democracy) but the framework of the Constitution, placing individual and private property rights over government. The Bill of Rights is unprecedented.


Sorry, your point is wrapped up too tightly around your own internal concepts for me to separate it into understandable parts.

Somehow you believe that the US is unique because it had a constitution and a bill of rights.

Yet what exactly is this constitution and bill of rights?

A living document which frankly is known more for what it does not do than what it does. A document for which inconvenient aspects can be removed or new items added - great for lawyers.

There are plenty of historical examples of nation-states which have been governed based on written guidelines - if perhaps not founded on them.

But just as the US was unique in having said written guidelines from the start, so too was the US unique in having an entire subcontinent available for expansion - protected by large and wide bodies of water. Contrast this with pretty much any other nation in existence.

Who is to say which was more important?

The straw man being thrown around is the concept of original virtue which you ascribe this nation to have.

As for your views on government behavior - then perhaps you should expound exactly what this so called ideal government should be. Apparently you are one of those who should believe the Whiskey Rebellion's failure was a major branching point. Interesting idea but frankly irrelevant to the discussion at hand.

[Mashuri]

Sorry, your point is wrapped up too tightly around your own internal concepts for me to separate it into understandable parts.

This statement really says a lot about your comprehension skills, since nobody else seems to have a problem understanding what I said here.

Somehow you believe that the US is unique because it had a constitution and a bill of rights.Has any other nation ever formed around even similar concepts? The answer is "no" which makes it unique.

Yet what exactly is this constitution and bill of rights?It's an idea -- a very new and unique idea for its time, as has been established -- to form a society around. Ideas are what define any society.

A living document which frankly is known more for what it does not do than what it does. A document for which inconvenient aspects can be removed or new items added - great for lawyers.Yes, the Constitution has been trampled by our now oppressive state, but you know I already agree with that.

There are plenty of historical examples of nation-states which have been governed based on written guidelines - if perhaps not founded on them.All nation states are governed based on guidelines and ideas. It's the ideas themselves that differentiate them.

But just as the US was unique in having said written guidelines from the start, so too was the US unique in having an entire subcontinent available for expansion - protected by large and wide bodies of water. Contrast this with pretty much any other nation in existence.So you DO agree that the US's guidelines/idea is unique. Man, that took a long, protracted effort to get you to capitulate. ;) As for the large bodies of water, yes, it helped protect the U.S. from European powers -- although we seem to get dragged into their conflicts anyway...

Who is to say which was more important?Both were. The U.S. was a radical new idea and certainly benefited by being insulated from nations that didn't like it.

The straw man being thrown around is the concept of original virtue which you ascribe this nation to have.Not a straw man at all. The Bill of Rights defined the new nation and was a radical departure from past methods of governance.

As for your views on government behavior - then perhaps you should expound exactly what this so called ideal government should be. Apparently you are one of those who should believe the Whiskey Rebellion's failure was a major branching point. Interesting idea but frankly irrelevant to the discussion at hand.Ideal government? As little as possible and all of it voluntary. If you're really interested in what I find ideal (somehow I doubt it) then I recommend another Rothbard book, "Man, Economy and State":

http://mises.org/rothbard/mes.asp

[c1ue]

bubba, if you can't differentiate between architecture and circumstance - I'm no longer going to waste time trying to demonstrate.

May your fantasy of Libertarian America Uber Alles continue.

[Mashuri]

bubba, if you can't differentiate between architecture and circumstance - I'm no longer going to waste time trying to demonstrate.

May your fantasy of Libertarian America Uber Alles continue.

Bubba, your posts in this thread are a tribute to logical fallacies. Thank you for not wasting any more of my time.

[*T*]

Has any other nation ever formed around even similar concepts? The answer is "no" which makes it unique.

wikipedia on constitutions (http://en.wikipedia.org/wiki/Constitution)

Excavations in modern-day Iraq by Ernest de Sarzec in 1877 found evidence of the earliest known code of justice, issued by the Sumerian king Urukagina of Lagash ca 2300 BC. Perhaps the earliest prototype for a law of government, this document itself has not yet been discovered; however it is known that it allowed some rights to his citizens. For example, it is known that it relieved tax for widows and orphans, and protected the poor from the usury of the rich.

The Romans first codified their constitution in 449 BC as the Twelve Tables. They operated under a series of laws that were added from time to time, but Roman law was never reorganised into a single code until the Codex Theodosianus (AD 438); later, in the Eastern Empire the Codex repetitæ prælectionis (534) was highly influential throughout Europe. This was followed in the east by the Ecloga of Leo III the Isaurian (740) and the Basilica of Basil I (878).

Japan's Seventeen-article constitution written in 604, reportedly by Prince Shōtoku, is an early example of a constitution in Asian political history. Influenced by Buddhist teachings, the document focuses more on social morality than institutions of government per se and remains a notable early attempt at a government constitution. Another is the Constitution of Medina, drafted by the prophet of Islam, Muhammad, in 622. It is said to be one of the earliest constitutions which guarantees basic rights to religions and adherents as well as reinforcing a judiciary process regarding the rules of warfare, tax and civil disputes.
In England, Henry I's proclamation of the Charter of Liberties in 1100 bound the king for the first time in his treatment of the clergy and the nobility. This idea was extended and refined by the English barony when they forced King John to sign Magna Carta in 1215. The most important single article of the Magna Carta, related to "habeas corpus", provided that the king was not permitted to imprison, outlaw, exile or kill anyone at a whim — there must be due process of law first. This article, Article 39, of the Magna Carta read:
No free man shall be arrested, or imprisoned, or deprived of his property, or outlawed, or exiled, or in any way destroyed, nor shall we go against him or send against him, unless by legal judgement of his peers, or by the law of the land.

[Mashuri]

wikipedia on constitutions (http://en.wikipedia.org/wiki/Constitution)

It's like people are trying to win an argument on irrelevant technicalities. I never said that Constitutions granting people some rights never existed before, just that the Bill of Rights, in particular, was a radical departure that set an unprecedented relationship between a government and its people. The U.S. was a new experiment in governance -- one that, in my opinion, is due for a "re-boot" using what we've learned from the past 200 years.

[c1ue]

T,

Good of you to post some counterexamples, but it is a waste of time to break through Mashuri's fanatic belief in American exceptionalism.

[Mashuri]

T,

Good of you to post some counterexamples, but it is a waste of time to break through Mashuri's fanatic belief in American exceptionalism.

So much for "not wasting your time". How much further would you like to draw out this tangent? How relevant is this to the original point? Finally, does our relentless nitpicking here on minutiae count as a thread-jack?

[Mashuri]

So much for "not wasting your time". How much further would you like to draw out this tangent? How relevant is this to the original point? Finally, does our relentless nitpicking here on minutiae count as a thread-jack?

Let me phrase this another way, just to be thorough. Whether or not the Bill of Rights is radical and unique (a subjective call, anyway) how is that relevant to the original public / private property debate?

[Chris Coles]

Let me phrase this another way, just to be thorough. Whether or not the Bill of Rights is radical and unique (a subjective call, anyway) how is that relevant to the original public / private property debate?

You tell us please.

[Mashuri]

You tell us please.

Thought it was hinted at enough. Answer: None. Let's kill the tangent.

[ThePythonicCow]

Let's kill the tangent.
... and the silent lurkers throw a party to celebrate its death

http://img.thesun.co.uk/multimedia/archive/00400/snf06h01ss280_400159a.jpg