Hudson on the Piketty Phenomenon

[Polish_Silver]

Re: Hudson's lack of distinctions

I’ve known 2 families land poor, then land rich, farmers whose fathers and grandfathers made a living on 300 acres outside a metropolis that eventually…generations later expanded to gobble up their land. The break-even existence of the grandfather became the comfortable sell 20-acres-send-a-kid-to-college father which became the gigantic windfall of the son who had to decide how many millions to dole out to the fourth generation.

I think Hudson’s fundamental point on real estate is obvious: When the property you own has increased immaculately, you need to pay more tax. If you can’t pay the tax, sell and move. Obviously, there are clauses that let people stay in their homes till death, but after that, tax the hell out of the corner of 11th avenue.

You make this HUGE windfall on being in the right place at the right time. Congratulations, but don't expect your great great grandkids to be royalty.

I don't think this is the central FIRE problem. Hudson complains about people who milk the system in a sustainable way.
This family started out lower middle class and sold property to be wealthy for a few generations. That involves no corruption, political manipulation, or sucking people into debt. The people who buy the small lots will pay plenty of taxes.

Hudson's example was a downtown landowner, whose property becomes more valuable because a subway is built nearby. It makes sense to levy a special property tax on property enriched by other tax payers.
However, the land does not continue rising in value. After 10 years or so, the tax rate should be the same as everywhere else. The wealthy would pay more, because they own more property.

If the real estate market is competitive, then any lowering or raising of taxes will be passed on to tenants. If it is not competitive, then fix that problem. Land in valuable areas does not rise in value faster than other areas. It rose faster 50 years ago, and retains a higher price. Shiller discusses this in irrational exuberance. Although land in Boston is more expensive than land in Milwaukee, both rise at the rate of inflation.

[Polish_Silver]

what is inflation?

Nothing wrong with inflation per se if it is reflective of economic growth, i.e., the money supply must grow to keep up with economic growth per Friedman approach.
. . .

If money supply keeps pace with economic output, prices will not rise unless velocity increases.

Under a gold standard, prices are very stable. Contrary to what is usually said, it is not a gold standard that causes deflations, but leveraged lending.

[Thailandnotes]

Re: Hudson's lack of distinctions

I’ve known 2 families land poor, then land rich, farmers whose fathers and grandfathers made a living on 300 acres outside a metropolis that eventually…generations later expanded to gobble up their land. The break-even existence of the grandfather became the comfortable sell 20-acres-send-a-kid-to-college father which became the gigantic windfall of the son who had to decide how many millions to dole out to the fourth generation.

I think Hudson’s fundamental point on real estate is obvious: When the property you own has increased immaculately, you need to pay more tax. If you can’t pay the tax, sell and move. Obviously, there are clauses that let people stay in their homes till death, but after that, tax the hell out of the corner of 11th avenue.

You make this HUGE windfall on being in the right place at the right time. Congratulations, but don't expect your great great grandkids to be royalty.

[Polish_Silver]

Re: Hudson's lack of distinctions

This has come up before on this forum. I think Hudson completely understands real estate and is not talking about an upper middle-class couple who inherits a house and rents it out or buys two houses looking for income.

“.

I have never heard him make that distinction. I think I'd agree that there are lots of tax loop holes for the bigger fish, not so many for the small and medium ones. I don't think rental apartments make gobs of money for their owners, and I have yet to see Hudson give specific numbers on that.

[shiny!]

Re: Hudson on the Piketty Phenomenon

Disagree, what you describe is participation in the system, the word I used was Collaboration, eg review Nazi collaborators for example. My point is that the line between the two is not bright and many, including apparently many here as well, don't want to think about that.

So TECI is the new religion hey? dream on for the coming of utopia if you must. History is replete with failed visions built on millions of corpses

Thank you for making the distinction between the words "participation" and "collaboration". I stand corrected. We are participators in the system, not collaborators. I don't think you'll find FIRE collaborators at iTulip. People here seem to think about these issues a lot.

I consider a TECI economy to be an investment concept, not a religion or utopia. Sorry if my words gave you the wrong impression.

Just as the FIRE economy replaced the manufacturing/productive economy before it, TECI industries will hopefully replace FIRE type industries as good investments. By "good investment" I mean beneficial for society and beneficial for my portfolio as well. I would simply like to preserve my assets in these hard times, invest in TECI companies as FIRE investments fail, and then ride the wave up. I feel no religious zeal about this at all. Don't know why the idea upsets you so much.

[vinoveri]

Re: Hudson on the Piketty Phenomenon

We're all unwitting collaborators to greater or lesser extents; it's impossible not to be! If you own stocks or insurance, use Federal Reserve Notes, pay any financial service fees or interest on debt, you're playing in FIRE's playground. The idea is to stay solvent during the death throes of the FIRE economy, then be part of the building of the TECI economy.

Disagree, what you describe is participation in the system, the word I used was Collaboration, eg review Nazi collaborators for example. My point is that the line between the two is not bright and many, including apparently many here as well, don't want to think about that.

So TECI is the new religion hey? dream on for the coming of utopia if you must. History is replete with failed visions built on millions of corpses

[lektrode]

Re: Hudson on the Piketty Phenomenon

For every thing there is a season...

We're all unwitting collaborators to greater or lesser extents; it's impossible not to be! If you own stocks or insurance, use Federal Reserve Notes, pay any financial service fees or interest on debt, you're playing in FIRE's playground. The idea is to stay solvent during the death throes of the FIRE economy, then be part of the building of the TECI economy.

+1

[shiny!]

Re: Hudson on the Piketty Phenomenon

Just be careful. It's very easy to become an unwitting Collaborator.

For every thing there is a season...

We're all unwitting collaborators to greater or lesser extents; it's impossible not to be! If you own stocks or insurance, use Federal Reserve Notes, pay any financial service fees or interest on debt, you're playing in FIRE's playground. The idea is to stay solvent during the death throes of the FIRE economy, then be part of the building of the TECI economy.

[vinoveri]

Re: Hudson on the Piketty Phenomenon

If by "what needs to be done," you mean "how to fix the broken system," we can discuss what brought us to this pass and what needs to be done 'till doomsday, but with the foxes in full control of the henhouse very few of our brilliant ideas will come to fruition.

Exactly.
Talk is cheap and reform ain't happenning.

If by "what needs to be done," you mean "how to protect ourselves and maybe even prosper in this rigged, dysfunctional system," I believe that is where EJ wants to keep the focus. That means focusing more on things as they are, not how they ought to be.

Just be careful. It's very easy to become an unwitting Collaborator.

[vt]

Re: Hudson on the Piketty Phenomenon

Vietnam and Iraq 2 were wars we should never have gotten into. I remember well colleges shutting down quickly almost immediately after Kent State; I was in grad school in D.C.. That was the most significant nationwide college protest ever.

We agree about TECI vs. FIRE; this is a reason almost everyone is here.

The two of us (and everyone in the forum) come from different perspectives and viewpoints of how to accomplish the common goals. I feel we do agree that we want to help the middle class and the poor to reverse their decline in living standards.

Above all we have found a respect for each other amid previous understandings, and that's progress.

[don]

Re: Hudson on the Piketty Phenomenon

1- an understanding of how our world works, rather than a 'blind trust' of managing our personal portfolios, is not only preferable but necessary.

2- a grownup acknowledgment that the US has been the world's hegemon since '45 and is acting as any hegemon would be expected to act is the starting point of comprehension, not a regurgitation of official agitprop. Once that's acknowledged we can go forward with . . .

3- the best way to maintain and possible grow our endangered portfolios.

hey, one can dream, can't one . . . .

[shiny!]

Re: Hudson on the Piketty Phenomenon

+1
and its nice - for a change - to see you two agree on stuff.

It sure is.

again - i think we (most of us on the 'tulip) agree on WHERE we are, its HOW we got here that is the ultimate issue

People may never agree on HOW we got here. That, IMO, is what all the left/right finger pointing is about.

now if we might just come up with more ideas on WHAT needs to be done, would say Mr J's concern(s) - re: the usefulness of the public/free sections - could be put to rest

If by "what needs to be done," you mean "how to fix the broken system," we can discuss what brought us to this pass and what needs to be done 'till doomsday, but with the foxes in full control of the henhouse very few of our brilliant ideas will come to fruition.

If by "what needs to be done," you mean "how to protect ourselves and maybe even prosper in this rigged, dysfunctional system," I believe that is where EJ wants to keep the focus. That means focusing more on things as they are, not how they ought to be.

[lektrode]

Re: Hudson on the Piketty Phenomenon

I say the fireman because it's tough to be anti-fireman, but I think we're on the same wave length here.

I'm with you....
....
Of course it is and we know how to do all of that better than anyone in the world. The people are desperate for work and relief, the nation is desperate for infrastructure (TECI), and there's an army of entrepreneurs desperate for capital to help make that happen (Chris Cole's Spillway), but the malignant cohort in command considers war and its derivatives too lucrative and useful to give up. And then there's FIRE. So we continue to be hollowed out as a nation and an economy.

+1
and its nice - for a change - to see you two agree on stuff. (and eye read near everything you both type)
again - i think we (most of us on the 'tulip) agree on WHERE we are, its HOW we got here that is the ultimate issue

now if we might just come up with more ideas on WHAT needs to be done, would say Mr J's concern(s) - re: the usefulness of the public/free sections - could be put to rest

[Woodsman]

Re: Hudson on the Piketty Phenomenon

Not just the fireman, but the policeman (or woman) and especially the soldier.

I say the fireman because it's tough to be anti-fireman, but I think we're on the same wave length here.

It still makes my blood boil to have seen our returning Vietnam vets cursed and spit on by some low life dirt who failed to understand the soldiers were forced into service and war by leaders who thought them expendable.

I'm with you. Just remember that they were both kids and both used by forces beyond their understanding and influence, the soldier and the dissident. Both were fighting on behalf of American ideals taught to them every day of their lives since birth. My contempt is largely reserved for the old men who sent them there against their will and against the interests of the nation as was recognized by the dissidents early on. My blood boils with the understanding that these ruthless and cynical men used those American ideals to their own cynical and ruthless ends and against the interests of soldier and dissident. And I'm embarrassed by the behavior of the young baby boomers at the time who should have known better.

Funny you mention the war. I just came back from a trip to your neck of the woods a few weeks ago. While there I stopped by Arlington National Cemetery to visit with an old friend as I usually do when I'm in town. After paying my respects, I often head over to JFK's grave site if there's time. I read the inaugural speech and watch folks bunch up before the flame.

This time as I was walking off past Bobby's memorial, McNamara's grave site caught my eye and I stopped and felt a distinct impulse to expectorate. I didn't, of course. I heard one of the kids, a teenager, ask his companion, "who's this guy?" and I found myself saying out loud, "nobody; just a lying moral coward and a decomposing sack of sh!t." It was uncharacteristic of me and inappropriate, but that place always puts me in a different frame of mind.


And at that moment I felt a hand land on my shoulder and I turned to meet an older, better dressed gentleman offering his other hand to me in a gesture of goodwill. He said nothing; just smiled broadly and nodded. I noticed a little replica gold Combat Infantryman's Badge on the lapel of his jacket and I knew he understood exactly what I had intended. The kids laughed, as kids usually do. No doubt we were ridiculous to them, two crazy old dudes standing before a cut forest of granite markers and smiling like loons. In front of us stood a mound where the desiccated bones of admirals and generals and secretaries lie, still clad in their woolen uniforms and suits. Together that small band of men had consigned millions others to their own graves. But we were here and alive, two strangers pumping our arms in recognition and worthy of every one of the kids' giggles and titters I'm sure.

It's difficult to explain artistic , athletic, or any type of talent; even the talent to manage a small, medium, or large business.

Shouldn't a world class violinist be paid more than a rapper? But who are we to judge how citizens spend their money for what they perceive as value? The world is not fair.

As you say, "should" and "fair" aren't all that relevant here. And we are talking about the art market, generally. Who can make sense of a world where Jeff Koons and Damien Hirst are considered world class. Art has become a kick in the nuts and a slap in the face.

Any large fortune gained illegally should be forbidden. Any gained unethically should be controlled and corrected. Any gained by a measure that it is excessive by a reasonable standard needs to be changed. But someone who creates something that improves life for people should not be denied the fruits of their labor.

If we enforced that standard the US would have the GNP of Lesotho. iTulip is not the best place to express it, but history has proved Balzac right.

8% of the population is employed by the non profit industry. Those organizations are supported by wealthy benefactors, corporations, and in some cases by government grants.

I can't speak to the numbers, but there's plenty of data and anecdotes demonstrating that most of this philanthropy goes to serving the interest (social and commercial) of the benefactors. The Chronicle of Higher Education and the WSJ both did rather deep pieces that support this conclusion; they're on Google if you have an interest. And the tales told by my ex (big in Development & Philanthropy) convinced me that this is the reality. Still and all, philanthropy - however misallocated, minuscule compared to the task before it, and scatter shot - is to be encouraged and recognized as a civic good.

What's inequality and not inequality is a complex subject. This thread is raising important issues.

Hardly as complex as we pretend it is (cf., Picketty, Galbraith, Hudson et al.) in my opinion.

It's not just distributing the wealth pie; more importantly is how do we grow the pie to have far more share in the innovation, invention, and creativity that this country has always cultivated, plus how do we duplicate this in other nations?

Of course it is and we know how to do all of that better than anyone in the world. The people are desperate for work and relief, the nation is desperate for infrastructure (TECI), and there's an army of entrepreneurs desperate for capital to help make that happen (Chris Cole's Spillway), but the malignant cohort in command considers war and its derivatives too lucrative and useful to give up. And then there's FIRE. So we continue to be hollowed out as a nation and an economy.

[Polish_Silver]

Re: Hudson on the Piketty Phenomenon

I found it interesting that Pikkety's book has already gotten more than 60 negative one-star reviews* on Amazon, whereas (Stiglitz) The Price of Inequality which is along the same lines has only garnered 1.

*Skimming these will seem like you just walked into the wrong bar.

(vt's Chasing the American Dream has not been reviewed)

A lot more people have heard of Stiglitz than Pikketty.
It seems like everyone agrees the subject is important. Interestingly, Hudson blames it on interest rate variations, and I agree that is at least part of the cause. Does Pikkety talk about interest rates?


I think the inequality bothers me less than the problem that the money is going to people who don't deserve it in the sense of being rewarded for producing something useful to others.

The people I resent are the ones who manipulate the system into rewarding their own group. One of these groups is corporate executives. They have created a system of corporate governance that enriches the people at the top for no good reason. I don't know how to fix it, but probably somebody does.