Monday, April 19, 2010

Housing Bubble

Way back in 1983 Fred Harrison published his book "The Power in the Land" which relied on Homer Hoyt's 18-yr cycle theory to predict a land boom peaking in 1989 and a recession thereafter.

Back in the day we Georgists were amused to see the prediction come true and thought the bubble was a big one too. Anyone could also predict that the next peak would be 2007 or therabouts.

But look at this latest boom! No wonder the Economist called it the "biggest bubble in world history".

It's been Michael Hudson perhaps more than anyone else who has emphasized that a big land boom means huge amounts of money have been lent with land or property as collateral, which means in a bust all the banks are bust. In a financialised economy all available rents or supluses are pledged to banks as interest.

The financial sector is a giant vampire squid, sucking the life out of the economy and the workforce. Here again Hudson has rightly emphasized that 'debts that can't be paid, won't be paid'; that we need a 'Jubilee'.

However, the financial sector owns and controls the world and won't get it's fangs off it until there is some kind of revolution or popular rebellion.

Neo-liberalism will also have to be destroyed. The core of this dogma is to privatize, de-regulate, de-fund, de-tax and de-stroy.

Privatize: hand over land and resources and everthing in the nature of a natural monopoly to the private sector to allow them to privatize the economic surplus.

De-regulate: remove barriers to the raising of profits.

De-fund: the public sector and in particular the essential government role of infrastructure. Infrastructure will be provided by the miracle of market forces! Just like some sort of latter-day cargo cult. All you need to do is set up on some level ground somewhere wooden carvings of Adam Smith and Hayek, and all the good things anyone could desire will come down!

De-tax: lower or remove altogether taxation on wealth, property and capital.

De-stroy: the obvious outcome of it all, although a small class of the very rich have gotten smaller and even richer, which is their objective.