understanding the fire storm consuming our economic survivability-part

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Understanding the Fire Storm Consuming our Economic Survivability PART 3 Voices in the Wilderness

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“Because he failed to realise the importance of land, Keynes had to lay the blame for anomalies elsewhere. He chose the vague concept of ‘individual enterprise’ -- an element which he nevertheless wished to retain in the life of the market! …”

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“Because of this indeterminate mixing of values, we find no clear divisions as to where private enterprise stops and public enterprise takes over, much to the joy of those who seek the corporate state as a solution to all evils.”

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“How Russia finally resolves her relationship with the land will define the wholesomeness of her society. But what should she do? Are there any historical models to guide her decisions? …Right now, no-one knows what the land is worth; which is not surprising, because rent was never measured before, and today there is barely a wealth-producing economy capable of generating surplus income (rent). ...”

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“But that is going to change: the economy will take off. And if Russia's Parliament refuses to alienate the freehold rights to land to existing holders, the nation will find itself enriched beyond imagination by the flow of rent into the public coffers.”

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"The failure to eliminate or control the business cycle, despite repeated attempts to do so, suggests that the received wisdoms do not lead governments to remedies that work. A second reason is that economics, as it is employed today, is seriously prejudiced by the dilution of some of its key concepts. ..."

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"Economists routinely work with economic models that treat the world as if it were composed of two factors -- labor and capital -- instead of the three-factor model favoured by the classical economists. This disembodies the economy from its spatial context. That, especially when we are concerned with the impact of the housing market on people's lives, creates analytical problems. For land is the key piece of the jigsaw that is the complex economy."

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“Throughout a long career, Professor Gaffney has identified the endogenous sources of instability in capitalist economies and has shown precisely how capitalism can become a more self-correcting system.”

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Sustainability Equality of Opportunity Full Employment A Just Distribution of Income and Wealth Highest, Best Use of Land An End to Privilege and Monopoly

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A Just Distribution of Income and Wealth

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I. Avoiding the Real Estate Cycle

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“To be effective as a brake on periodic land booms, [a] tax on land values must be high enough to offset the expected growth of land values, which is the basis for rising prices in the market. …”

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“We should look to the taxation of land values as the key to damping the wide oscillations in the real estate cycle. …”

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“Because land is underassessed and buildings are overassessed, an improved system of assessment that corrects those biases would have an effect quite similar to shifting the tax rate from buildings to land.”

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“Banks should be regulated away from lending on land collateral.”

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II. Achieving Full Employment by Increasing Capital Turnover

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“The economic problems we face today … stem from the misallocation of capital. The consequences of that misallocation have manifested themselves in regular cycles of expansion and contraction, which have recurred approximately once every generation in the United States since 1798 (and perhaps earlier).”

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“It is not necessary for government officials to sort through lists of capital investments to make this determination. The market can do so quite well on its own, if it is coaxed to do so by the right incentives. …What is needed now is an entirely different approach to macroeconomic problems, an approach that takes account of different types of capital, and the effects of those differences on bottlenecks in the real economy.”

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“Faced with a surplus of labor (high unemployment) and a shortage of land and capital …, an obvious way to adapt is to substitute labor for land and capital, at the margins of course, making all process more labor-using. …It is not a question of stopping growth. …We can grow by combining more labor with the same land and capital. …Growth of capital is not needed for progress; turnover is.”

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* Land is not capital * Price does not clear the market for land; rising prices result in hoarding and speculation

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III. Money, Credit and Crisis

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“The financial system of any nation is built on confidence. No amount of ‘backing’ from gold or reserves or ‘too big to fail’ plans can sustain a financial system in which participants have lost confidence. …Monetary authorities have tried with very limited success to prevent the creation of speculative bubbles by imposing quantitative controls on credit formation.”

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END OF PART 3

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