Q - when will banks start lending again?
A - when they think they can make profits from doing so.
Q - will quantitative easing work?
A - no, it's just separate branches of the government shuffling bits of paper with numbers on them back and forth. The experience of Japan suggests that is won't even cause inflation, let alone get the economy moving.
Q - what's the main cause of child poverty?
A - poor parents.
Q - would you describe Sir Allen Stanford as a sophisticated fraudster?
A - no, he invested some of his money with Bernie Madoff and then tried to deny having done so. Sir Allen should have claimed that he invested all his money with Bernie Madoff and that he himself was the innocent victim of a fraud. Daft bastard, honestly.
So What Will Be Done About The Officer?
1 hour ago
16 comments:
The experience of Japan suggests that is won't even cause inflation
You'll need to run that one by me again ~ how can increasing the supply of something not reduce it's value? I can see how this may be hidden for a bit due to deflation caused by lack of confidence / anticipated tax rises, but that will be temporary.
Surely, for quantitative easing to work*, it has to be at a level to cause inflation, i.e. people have to notice it, thus to anticipate inflation, thus to start spending rather than saving?
* as in what 'they' consider as 'working'
HH, if you want the long answer to that question, try Paul Krugman's fine essay from 1999 in which he predicted this.
Or to save time, try Ed Harrison's summary.
Or save even more time and to see the effects of QE on JPY (which did not cause domestic inflation in Japan) see the chart here.
Or you can just take my word for it, it's one of those counter-intuitive things (a bit like Land Value Tax!) that has now gone into accepted economic wisdom, which obviously bypasses the present governnment, and the next Tory one as well, come to that.
Q - when will banks start lending again?
A - Not until they're solvent again?
AEA, that's half the explanation (being insolvent, they can only borrow at high interest rates). The other half is they don't particularly want to lend, not while house prices are falling and the economy is in a downturn.
It is a reasonable inference that the banks will start lending for mortgages when the market bottoms out. Their insistence on 23% average deposits seems to indicate that they think house prices will fall this much and they want their customers to take the hit.
Brown needs this lending to start again before the next election but the market is not bottoming out fast enough.But he only needs to suggest that he will intro LVT when a new bubble begins developing ( when prices start rising again) and their will probably be the rapid downward adjustment he needs.
DBC, that's all in the MW Five Point Plan (see bullet point 5 of my comment number 10 here
Cheers for the links, I'll give them a read.
LVT isn't counter intuitive, btw. You give the state a new power over something ,in this case,over land ownership and use, and it will abuse it (usually using the tyranny of the majority).
HH, sure, income tax came in at 1% two centuries ago and has since crept up to around 50% (incl. VAT and NIC). I'd like to head back toward 1% if I may.
But, aside from the fact that the state controls land use (we agreed on this point), this cannot happen with LVT, because:
a) Revenues are set by the market. If a home buyer offers more than the bricks and mortar cost/value, the deal is he pays 5% of the excess amount in tax every year (like if you buy a car, you still have to pay for fuel and insurance every year), so that acts like a higher interest rate - he pays less to the bank in interest and more in LVT, which can used to cut other taxes (so the buyer is actually better off under LVT).
b) If people are disgusted by the thought of paying LVT, then they will just never offer to pay more than the bricks and mortar value, simples!
c) There is a natural upper limit to how much can be collected, I would suspect 10% to 15% of GDP, tops. Unlike income taxes, which collect 45% of GDP.
Mark, until you recognise that tax is politics not economics, put your economics books away and understand my objection is one of liberty, not economic efficiency, you will never, ever, understand my point. I am a libertarian, not a tax simplifier. I am a libertarian not because I think the free market will make us all richer, but because I believe in individual liberty. The fact it will make us all rich is super, but consequential, as is the fact that I believe that individual liberty will lessen crime, make us happier, and make sure we all rub along together much better than we do now. All super things, all consequential. Therefore, for me, there are larger global arguments than economic efficiency. There is no room for sticks in my bag of carrots.
I can, and have, lay down scenarios where a state, either national or local, with unhealthy attitudes to any minority could persecute that minority using LVT in a way that no other tax system, bar ridiculous made up systems such as a 'black man tax', could achieve, invariably using the tyranny of the majority. I remain opposed to LVT for this reason.
The fact that I believe there are also gaping holes in the economic argument is, in the main, secondary, as my priority here, again as I have pointed out before, is the reduction of the state to a level where it could almost be paid for by a tax on bubblegum, ergo there holes would be of no consequence. But until we get there, I cannot support LVT for the reasons given above.
HH, if you know of any economic arguments against LVT, I would be interested to hear them. I have only ever heard political arguments, and short sighted ones at that.
You fail to realise that 'taxes' and 'rents' are pretty much the same thing from the point of view of the person paying them. In your vision of the world, altho' "the state" as an administrative body might only collect tax from bubblegum; "landowners" as a class have quasi-tax raising powers over those who don't own land, remembering that their land ownership is registered by and protected by the state (as an administrative and law-enforcement body), so it's a question of matching costs and benefits.
And how the fuck does LVT 'persecute a minority'? Rich people would live in big houses and pay more than poor people who live in small houses. Farmers would pay next to nothing.
You fail to realise
I fully understand, I have pointed out, I do realise, I'm afraid. Simply accusing those who disagree with LVT as 'failing' to understand is trivial.
However, as you ask...... we will go right back and start at the beginning
if you know of any economic arguments against LVT, I would be interested to hear them
I'll point one out. Again. It is impossible to separate out the earned and unearned value from land. Now, read that back, really slowly. L A N D. Not buildings, L A N D.
For instance, what is the value of this land I am sitting on, that would be, but for the labour of man, be under 18-24'' of sea water?
And that, sir, it what you fail to understand.
HH, "what is the value of this land I am sitting on, that would, but for the labour of man, be under 18-24" of sea water?"
Its value is its market value, which is the capitalised amount of future rents minus the additional costs that might be incurred by keeping flood defences in good order, minus any tax thereon.
Jolly good. Now ~ what is it's unimproved value, and thus its value for LVT? Just to recap ~ that would be the value of a few square yards of tidal marsh.
HH, the value of a few square miles of marsh in e.g. the Thames Estuary is whatever somebody is prepared to pay for it.
They work out/guess:
1. What planning permission they will get - if none, then value negligible. End.
2. If they will get planning permission, they work out the value of buildings they can sell. They minus off from this the drainage and construction costs, that's the value. See point 1) here. I do this for a living.
Compare this with a few square miles of marsh off the coast of Nowheresville, where there are no places of natural beauty, no nearby towns, no rail or road infrastructure. The value of that, with or without planning permission will always be negligible. Taking an extreme example, what's the value of a few square miles of marsh off the coast of Somalia? Nothing, I'd guess.
So the unimproved value is derived from the value of the finished product minus construction and drainage costs. The value of the finished product is in turn derived from its location. A few square miles of mud in the Thames Estuary is worth a lot more than a few square miles of mud in the Shatt-Al- Arab Estuary which in turn is worth a lot more than a few square miles off the coast of Somalia.
It's all about location, location, location.
So, back to the chase... how are you going to value the majority of land that is owned by someone, and that someone doesn't want to sell? Stop avoiding the answer... visa vi the reclaimed marsh land..
what is it's unimproved value, and thus its value for LVT? Just to recap ~ that would be the value of a few square yards of tidal marsh.
Also, what about the conditioning of the land carried out by owners over the last 200 years or so. All inputs of labour. How are you going to factor that in? Who calculates the worth of that?
As I said, you can't, without robbing people.
HH, the value of a few square miles of marshland is, as I described above, what somebody is prepared to pay for it, and I explained the mathematical procedure in which people value land.
I'm not sure what's so difficult to understand here, it is a real life process that happens all the time.
Assuming NO planning permission - because the local wild life preservationists have decided nothing may ever be built there ever, ever - backed up with legal force of local council, for example, the value is negligible, or certainly less than some de minimis limit of £5,000 per acre that would exempt most farmland. In fact, that would exempt 80% of the UK by area, but only 5% by value. That simplifies matters enormously.
Which I have explained to you before.
The conditioning of farmland of which you speak has a very marginal effect. The only bits of farmland that are worth more than £5,000 are those with other uses - primarily because people want to snap up an old farmhouse to use as a weekend home or something.
And as I explained to you at length before, 99.9% of the value of land is derived from planning permission, whether that's the implied permission that comes with an existing building, actual or potential. If you are absolutely determined that you will never ever pay one red cent of LVT on your land, then you must accept the quid pro quo and enter into a restrictive covenant for the benefit of, and enforceable by, every single owner of any surrounding plot enforceable by their heirs, assigns and successors in title.
This is why farmland is worth £1 per square yard but a residential land is worth £100s per square yard or £1,000s for land in City centres. Do you see the massive difference there? Can you understand why agricultural land is of no relevance here whatsoever?
You keep talking of 'robbery'. The key word in Land Value Tax is 'value'. With the narrow exemption of agricultural land that has been superbly well tended (which I have dealt with above) land values do NOT derive from what the owner does - they derive from the legal protection that the state and legal system provides and from stuff that other people do.
So LVT is a user charge, a form of insurance etc.
I'm not sure what's difficult to understand about that either. I do wonder why you ask questions and then conveniently forget the answer.
As I said, if you have any ECONOMIC arguments against LVT, I'd love to hear them, so far you haven't advanced any, not one single one.
Post a Comment