Killer Arguments Against LVT, Not (408)

At the nuttier end of the Faux Lib spectrum, from politicsforum.org. He or she refers to land or land and buildings as "property", but it's a very common mistake so ignore that.

The basic point is that property is indispensable for supplying credits. Property generates rents, and it can be sold. Therefore it is an excellent security in order to back up credits. Thus property involves a premium, namely the right to receive a credit.

Liquidity originates from property. Since a bank receives the security in exchange for the credit, the interest originates from the premium of the property. Its height is still determined by the premium of liquidity.

In general capitalism emerges as soon as land becomes a private property, for land is a reliable security. Securities must maintain their value during the currency (term) of the credit. Land is durable, so that its premium remains intact. Credits create money.

In other words, money is simply a claim on property, and solvency corresponds to property. So the amount of money is determined by the available property. The debtor must pay (transfer) the premium of property to the creditor.

Note that the debtor retains the right to use his property. Entrepreneurs compete for credits. They exchange their premium on property with the premium on liquidity (the opportunity to make profits). In fact the interest on credit forces the entrepreneurs to become profitable.

This in turn furthers innovation. So the driving force for productivity is institutional, namely the creation of debts, which must be served. During a crisis the state can stimulate the economy by supplying additional property, for instance by selling state-owned land.

That is all so incoherent and feeble it is barely worth demolishing - it collapses under its own weight. All the credit created by land merely goes into buying land, by definition. There is no knock-on benefit for the real economy. You can unpick each and every single assumption/argument just as easily. TruthToPower did a lengthy demolition, but let's go with...

Paradigm wrote:

I think it should be pointed out that the argument presented in the OP actually does a good job of explaining the argument for land value taxation. See, the use of land for credit is precisely the sort of thing Georgists are critiquing. The fact that rising rents are used for credit expansion is why land is such a central component in economic bubbles.

Since land is a fixed commodity, its value is bid up by speculators until it becomes too expensive for continued economic activity, at which point the bubble bursts, and the whole house of cards comes crashing down. The idea with land value taxation is to take this asset out of the equation so that economic activity can be based on the actual goods and services available, rather than on speculative assets.

The other really obvious fish in the barrel is this bit:

Entrepreneurs compete for credits... the interest on credit forces the entrepreneurs to become profitable. This in turn furthers innovation. So the driving force for productivity is institutional, namely the creation of debts, which must be served.

Let's assume that's correct. With LVT, businesses would be under the same pressure to meet their LVT bills. In that sense it comes to the same thing and his argument falls flat, but...

a) With LVT, businesses (or households) are not faced with huge debts, hence more financial stability etc.

b) With LVT, all landowners would be under pressure to innovate. Without LVT, those landowners who are not engaged in wealth creation on their land (landlords and those who leave land idle) merely consume/reduce the wealth created by others.