Senators Ask Fannie, Freddie to Freeze Foreclosures

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Don't get me started on the MORALITY of a society who thinks the answer to its problems is to steal money from those who work and save and where that civilsation is headed!

[ASH]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Don't get me started on the MORALITY of a society who thinks the answer to its problems is to steal money from those who work and save and where that civilsation is headed!

Actually, please do hold forth. Some days it seems like half the posts on iTulip are from Hudsonites who view anyone with savings or investments -- i.e. those who collect economic rent -- as fat cat parasites. It would be refreshing to see a few vigorous words in defense of hard-working individuals who also happen to be creditors. (Again the distinction between the uber-rich and the merely affluent.)

In my fantasy land, signatories of the social contract give up a portion of the fruits of their labor and their property to the community in exchange for provision of and access to public goods which enhance the productivity and security of the individual relative to their natural state. In that fantasy land, the material goods and services which an individual is entitled to are precisely those which they are able to afford based upon the value of their labor and property, less the "membership dues" of society. The "fantasy" enters into it because in my ideal world, public goods could provide mobility between different social strata based upon merit (e.g. public education), and society could be stable with a distribution of income that mirrored the distribution of talent and effort.

In the world in which I actually live, the standard of living merited by the value of the labor of a large section of society is not "tolerable", nor do the public goods function to create adequate opportunity. Society transfers wealth from more productive individuals to subsidize those less productive as part of the social contract -- not because the less productive members "deserve" handouts, but because society will not be stable otherwise. It is largely the trappings of society which enable the more productive members to BE more productive (i.e. through enabling economic specialization, protection of property, provision of infrastructure, etc.), and this wealth transfer is necessary to maintain society. Even in this context, there are more- and less-efficient categories of spending, which is where I get in trouble with Lukester for being a Bad Man and suggesting that granny should starve before Johnny goes without his vaccination.

... All of which brings me to this issue of inflation penalizing the productive and the prudent. Progressive systems of taxation ALSO penalize the productive. We can argue about whether taxation of interest income and capital gains is progressive or regressive (I say regressive in structure but progressive in practice), but they also penalize those who wish to save rather than consume. That's the similarity. One important distinction, I suppose, is that tax law can be written to exclude the least productive members of society from having to pay tax, whereas there is no "zero inflation" bracket. Also, it seems clear that a given rate of inflation is harder on the budget of someone living hand-to-mouth than it is on somebody with money in the bank, even if it proves more corrosive of the saver's net worth (because the hand-to-mouth guy has no net worth to devalue).

Both the tax system AND inflation generally act to steal money from those who work and save. Is there enough of a distinction to say that progressive taxation and social spending are moral, whereas structural inflation is immoral, or are they both essentially the same pragmatic expedient -- ultimately a means of keeping living standards up for the less productive members of society at the expense of the more productive members? Half the payout is in direct benefits paid for by taxation, and the other half is direct benefits paid for by borrowing (which leads to inflation) or the indirect benefits of consumption financed by cheap credit (which also leads to inflation).

Should I be angry about both, neither, or just one or the other?

[c1ue]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

ASH,

I think you are confusing rentier with saver.

Hudson has always spoken of the rentiers - those who extract benefit from monopolistic/oligarchistic ownership of capital - as opposed to the public who pays said rent.

Someone who saves is not necessarily a rentier; in fact a rentier does not necessarily have to save ANY money: Since he/she has a steady income from receiving rent without providing benefit, the requirement to save is minimal. Usually the accumulation of cash is a consequence of their rent, not a source of it.

Certainly a single person who owns a home and rents it out is a 'rentier' in a certain sense, but this single person does not have the power and capabilities of a true rentier a la Leona Helmsley. And the aforementioned small time rentier is still subject to taxes and laws without recourse.

In fact the true rentier in Hudson's sense is an even bigger fish than our dear departed Leona; a better example would be Standard Oil in its heyday or Murdoch in the media world.

As for the few words in defense of the hard working wanna be rentier: capitalism is just fine, until a few big capitalists start working to break it.

Similar to balance in a chess game; once equilibrium is broken then the path downward for the disadvantaged side is asymptotic.

All Hudson is pointing out is that the financial sector and its rentiers are driving all of society worldwide into an ever increasing spiral of asset price inflation intertwined with low real taxes and high debt.

This spiral is induced not by those individuals who own homes and rent them out, but by those who build housing developments, operate banks, sell mortgages, and so forth through such tools as funding elections for pet legislators and marketing long term negative laws as being 'good for you'.

Your hypothetical everyman saver/rentier is not able to do this and thus is not in the true rentier category.

Although the aspiring greed of "everyone can be a millionaire" is frequently harvested for the rentier's schemes...

My personal anecdote of this is from 6 years ago.

At that time I started looking into the ridiculous executive compensation schemes. At a blackjack table in Vegas - right after a famous tennis player barged in and bet $500 for 1 hand - I had noted that executive compensation seemed to be ridiculously out of hand both for the job being done and in proportion to others working in the same company.

All 5 other players - my age or younger - violently disagreed. It turns out - after many hours of exploration of this theme - that the main reason they did not object to executive compensation levels was that they thought they themselves would someday get to that point.

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Ash

I'm a little hesitant to enter any sort of discussion with you about anything. You think a bit too clearly for me! I might have to go back and pull out my old copy of Jean Jacques Rousseau's treatise and get back to you :confused:
Firstly thank you for your very lucid thoughts on taxation and its role.
Now, for the sake of simplicity, i am going to refer to the general rise in prices as 'inflation'. Don't bring the debate about what inflation actually is in here!!

Thank you for your comment re Hudson. I have been particularly ired by the tendency of itulip to accept, what i would term, the Hudson tripe.

I have a few initial thoughts

The really big difference between progressive taxation and inflation is that taxation tends to tax income or capital "gain". It (generally) does not simply confiscate savings as inflation does.

The type and level of taxation is clearly stated in the statutes and can be voted on by the society.(well theoretically at least). As you say we can exclude the less wealthy from tax but not from the penalties of inflation.

We accept 'taxation' as part of our 'Social Contract". Your case for it is well put. We pay our contrtibution to those who earn less for one reason or another in order to maintain the structures of society. As you say it provides some public good which both maintains stability and provides a conduit for mobility across levels of wealth and learning. Inflation is in no way so idealistically aimed. It's sole role is to confiscate from the prudent and distribute to the reckless. There is no qualification of level of wealth or income before one is subject to the confiscation and there is no level of wealth which bars us from being a recipient of its benefits. Indeed i would be very surprised if a serious study did not show that inflation has served to redistribute wealth from the less well off to the more wealthy. the use of inflation to reduce pensions being a very obvious case in point. In fact it distributes TAX FREE wealth to the reckless while penalising the prudent at the very highest applicable rates of taxation

The combination of progressive taxation and inflation and the resulting penalties for saving and total confiscation of wealth have brought us to where we are. The public approval, nay.. promotion, by Government, the power elite, and us as individuals, of this long term continuous theft from a 'minority' is an evil that has permeated our lives, eroded our ethical base, contributed to the erosion of the notion of responsibility for ourselves and our own actions, promoted the pursuit of selfishness etc. (My other pet hate is television!)
DESPITE WHAT MIGHT APPEAR IN THESE PAGES, THERE IS NO ACCEPTABLE LEVEL OF INFLATION. IT IS AN EVIL. PURE AND SIMPLE.

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

c1ue

I think you ought think Hudson right through. His answer to the current crisis is to blame it all on some mythical class. The class is not clearly identified and is certainly blurred with those who have been prudent and diligent throughout their lives. Put them all to the guillotine!
Then he extends his notion and uses his blame game to promote forgiving all mortgages. EFFECTIVELY THE COROLLORY OF THIS IS TO CONFISCATE THE SAVINGS OF THOSE WHO HAVE BEEN MORE PRUDENT WITHOUT CONSIDERATION OF JUSTICE AND DISTRIBUTE THEM TO THE RECKLESS WITHOUT QUALIFICATION AS TO WORTHINESS OR NEED.

All I have had from itulip members on this is that Hudson is not saying we should confiscate savings. But noone even thought to try to explain how we can erase the mortgages without erasing the savings upon which they were based.

[c1ue]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Outback,

I understand that you greatly dislike socialism.

However, that should not blind you to what Dr. Hudson has to offer.

You personally may not believe that 'rentiers' exist.

But if you look at say, the Kennedys, it is clear that significant sums of money can and do impact entire nations. And the Kennedy's original fortune was one of the biggest fish after WW II.

I personally do believe that rentiers in the Hudson sense exist, and that they do have a hand in the policies which have resulted in our present predicament. What Sapiens has noted and what I believe is that any resource that exists is a target for unscrupulous operators, and the savings of the 'little man' is an especially juicy target. This is indirectly also what Dr. Hudson is alluding to.

But disregarding the rentier issue, look also at how Dr. Hudson relates low property taxes are a strategy to increase real estate prices (asset prices) and increase bank profits.

As a checkpoint on Dr. Hudson's teachings, I have been conducting an informal survey of the 50 United States to see if there is a correlation between property tax rates and housing prices.

It is not completed, but there is a clear correlation thus far between states with yearly assessment of property value and fixed property taxes based on said value vs. states with 'assessed at purchase' policies from which taxes are then capped in increase/decrease.

Check out these states represented in the Case Schiller top 20 city index:

State
Tax as % of Home Value
Median Price
Date of data
Notes
AZ
0.61
207000
Jul-08
 Phoenix only
CA
0.48
350760
Jul-08
CO
0.58
228200
Jun-08
WA
0.99
291900
Jun-08
FL
0.79
193600
Jul-08
GA
IL
1.58
167000
Mar-08
MA
0.82
314900
Apr-08
MI
1.24
119796
Apr-08
MN
0.81
204500
Apr-08
 Minneapolis only
NC
212623
Apr-08
NV
0.51
210000
Aug-08
 Las Vegas only
NY
1.19
210000
Mar-08
OH
1.23
132700
Apr-08
OR
0.95
283500
Sep-07
 Portland only
TX
1.82
147300
Apr-08

Median price data from housingbubblebust.com ; median state percentage tax from http://articles.moneycentral.msn.com...StateRank.aspx

Note the correlation between actual property tax paid as a % of median price vs. actual median price.

This is exactly what Dr. Hudson talks about: low property taxes mean more cash available - banks in turn absorb this cash by fueling an asset price spiral. The result is that states with low property taxes should have higher home prices.

If you adjust for median incomes, it appears the correlation becomes nearly perfect.

Even within a 'high property tax' state like Illinois, there are counties which have a California style property tax increase limit: Cook county. Cook county median price is $449,400: http://www.bestplaces.net/County/Cook-Illinois.aspx

So you may disagree with Dr. Hudson's socialist tendencies in resolving the present issues, but attack his conclusions with care.

[Milton Kuo]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Thank you for your comment re Hudson. I have been particularly ired by the tendency of itulip to accept, what i would term, the Hudson tripe.

For what it's worth, it is my understanding that iTulip (EJ and FRED) find Dr. Hudson's diagnosis of the causes of our economic woes spot-on but do not necessarily agree with his prescribed remedies.

[ASH]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

ASH,

I think you are confusing rentier with saver.

Hudson has always spoken of the rentiers - those who extract benefit from monopolistic/oligarchistic ownership of capital - as opposed to the public who pays said rent.

I am of the impression that income derived from owning capital investments -- i.e. interest and dividends -- was included in the category of "economic rent". Straight from the horse's mouth, in New Road to Serfdom:

"Economic rent can take the form of licensing fees for the radio spectrum, interest on a savings account, dividends from a stock, or the capital gain from selling a home or vacant lot."

What you are saying with regard to the distinction between every day savers and monopolistic oligarchs is eminently true and reasonable. However, I don't think the distinction is made so clearly by everyone who posts on this general topic. My own attempt to make the distinction in my prior post was a reference to "the distinction between the uber-rich and the merely affluent." I would argue that I am not any more confused than you.

All Hudson is pointing out is that the financial sector and its rentiers are driving all of society worldwide into an ever increasing spiral of asset price inflation intertwined with low real taxes and high debt.

This spiral is induced not by those individuals who own homes and rent them out, but by those who build housing developments, operate banks, sell mortgages, and so forth through such tools as funding elections for pet legislators and marketing long term negative laws as being 'good for you'.

Your hypothetical everyman saver/rentier is not able to do this and thus is not in the true rentier category.

I agree with this basic analysis. As Milton Kuo suggests, I think the official iTulip line -- and the opinion of much of the iTulip community -- is that Hudson's basic observations about the problems with the FIRE economy are spot on.

I have a rocky relationship with Hudson, because 90% of the time he is saying something insightful and reasonable, and 10% of the time he is foaming at the mouth -- for instance, as far as I can discern, inventing diabolical plans to ascribe to his political opponents. However, such aberations aside, I am complaining more about Hudson's would-be adherents and interpreters, than Hudson himself. The biggest problem I have is that something about his rhetoric seems to encourage his readers to divide the world into exploitative haves and exploited have-nots, with ownership of capital being the key dividing line. As I have complained recently,

Before we all rush out to man the barricades, we should probably differentiate between the top 10%, the top 1%, and the top 0.001%.

You make these distinctions because your vision is clear. However, I was encouraging The Outback Oracle to fulminate about how inflation penalizes the prudent because, on balance, I read more on these pages that casts the small-time borrower as a blameless victim of the rentier class, as opposed to an ill-disciplined and imprudent rube who allows himself to be victimized. Again, something about Hudson's rhetoric encourages one to view those who get themselves into financial trouble under the current system as victims rather than idiots, and one or two kind words for personal responsibility and fiscal prudence would be welcome.

[ASH]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

I'm a little hesitant to enter any sort of discussion with you about anything. You think a bit too clearly for me! I might have to go back and pull out my old copy of Jean Jacques Rousseau's treatise and get back to you :confused:

Sir, you do me too much honor. If we had a long enough conversation, you would discover that I am a fraud, and have not read Rousseau -- but am merely using the phrase "social contract" to mean what I understand it to mean from the context of its usage by others. Although I have fairly strong philosophical views of my own, (as Lukester surmised earlier) they do not result from scholarship. In fact, when writing about things I know, I try to include references, so when I write assertions without a reference it's a good indication that I'm BSing!

The really big difference between progressive taxation and inflation is that taxation tends to tax income or capital "gain". It (generally) does not simply confiscate savings as inflation does.

The type and level of taxation is clearly stated in the statutes and can be voted on by the society.(well theoretically at least). As you say we can exclude the less wealthy from tax but not from the penalties of inflation.

We accept 'taxation' as part of our 'Social Contract". Your case for it is well put. We pay our contrtibution to those who earn less for one reason or another in order to maintain the structures of society. As you say it provides some public good which both maintains stability and provides a conduit for mobility across levels of wealth and learning. Inflation is in no way so idealistically aimed. It's sole role is to confiscate from the prudent and distribute to the reckless. There is no qualification of level of wealth or income before one is subject to the confiscation and there is no level of wealth which bars us from being a recipient of its benefits. Indeed i would be very surprised if a serious study did not show that inflation has served to redistribute wealth from the less well off to the more wealthy. the use of inflation to reduce pensions being a very obvious case in point. In fact it distributes TAX FREE wealth to the reckless while penalising the prudent at the very highest applicable rates of taxation

The combination of progressive taxation and inflation and the resulting penalties for saving and total confiscation of wealth have brought us to where we are. The public approval, nay.. promotion, by Government, the power elite, and us as individuals, of this long term continuous theft from a 'minority' is an evil that has permeated our lives, eroded our ethical base, contributed to the erosion of the notion of responsibility for ourselves and our own actions, promoted the pursuit of selfishness etc. (My other pet hate is television!)
DESPITE WHAT MIGHT APPEAR IN THESE PAGES, THERE IS NO ACCEPTABLE LEVEL OF INFLATION. IT IS AN EVIL. PURE AND SIMPLE.

Thanks for your further thoughts about the distinction between taxation and inflation. I think what you said about confiscation of savings rather than income is important. (This, by the way, is why I dislike property taxes -- there can be no security if staying on "your" land in "your" home requires a constant stream of income. Taxes on property may be effective at extracting money from the wealthy, but they also tend to make the poor much less secure.)

As I wrote to C1ue, I don't exactly consider Hudson's writings to be "tripe", but I find the quality of his assertions varies widely, and in particular, I dislike the implicit division of the world into oppressors and victims. Anyone with a kind word for personal responsibility and fiscal prudence has an ally in me.

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

C1UE
I don't hate socialism as such. I too read Huixley's 'Island' and Sir thomas moore's 'Utopia' as a youth and i am not without a soul. What I hate is extremism. It knows no bounds and is ALWAYS based on stupidity and irrationality. I'll admit, on occasion, my vehement opposition to extremism, may make me sound a little extremist myself. That 'sound' is mainly jest or bait for further argument.

ASH has already asked the question. You say a "rentier" class exists. OK I'm part of it. I've worked my arse off for the last 40 odd years, often in difficult circumstances, limited my lifestyle, driven second hand cars etc etc...I still don't own a Flat screen TV...Now I own a business in which people work for me. I own my own warehouse and when i sell the warehouse I'll rent it to someone else. I own shares in Companies which means others work for me. I have some cash savings that earn interst. I hope on my passing that the product of my work will go to my children to enhance their lives and help educate their children. So as I say I am in Hudson's 'rentier' class. Am I for the Guillotine? Should all my property be confiscated?
If not me a my level, what if i now owned 2 warehouses? Exactly how many warehouses do I need to own before it is straight into the tumbrils for me?

Now as to the taxation on property issue, that requires no great change in outlook to fix. In Australia there is no such problem as all rates for local Government and Land tax is based on the current unimproved value of the property. Such a change does not require the confiscation of savings to fix.

Now i don't care much whether you start talking about Socialism or Fascism. They are two sides of the same coin to me. The methods are the same. The ends justify the means etc. Everything is distorted to accomodate the required ends. In this case because property taxes are distorted, which leads to distortions in pricing. Ahhhhhh there's a sinister plot by the banks!!!!! What a load of tripe! Low property taxes anywhere decrease the cost of ownership. PEOPLE willingly pay higher prices where costs are lower. That is a FREE market in action. People, willingly and of their own free will, have gone to Banks to borrow more to buy houses in your low tax areas. Their children were not held to ransom while they were forced to go to the bank to borrow the money.
People did not have to overspend on housing. They did not have to live in McMansions. They did not have to lie about incomers to get into houses they could not afford. They did not have to believe that they were on some sort of free gravy train that automatically delivered wealth (I am not saying there aren't a few blokes like Greenspan and Paulson who ought go straight to the tumbrils for promoting the idea). People did not have to, quite knowingly, indulge themselves in a system that was totally grossly unfair to pensioners, ther retired and the prudent, thinking that class were just plian stupid and deserved to starve anyway, in order to accumulate their own free wealth.
I'm not arguing there is nothing wrong with our banking system or any other part of the system. Nor am i arguing that there is not a cooperation and even coordination of action by various powerful self-interest groups. What problems we have ought be addressed. The type of extremist solution (the confiscation of savings and property) proposed by Hudson will only lead to a more extreme society.
Now you and Hudson may wish to redistribute the wealth of the United States. There are, as argued in these pages, sound economic arguments for doing so. Could you please explain to me exactly how this is achieved by confiscating the savings of the prudent and redistributing it to those who have continuously recklessly indulged themselves in every piece of the new consumerism?
How do you judge who is for the tumbrils and who is to knit?

[LargoWinch]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

INFLATION LEADS TO HIGHER DEBT OF ONE FORM OR ANOTHER! IT HAS FOR THE LAST 40 YEARS AND WILL CONTINUE TO DO SO.

Hey Outback, did not have chance to cross swords with ya, but here it goes:

What happens when median income cannot pay for the median house? When debt levels are out of control compared to income?

Yeah; that is right: Debt repudiation or depression or a high even hyper inflation under a fiat system (to grow out of debt).

My point is that real debt cannot increase forever because at some point it is game over (not able to service the interest on the debt is an obvious "game over" example).

[santafe2]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

I do not agree that saving is insane. Personally I had rather have cash assets that are depreciating rather than a car that is, or a TV that is, or an ipod that is, or any of the gaming doodads in which people spend money, or granite counter tops, or designer togs.

What is insane is not to save something--people surely are not improving their lots by spending all they make and can borrow.

Jim - In my experience, saving dollars in the US economy is insane. I'm not saying one should not have some liquid assets, I'm saying a savings account is an insane way to try and get ahead in an environment where the value of currency is regularly devaluing faster than the rate of interest.

I'm not suggesting that one consume depreciating assets, I'm suggesting that measured leverage will allow one to move forward economically. This is the nature of our economic system. Our banking system has survived for several hundred years by adhering to reasonable assumptions regarding leverage. Some current bankers have taken this idea too far, but those that haven't will reap the spoils and so will other sensibly leveraged investors.

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Hey Outback, did not have chance to cross swords with ya, but here it goes:

What happens when median income cannot pay for the median house? When debt levels are out of control compared to income?

Yeah; that is right: Debt repudiation or depression or a high even hyper inflation under a fiat system (to grow out of debt).

My point is that real debt cannot increase forever because at some point it is game over (not able to service the interest on the debt is an obvious "game over" example).

Largo
I doubt you are crossing swords with me. My simple point is that inflation MAY be repudiation of debt BUT by its very nature leades to more debt. In inflationary times, REAL after tax interest rates have alwyas been negative. Inflation has lead us to the place we are....too much damn debt. It is the cause not the solution.
Other than that i can't see where we differ?

[c1ue]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Outback, ASH,

Owning a warehouse or having some real property is not being a rentier in my opinion, but it equally does not prevent you from BENEFITING from rentier policies.

The point I make is that policies which encourage the reaping of 'economic rent' are not ultimately beneficial to the overall population or nation.

As for your example of land tax not needing to be high - again a more detailed reading of Dr. Hudson's work will show that:

1) Property taxes have been declining in the US ... AND TAKING LOCAL AND STATE BUDGETS with them. Reducing reliable tax income means local and state governments are forced to raise revenue via other means - sales, income, use fee, and what not. Overall taxes paid have been rising.

Thus the "low property taxes" are in reality just a mirage as money still gets paid out - but who benefits from rising asset prices? And who pays sales, income, and other taxes?:mad:

2) Your assumption of low property taxes and low property prices is incorrect.

You did not respond to my example of a number of US states - and how their actual property tax rates were quite clearly inversely proportional to median property price. The concept I was trying to illustrate is that the dollar amounts of property tax in each state are actually roughly equal, but the ASSET PRICES are not. And it is exactly this dynamic that Dr. Hudson talks about.

3) As someone who owns a warehouse and has been thrifty, you are now in a great economic position. But do you recognize that you are the beneficiary of asset price inflation?

The economic situation of someone who is 55 years old now is completely different than that of someone 20 years old.

For example: in the US in 1970, total US residential real estate value (USRREV) was 2/3rds of US GDP.

USRREV peaked at nearly twice GDP ($24t vs. $13.3T), but is now probably 1.5x or 1.6x GDP.

This means house prices have grown more than TWICE as fast as GDP/income.

Or put another way:

in 1970 - median home prices were equal to under 3x average income. Today, or at least in 2007, median home prices are at least 5x, maybe 6x average income.

The same strategy employed by someone in 1970 WILL NOT WORK in 2008.

The rentiers have cannily protected their interests by passing laws which enshrine their relative advantage (ownership of real property) by having low taxes.

This is economic rent because there is ZERO extra skill or acumen in charging rent for owned property when the cost basis is insignificant.

Having reasonable property tax rates makes economic rent more difficult: you cannot as easily charge economic rent when your yearly costs are at market rates.

Having a house bought in 1970 for 3x your then income of $8500, and having a tax basis today of $54000 = $700 property tax per year, and charging $2000 per month rent - is no different than buying a Russian oil company for $200M and then reaping revenues of $1B/month.

But let's do the math:

If I buy a home now for $250K, then in 35 years will the property be worth $2.6M?

And USRREV will be $110T? (5.3% increase annually, Year 2000 $)

And US GDP will be $32.9T? (3% increase annually, Year 2000 $)

In other words a repeat of the 1973-2008 behavior? (GDP $3.8T, 1970; $11.7T, 2008 - constant Year 2000 dollars)

Neither case will happen unless we get hyperinflation and ignore the constant dollar equivalent value.

GDP Data from: http://www.data360.org/dataset.aspx?Data_Set_Id=354
USRREV ratios from eyeball of iTulip graph: .66xGDP in 1970, 1.55xGDP in 2007

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

c1ue

The logical conclusion of not allowing "economic rent" is that there will be no saving. How the hell does that benefit anybody? How is that good economic policy. You are advocating the very same stupidity that has resulted in the current mess.
Now go back and read my post again properly! What you just did was typical of the Hudsonite approach! I did not say low property taxes result in lower prices. In fact, quite the contrary is true
Low property taxes anywhere decrease the cost of ownership. PEOPLE willingly pay higher prices where costs are lower. That is a FREE market in action. People, willingly and of their own free will, have gone to Banks to borrow more to buy houses in your low tax areas.

What I did say about land taxes was that here in AUS they are set on the current Unimproved Value which is revised by a Govt body every three years. I DID NOT SAY THAT PROPERTY TAXES SHOULD BE LOW!!! What rates of tax you want to set on that UV are the responsibility of governments for whom we vote. It does not require the confiscation of savings or the removal of rights to private property to fix. I'd suggest that as a result of inflation and negative interest rates your whole society (and ours) has been on a debt binge, fuelled by inflation and the resulting negative interest rates. The negative interest rates have been the major factor in the inflation of housing. Everyone thinks he is getting richer because the value of his house goes up. Hence there has been no great pressure on Governments to fix your property tax scenario. To ascribe the problem you have with property taxes to some small group (as per ASH's enquiry and my own .001%, or 10% of the population) who are able, somehow, control the legislatures, is again typical Hudson distortion designed to justify the appalling outcomes he has in mind.

As to my personally benefitting from asset price inflation let's have a little look
I have tried my whole life to save. I have borrowed from time to time. Now with those borrowings I did benefit from inflation because I did not pay a proper (proper as in ethically correct) market interest rate i.e. an interest rate that would have given the saver on whose money the loan was based a decent return. No doubt my after tax interest rate was negative. At times very much so. That is EXACTLY the situation I am railing against!
Now I chose to have a more humble home so that I would have adequate capital for my business. I would be far better off now had I borrowed a lot more and had a palatial house to sell. So to that extent asset price inflation has been a negative for me. In addition, as inflation effected the price of my stock, I have been paying 50% tax rate on the inflationary increase of the stocks value without any income benefit whatsoever. My working capital is destroyed. That is confiscation of private property not taxation of income. So now go back and redo your calculations and include a few things like that instead of this blinkered typical Hudson approach that any rubbish reasoning will do to justify the ends. That is exactly my objection to people like Hudson.
Now you can accuse me of having zero skill and business acumen in owning a warehouse and you are probably right. My life has been characterised by sheer doggedness in the face of making financial mistakes mainly caused by a tendency to stupidly believe that this negative interest rate thing was immoral and therefore would be corrected in the medium term. My son now constantly reminds me to invest according to what will happen not according to what ought to happen. The point is I am in business. I make decsions according to the laws. Within those laws, and a very strong ethical stance, I try to maximise my returns. As part of that process i eventually managed to get enough funds together to buy a warehouse. Again, in the Hudson world, is this so wrong?
Just a little aside, owning a warehouse is not an automatic rise to wealth. When i bought it the NOMINAL dollar value had not changed for 12 years! You still could not build it for the price I would need to sell it at.
Now, you started this debate as a result of my somewhat spirited attack on inflation and negative interest rates. Your attack, promoting Hudson, stemmed from my idea that people who saved ought get a (REAL) after tax return on their savings. The problem with housing inflated costs is that it stems from 40 years of negative interst rates. In addition, in the US, you have some strange bankruptcy laws in regard to houses. In Australia we have some terrible tax laws that Capital gains on housing is tax free. All these things result in overinvestment in housing and house prices that preclude young people from buying a home. But I'll tell you this...you try to change the Capital Gains tax exemption here in Aus and you would get thrown out as soon as an election could be arranged. It's not about the mythical "rentier" class. The whole damned stupid population votes for it because they think they are personally gaining! You cannot divide the population into morally pure "have-nots" and corrupt "haves".
In my original post, I had made no comment about property taxes or anything else. I do object to Hudson's proposal to confiscate savings and eliminate property rights. Oh that's right...he is only eliminating property rights for the rentier class! He will allow property rights for all the reckless who have taken out mortgages so they can overspend on consumption.

Now again back to Hudson...EXACTLY how is it to be decided who is for the tumbrils and who is to knit? This is an answer I would like to see from Hudson or any of his proponents who would care to enlighten me. It is a fundamental question about our society and civilsation.