Archive for the ‘investments’ Category

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The Secret Life of Real Estate

May 17, 2009

is subtitled “How it Moves and Why,” but this isn’t about the Kinetic Condos. It’s a response to a questions Georgists often hear: “If you’re so smart, why aren’t you rich?”  Different Georgists give different answers, including “I am rich.”

We know that the major cause of the business cycle is the capitalization and trading of government-protected privilege.  This privilege can be any kind of income obtained without producing, and may flow from spectrum licenses, drilling rights, patents, copyrights, or a hundred other sources.  But the main one is land ownership, since land is not a product of human labour.

When demand increases for a product or service, production can increase, but that isn’t true of privilege. The only limit on the price of privilege is what the market will bear without breaking.   So can’t we measure that price, use the information to forecast economic meltdowns, and thus become wealthy?

Our massive government statistics operations, which know how much more Asian-American households spend on rice than the rest of us do (4 times as much, as of 2003), and that people spend an average of 2.43 hours each weekday watching television, know just about nothing about the price of land.  Only a few countries maintain any such information (Korea, Japan, Denmark, and Australia come to mind).  Many local authorities compile land assessments, but the relationship to actual market prices is, at best, elastic, and the information is not systematically reported.  So indirect and ephemeral indicators must be relied upon.

Moreover, they land price cycle tends to run about 18 years, and may be disrupted by war (not by much else, it appears). This means that taking advantage of it requires a great deal of patience and, one can only say, a certain amount of faith.  And starting at a young enough age, by the way. Of course the cycle might be entirely abolished, but that would require the elites, and some of the non-elites, to surrender significant privilege.

The book is well-written, well-edited, and well-documented. (A subject index would be nice.) Economist Mason Gaffney’s  review is far more informed than anything I could have produced.  He points out a number of imperfections, but on the whole this is a very useful book for anybody who wants to know why many of us aren’t rich, or who would like to be.

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You needn’t mention Henry George…

February 15, 2009

…to be a Georgist. Michael Hudson’s analysis and forecast of bailout developments is helpful in understanding who benefits, and how it will be packaged to appear as homeowner aid.  One of his recommendations is clearly Georgist:

It is easy enough for fiscal policy to prevent a new real estate bubble. Simply shift the tax system back to where it originally was, on the land’s site-rental value. The “free lunch” (what John Stuart Mill called the “unearned increment” of rising land prices, a gain that landlords made “in their sleep”) would serve as the tax base instead of burdening labor and industry with income taxes and sales taxes. This would achieve the kind of free market that Adam Smith, John Stuart Mill and Alfred Marshall described, and which the Progressive Era aimed to achieve with America’s first income tax in 1913.

Hudson, like Kinsley and a few others, disdains the modern Georgist movement tho he seems to accept the validity and applicability of George’s (and modern Georgists’) analysis.

Thanks to Alanna Hartzok for the tip.

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The Secret Life of Real Estate

February 1, 2009

It’s a new book by Phil Anderson of Economic Indicator Services.  Some may remember Phil from his talk at the 2006 CGO conference, and earlier from his 2001 Mastering Wealth course at HGS/Chicago.  (We offered a money-back guarantee, which no attendees claimed, so it seems the course was quite satisfactory.)  The book unfortunately doesn’t seem to be available yet in the US, tho it can be ordered from the UK.

Phil is one of several Georgists who predicted the current economic meltdown. Anyone who’s taken courses at any Henry George School will be familiar with the general patterns. but Phil has studied them in detail and applied them specifically to financial forecasting.  He has devised helpful descriptive models, a real estate clock(pdf) and an investment clock.

In the ’90s, Phil produced some studies relating to land value tax in Australia (where they call it “site value rating”), including one showing that land value tax seems to lead to increased manufacturing activity, and another reporting that, when popular vote is taken, in the overwhelming majority of cases land value tax is preferred by the electorate.