Hudson hints at why speculators are ignored in supply slide debate

Karl FitzgeraldArticles, Hot Issues2 Comments

there is that flickr-er again!
Creative Commons License photo credit: hans s

Michael Hudson

As published in today’s Business Age Opinion section

HIGHER land and house prices typically lead to an increased supply of housing. Yet at the peak of Australia’s perennial housing affordability crisis, the Housing Industry Association declared that there would be a 13 per cent fall in housing starts this calendar year, compounding last year’s 18 per cent fall.

In light of massive rezonings in Victoria and improved planning bureaucracy in many states, this can only be seen as a warning that property insiders expect there to be a price crash.

The public face of the housing industry is quite different. So, what do property investors expect that the rest of the population does not?

Government spokesmen reflect assurances by bankers and their major category of customers – the real estate industry – that Australia’s economy is defying gravity. In reality, that is as impossible in economic life as it is in physical nature.

Property prices are defined by how much a bank will lend. Donald Trump claims that a man is worth what he can borrow. This usually depends on what a borrower can afford to pay, after meeting basic break-even needs (the cost of living, plus taxes). In the corporate sector, it means after-tax cash flow. So property prices are set by the banks, subject to the tax system.

The motto of real estate investors is that rent is for paying interest – and whatever the tax collector relinquishes is available to be capitalised into a bank loan as a flow of interest payments. The guiding idea is that affordability determines property prices. One example of how the tax system affects property prices is in its failure to distinguish land from capital improvements. Speculative withholding of prime locations from the market in an undeveloped or unsold state creates artificial scarcity. This raises prices.
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Fast Forward News #6.1

Casey JenkinsCommentary1 Comment

David Pecotic

Read not the Times. Read the Eternities.

Or at least the not completely Untimely …

Prof. Hudson’s tour pushed the team – we endeavour to return you to our regularly scheduled program minus technical glitches soon.

Web 2.0:

data.australia.gov.au – beta
[The Gov 2.0 Taskforce has launched a website that brings together around 59 datasets from Australian Federal, State and Territory governments released under licenses that permit reuse.

Alongside the launch the Taskforce announced on their blog the launch of a Mash-up competition challenging Australian developers to use one of more of the datasets to create a useful online application.]

Find Where Stimulus Money Got Spent In Your Area
[Land value uplift in action: the Economic Stimulus Plan site lets you search for projects in your area by postcode or address, neatly dropped onto a Google map. You can also filter the list by project type, finding out what’s been spent on rail in your area or how many applications for various subsidies have been lodged.]

Inflation Calculator
[Over at their Betaworks, the ABS has developed some mockups of a personal inflation calculator for you to try out and comment on – seems pertinent …]

Web 2.0: The New Tools for Democratic Conversations – A snapshot of Initiatives in Government
[And in case your wondering what all this Web 2.0 stuff is all about, the Victorian Government has put together this handy summary of national and international developments.]

House prices: Safe as houses | The Economist
[Compare countries’ house-price data over time.]

Climate Interactive
[A climate simulator that started life in a doctoral dissertation is being adopted by negotiators to assess their national greenhouse-gas commitments ahead of December’s climate summit in Copenhagen. Dubbed C-ROADS — for Climate Rapid Overview and Decision-support Simulator — the tool translates complex climate modelling into readily digestible predictions. It allows policy-makers — and we, the public, through this simplified version, to see the likely consequences of their decisions immediately. See Instant climate model gears up : Nature News ]

National:

If climate change destroys your property, who should pay?
[A round-up – where climate change and Geonomics converge …]

Ross Garnaut warns PM on stimulus as surprise jobs rebound points to faster rate hikes
[On the promotional trail for his new book, The Great Crash of 2008, Garnaut warns that by further fuelling excess spending the Rudd government’s budget stimulus will have to be followed by “hard times” and lower living standards that the government has “barely begun to contemplate”. Among other things, he points to problems with the “Australian bailout”, from the guarantee for wholesale bank borrowing to foreign bank subsidiaries, state governments, mortgage securities, commercial property and the bigger first-home buyers subsidy.] Read More

Prof Hudson Tour Charges Ahead

Karl FitzgeraldEvents1 Comment

Hudson_Tour_final22

Seats to Professor Michael Hudson’s presentations (Oct 14 – 27) are filling fast, with major PR next week to fill the remaining spots. The renowned US economist is set to leave ears burning on why a decade of record economic growth has left so many behind.

He has 3 presentations in Melbourne next week, followed by Canberra, Sydney and now Adelaide (via our friends at E.R.A). Lifting the Lid on the GFC – Wed Oct 14th will be the highlight.

Check all the details & RSVP immediately via our sister website www.prosper.org.au

The interest building is commensurate with Hudson’s extensive public record. His 1972 book Super Imperialism covered topics such as financing America’s wars with other nation’s resources, American strategy within the World Bank and the imperialism of US foreign aid. His 1977 Global Fracture gave insights on the source of the Middle East’s oil price shock and discussed in detail the new international economic order. More recently he has delivered stinging blows via his many online articles re the GFC, Obama’s financial reforms and the bankers deception of Iceland and Latvia.

On Monday evening (Oct 12th) make sure you tune into Phillip Adams – Late Night Live on Radio National at 10pm.

Hudson will also be interviewed on SKY News TV (7pm Monday). Our own Renegade Economists radio show will have an in depth interview on the Wed Oct 14th show. A raft of other interviews are lined up.

There are only a handful of seats left at Hudson’s Sydney talk (less than 10). In Melbourne we are closing in on 200 attendees for the Lifting the Lid on the GFC event at the Melbourne Town Hall (Wed Oct 14) with our own Bryan Kavanagh and the highly respected Steve Keen.

Make sure you hear Prof Hudson, a dynamic speaker who can make sense of why the GFC occurred. Has Australia defied global economic gravity?

Population Myth V Energy Consumers

Karl FitzgeraldCommentary2 Comments

an efficient drive
Creative Commons License photo credit: Listener42

George Monbiot writes another sterling piece, this time dispelling population as the bugbear of global warming. Click on our population tag to read other critiques of this issue – namely the link between poverty, education and poor health on population growth rates.

The Population Myth

It’s no coincidence that most of those who are obsessed with population growth are post-reproductive wealthy white men: it’s about the only environmental issue for which they can’t be blamed. The brilliant earth systems scientist James Lovelock, for example, claimed last month that “those who fail to see that population growth and climate change are two sides of the same coin are either ignorant or hiding from the truth. These two huge environmental problems are inseparable and to discuss one while ignoring the other is irrational.”(1) But it’s Lovelock who is being ignorant and irrational.

A paper published yesterday in the journal Environment and Urbanization shows that the places where population has been growing fastest are those in which carbon dioxide has been growing most slowly, and vice versa. Between 1980 and 2005, for example, Sub-Saharan Africa produced 18.5% of the world’s population growth and just 2.4% of the growth in CO2. North America turned out 4% of the extra people, but 14% of the extra emissions. Sixty-three per cent of the world’s population growth happened in places with very low emissions(2).

Even this does not capture it. The paper points out that around one sixth of the world’s population is so poor that it produces no significant emissions at all. This is also the group whose growth rate is likely to be highest. Households in India earning less than 3,000 rupees a month use a fifth of the electricity per head and one seventh of the transport fuel of households earning Rs30,000 or more. Street sleepers use almost nothing. Those who live by processing waste (a large part of the urban underclass) often save more greenhouse gases than they produce.

Many of the emissions for which poorer countries are blamed should in fairness belong to us. Gas flaring by companies exporting oil from Nigeria, for example, has produced more greenhouse gases than all other sources in sub-Saharan Africa put together(3). Even deforestation in poor countries is driven mostly by commercial operations delivering timber, meat and animal feed to rich consumers. The rural poor do far less harm(4).

The paper’s author, David Satterthwaite of the International Institute for Environment and Development, points out that the old formula taught to all students of development – that total impact equals population times affluence times technology (I=PAT) – is wrong. Total impact should be measured as I=CAT: consumers times affluence times technology. Many of the world’s people use so little that they wouldn’t figure in this equation. They are the ones who have most children.

While there’s a weak correlation between global warming and population growth, there’s a strong correlation between global warming and wealth. I’ve been taking a look at a few superyachts, as I’ll need somewhere to entertain Labour ministers in the style to which they’re accustomed. First I went through the plans for Royal Falcon Fleet’s RFF135, but when I discovered that it burns only 750 litres of fuel per hour(5) I realised that it wasn’t going to impress Lord Mandelson. I might raise half an eyebrow in Brighton with the Overmarine Mangusta 105, which sucks up 850 l/hr(6). But the raft that’s really caught my eye is made by Wally Yachts in Monaco. The WallyPower 118 (which gives total wallies a sensation of power) consumes 3400 l/hr when travelling at 60 knots(7). That’s nearly one litre per second. Another way of putting it is 31 litres per kilometre(8).

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