Dream House, Nightmare Mortgage: Carry on!

An interview with Australia's Renegade Economists. Karl: Listeners, it’s time to discuss with Professor Michael Hudson, the author of ‘The Bubble and Beyond’, ‘Forgive Them Their Debts’, ‘Super Imperialism’ and so many others. We’re lucky to have Michael with us yet again to continue our series of interviews and, Michael, here we are where, in Australia at least, we’ve made it through COVID, America is still being whacked by it. But our central banks, they’ve really put a lot of pressure on society, it seems like the mainstream economy is struggling, but Wall Street’s powering ahead and sitting behind that, of course, is the real estate market, which is also booming. Yes, society’s economic fragility, it’s been weighed down by high land prices and record high debts, but central banks ...

Incorporating the Rentier Sectors into a Financial Model

by Dirk Bezemer and Michael Hudson As published in the World Economic Association's World Economic Review Vol #1. ABSTRACT Current macroeconomics ignores the roles that rent, debt and the financial sector play in shaping our economy. We discuss the Classical view on rents and policy responses to the rentier sector in the 19th century. The finance, insurance & real estate sector is today’s incarnation of the rentier sector. This paper shows how financial flows can be conceptually and statistically studied separately from (but interacting with) the real sector. We discuss finance’s interaction with government and with the international economy. 1. Introduction Now that the Bubble Economy has given way to debt deflation, the world is discovering the shortcoming of models that fail to explain how most credit creation today (1) inflates asset prices without raising ...

Wall Street’s War Against the Cities

Why Bondholders Can’t – and Shouldn’t – be Paid The pace of Wall Street’s war against the 99% is quickening in preparation for the kill. Having demonized public employees for being scheduled to receive pensions on their lifetime employment service, bondholders are insisting on getting the money instead. It is the same austerity philosophy that has been forced on Greece and Spain – and the same that is prompting President Obama and Mitt Romney to urge scaling back Social Security and Medicare. Unlike the U.S. federal government, most states and cities have constitutions that prevent them from running budget deficits. This means that when they cut property taxes, they either must borrow from the wealthy, or cut back employment and public services. For many years they borrowed, paying tax-exempt interest to ...

Adam Smith critiques the Deficit Reduction Commission

What would Adam Smith have said about the Bowles-Simpson economic report last week? What a pity the great free marketer was not around to serve on the Deficit Reduction Commission. He not only would have rolled over in his grave, he would have risen up wielding an ax to the fiscal proposals that are diametrically opposite to the fiscal principles that he and his original free market contemporaries urged. Writing in the wake of the French Physiocrats with their Impôt Unique to collect the revenues that France’s landed aristocracy drained from the countryside and towns, Smith endorsed the idea that the least burdensome tax was one that fell on land rent: A more equal land-tax, a more equal tax upon the rent of houses, and such alterations in the present system of customs ...

The Methodology of Real Estate Appraisal: Land-Residual or Building-Residual, and their Social Implications

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NYU Real Estate Institute's Round Table Discussion of Land- and Building-Price Indices A meeting was held at New York University’s Real Estate Institute on October 25 to discuss the virtues and pitfalls of constructing a land-price index to distinguish between land and building values. The Institute’s Associate Dean Ken Patton had invited Michael Hudson and the Robert Schalkenbach Foundation to assemble an economic team to discuss the pros and cons of the Georgist position regarding land-values with the Institute’s faculty and real estate industry representatives. The discussion was moderated by Schalkenbach’s Executive Director, Christopher Williams. Prior to the meeting, Dr. Hudson, President of the Institute for the Study of Long-term Economic Trends (ISLET) had circulated a discussion paper spelling out the statistical problems of constructing real estate value indices at the macroeconomic ...

The Land-Residual vs. Building-Residual: Methods of Real Estate Valuation

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Some Prefatory Remarks to the N.Y.U. Real Estate Institute discussion, Oct. 25, 2001 Economic theory focuses on labor and capital, yet the largest category of tangible assets is not industrial plant and machinery earning profits, but real estate, and its primary objective is to make capital gains. Most new entries into the Forbes or Fortune lists of the richest men consist of real estate billionaires, or similar individuals coming from the fuels and minerals industries or natural monopolies. Those who have not simply inherited long-standing family fortunes have gained their wealth by borrowing money to buy assets that have soared in value. The Federal Reserve Board publishes an annual balance sheet of the economy’s assets and liabilities showing real estate to comprise two-thirds of America’s tangible assets. Land represents most of this ...