Housing & the Money Trap

Economics is a subject founded, and dominated, by philosophy. or rather, it should be. Instead it got to be dominated by gangsters and banksters.

The crisis the western economy comes from what passes for rational economic theory is far plutocratic lunacy. To put it in one sentence: “greed is not just good, but god.”

How did this come to be? Force. Force is what gave meaning to economics. In 1945, Allen Dulles, head of the OSS, was sitting in Berlin, in charge of de-Nazifying his Nazi friends he had made such good business with. A few thugs got tried, but the real friends and business associates were taught to make American style jokes, so they could go back to business. Force works:

Wall Street Golden Calf: Larger Than Life Itself

Wall Street Golden Calf: Larger Than Life Itself

Decades unfolded. The OSS, now called the CIA imposed military men all over the Americas, if not the World, covered up by Harvard, Chicago or Stanford certified “economists”. No god, but greed: an old story, already found in the Bible (the adoration of the gold calf). That was great for We The People of the USA, as riches flowed towards the USA. That comforted USA universities in their knowledge that their vision of economics as all about greed was correct.

The City of London poodle reinforced that notion and that system, after Thatcher came to power.

Then Reagan came to power. His greatest feat was probably to have introduced a tuition in the public University of California. That University had been founded specifically to be free, in contradistinction with the plutocratic universities, where diplomas were paid for, to give the appearance of distinction and qualification on merits to the children of plutocrats. Reagan broke that nasty idea.

From there on, all what was worthy in the USA would be paid for.

Reagan had in his cabinet two twenty-something economists, eager to please and succeed: Larry Summers, hyper connected to plutocratic economists with Nobels, and Paul Krugman. Nowadays Krugman, is viewed, erroneously as the most progressive economist there is. And his blog is the most read in economics, worldwide (complete with my more damaging comments censored).

Summers’ attempt to head the Fed, supported by Obama, was shot down by an Internet born campaign. As far as I know, I am the first to have excoriated Summers from way back. What Summers did under Clinton would have made FDR scream. Summers not only destroyed the Banking Act of 1933, FDR’s most important economic reform, but he allowed the expansion of banking scams to realms never imagined before.

Now, Summers, seconded by Krugman, has embarked in a vast campaign to justify the abysmal economy they helped to create in the last three decades. See:

http://krugman.blogs.nytimes.com/2013/11/16/secular-stagnation-coalmines-bubbles-and-larry-summers/

Recently, Krugman has been trying to explain that Keynes was not an idiot, that Keynes was just joking when he said real stupid stuff. I have long argued Keynes was partly a confirmed idiot, and even a lethal one.

See: https://patriceayme.wordpress.com/2010/09/04/colbert-good-keynes-not-so-smart/

Lord Keynes was just not an idiot, in many ways, he was also a Nazi. A Nazi incubator. a mother hen for Nazism. No wonder he wanted people to fill up holes at the bottom of coal mines; he was inspirational for Nazism.

Krugman is a strange case: on one hand, he is violently and haughtily condemning those who call him, Larry Summers, Alan Greenspan, Robert Rubin Jews, as they originally are, although he admits he is badly estranged from his roots.

On the other hand, Krugman exhibits wild enthusiasm and total devotion to Lord Keynes. Lord Keynes was a rabid partisan of murderous, German fascism, and regretted loudly and extensively that the Versailles treaty had freed enslaved nations subjugated by Prussia and Vienna. Keynes, as early as 1919, wrote down the entire system of thought the Nazis would run away with. Then he published it, as “The Economic Consequences of Peace” and that piece of trashy Nazi propaganda became the Bible of pseudo-progressives plutocratic sycophants throughout the Anglo-Saxon world. Including presumably, that of Krugman as he is all things Keynes, night and day.

To this day, Keynes’ TECP is the source of much anti-French hatred and contempt in the Anglo-Saxon world (something Krugman deplores, another of his charming contradictions). Most cultivated Americans have been brain washed, by a time honored Nazi tradition,  to deplore “Versailles” as the cause of everything bad. Those Americans ought to have to line up, and be spanked vigorously by Poles, Czechs, Slovaks, Romanians, Serbs and assorted others. French judges could assert when USA buns are rosy enough.

So now Krugman is again in love with Summers for all to see (Curiously he does not extend that affection to Summers’ compère, the Maestro of bubbling, babbling and mumbling, Alan Greenspan (Greenspam, Greenmail? who is out with another trash book).

Summers’ theory is that bubbles are good. It’s nothing new: that “theory” was put in practice by him and Greenspan under Clinton. Now our errant boy, Krugman, is embracing it idly (caveat: although, before anyone, I pointed out 4% inflation was good, I do not embrace bubbles.) In ‘Bubblephobia and Monetary Policy’ Krugman opines that:

How do you know that monetary policy is too loose? The textbook answer is that excessively expansionary monetary policy shows up in rising inflation; stable inflation means money is neither too loose nor too tight…I’m pretty sure the side Janet Yellen is on, says that at low inflation rates this rule breaks down… stable inflation at a low level is consistent with an economy operating well below potential. [I agree with this.]

But there’s a critique from the other side that seems to be gaining a lot of traction with central bankers not named Janet Yellen — namely, the notion that if asset prices are rising, and that this might signal a bubble, it’s time to tighten, even if inflation is low or falling.

And Krugman to inform us than an esteemed colleague at the Swedish Central Bank was fired because he disagreed with rising interest rates. Indeed, it makes no sense:

Killing The Economy: Good, Say The Plutos, We Will Shine More Brightly

Killing The Economy: Good, Say The Plutos, We Will Shine More Brightly

 

The Riksbank raised rates sharply even though inflation was below target and falling, and has only partially reversed the move even though the country is now flirting with Japanese-style deflation. Why? Because it fears a housing bubble.

This kind of fits the H.L. Mencken definition of Puritanism: “The haunting fear that someone, somewhere, may be happy.” But here’s the thing: if we really are in the Summers/Krugman/Hansen world of secular stagnation, things like this are going to happen all the time.”

Krugman, Summers, Greenspan, and the entire economic establishment are barking up the money tree. But an ultra major economies have worked without money. I sent Krugman the following, and, perhaps having understood it, he kindly published it.

Thinking of the economy in terms of money only brings the lowest bounds and deliquescent traps to the economic discourse.

There is a housing problem, from Germany to California. A neighbour’ two full grown, professionally employed children, just moved in to share her small apartment. Why? Because in San Francisco, studios are renting at $3,000 a month.

Real estate prices have tripled in Munich, und so weiter.

Verdict? It’s not about money, or “inflation”, it’s about supply of housing. The old solution is to throw money at banks and to hope them to throw some more money at the housing market.

But bankers, and other rich people, have interest to see housing prices go up: thus they become richer, while doing nothing. That is they have more and the others, relatively less. So housing’s supply diminishes, relatively speaking.

In more than three decades, the population of California more than doubled, but housing did not. Especially not where the jobs are. So prices exploded, especially after international plutocracy bought itself a few adobes. Does that mean there is inflation? No. Just not enough housing.

How was the problem solved after WWII in Europe? Entire cities had been levelled (say Toulon in France). Well, the governments simply decided to build housing. Forget the banks. Just pay the contractors directly, and get on with the work.

This stays true today. Government driven, quality (energy neutral) housing ought to be governmentally decided throughout the West.

That would surely help the economy more wisely that frantic fracking. (Fracking can be considered a Ponzi, or pyramid scheme, because it does not pay for the escalating damage it causes, so it’s a repeat of the “subprime” madness, and a crazed bubble.)

So we need more governmental intervention in the economy. But not by just exacerbating the consuming. Turning “patients” into “consumers”, on the “health marketplace” as the clueless Pelobama did, is the way of error. What we need is a government that brings work where needed, directly. (Although fiscal tools could help, say by cutting taxes on construction, and relaxing some regulations.)

Big time energy policy, both in research (Thorium reactors, Thermonuclear Fusion, etc.) and development (replacing planes by nuclear-electric trains, so to speak, etc.) scientifically driven is needed. There are simply projects only the government is big enough, and free from short term profit enough to engage in; see “Synthesis Found”.

Just throwing money at banksters, so they be good, as Krugman and his colleagues have advocated, forever, is not good enough. It’s just perverse enough.

And measuring inflation, as is done in housing, by lack of supply, is deeply erroneous, indeed.

***

Patrice Ayme

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13 Responses to “Housing & the Money Trap”

  1. gmax Says:

    How do you propose to make a housing program? Aside from lowering taxes on construction?

    • Patrice Ayme Says:

      As I said, the government could also just print money. Even Greece could do that, with or without Euros. But nobody dares, lest the Plutos get displeased.
      The minimal solution is to tax the rich, get money that way, and order housing projects, same as after WWII. Another advantage is that it will reduce plutocracy.
      PA

  2. hazxan Says:

    Patrice, even being fully aware of the wealth disparity of the top 1%, I was truly shocked at how much land they own. I quote from “Who Owns Britain and Ireland” by Kevin Cahill:

    “160,000 families, 0.3% of the population, own 37 million acres, two thirds of Britain, 230 acres each. Just 1,252 of them own 57% of Scotland. They pay no land tax. Instead every government gives them £2.3 billion a year and the EU gives them a further £2 billion. Each family gets £26,875. ”

    That sentence should be in large letters on every schoolroom in the country. Take down the flags and put up the facts. I doubt if the USA is much different.

    And apparently, over 50% of that land is still owned by descendants of the Norman dukes who expropriated every acre from the locals after 1066. So much for meritocracy. So much for “free” market.

    What’s interesting is how this changes the “overcrowded planet” worldview. There is enough land to go round, even 7 billion of us. Just that too few own nearly all of it and crowd the majority of us into the small space left.

    Have you seen “Geoguessr” internet game? Basically, it puts you in a random Google streetview location anywhere in the world. (Well, anywhere covered by streetview i.e. Europe, N. America, Russia, Australia, Brazil.) . The game is to guess where you are as closely as possible. Addictive as it is, after a few tries, one can only conclude that the world is not overcrowded. Far from it. Almost every random location is an empty road through a landscape with a couple of farms at most. And occasionally you land in the middle of the city…

    Like wealth, there is more than enough quantity of land. It is the distribution that is at fault. Land is artificially restricted, huge tracts sit emoty, just to keep the value high for those who own most of it. And, it appears, to claim subsidies and rent, meanwhile pouring scorn on the unemployed as “scroungers”.

    Food has the same pattern. Globally, we can easily feed the world. Only today I was told by someone working in a store, how they are instructed to destroy the unsold food each day. If staff give the food away, they will be dismissed. So food gets destroyed to keep the price high. So much for free market efficiency! Let alone that while 1 billion starve, another 1 billion are overweight.

    When there are people willing to work, work that needs doing, yet not getting done, due to our strange beliefs in the value of totally arbitrary “currencies” ,and fictitious “titles” to land and wealth….something is wrong. At least Soviet communism failed quickly. Western capitalism is failing in painful slow motion.

    • Patrice Ayme Says:

      Thanks for these astounding facts, Hazxan! I am not surprised, though. The property tax in London is ridiculously small, especially for the hyper super rich (Blomberg, the soon to be ex mayor of New York, owns a residence there, in London, worth several dozen million dollars, and pay only three thousand dollars of tax, a year).

      For the longest time, Prince Charles got like 2 million euros a year from the European Union, because he consented to not poison the environment… Meanwhile my very modest imheritance got chopped down to near nothingness, to pay for Charles’s way.
      Let’s notice that some reforms (see Teddy Roosevelt) got engaged around 1900 after a systematic campaign of assassinations of leaders (McKinley in the USA, Carnot in France) by anarchists. OK, I agree it’s something laden with evil to contemplate that fact, and that one could be accused of terrorism, for just doing so. Thus we will not contemplate. However, the fact we can’t even contemplate, is also laden with meaning.
      PA

    • Paul Handover Says:

      Hazxan, as a Brit now living in the USA, I was vaguely aware of those statistics. They underline the self-reinforcing nature of things.

      Coincidentally, earlier this morning saw one solution being offered, well at least for the USA.

      “Want a real overhaul of the tax code? Here’s an elegant way to reduce inequality and mitigate poverty — in one tax”

      Read the article here: http://www.salon.com/2013/11/22/end_the_1_percents_free_ride_how_taxing_land_would_solve_americas_biggest_problems/

      Good Lord, just seen some pigs flying past the house!

      • Patrice Ayme Says:

        Ike’s solution 93% tax on very high income is best. But a land value tax could help, for sure. In any case, all the problems of the USA hold in the tax code. it pobably more than doubled in size under Obama. same thing as Obamacare: make the heist really complicatd, and the 99.5% will see nothing.
        PA

  3. Dominique Deux Says:

    In France, grain growers, who are essentially very large land owners with a median NET income in excess of € 100,000, and accordingly sponge up most of the EU’s agricultural subsidies thanks to Chirac’s unabashed pork barrel policy, went berserk when the Socialist Govt decided to (partially) redirect the subsidies towards those farmers with the most need (dairy, poultry etc) and in accordance with the CAP’s initial spirit.

    They had the good grace to relent after one of their roadblocks killed a fireman.

    That was mighty grand of them, since the fireman held no land to his name and was therefore a nobody. Goes to show France still has to catch up.

    • Patrice Ayme Says:

      Yes, I am against lots of the support the rich farmers and herders are getting in France. The rich vigneron next door not only set fire to part of the national park (from sparks of his tractor during a scorchting day), and the houses got saved only through Canadairs acrobatics above rooftops… I know he is rich, because the cars he drives, and, on top of that, he decided to bar paths used since the Middle Ages… Through the national park.

      Seeing thousands of sheep flocking through alpine national parks particularly infuriates me. Then they whine that wolves eat them, and that was stressing, even though they get compensated for it by taxpayers… Same with the bears. Although in Slovenia, with 1000 times the density of bears, they have no problem…
      PA

  4. Kathleen Hawes Watkins Says:

    So, to end stagflation, will rumored Dec 18 Fed announce GCR (Global Currency Reset) in order to recalibrate OLD wealth (savings) vs. NEW wealth (GDP)? To impose TRUE negative interest rates on savings entails insulating all capital in an electronic monetary system (no cash allowed “temporarily”).

    Obstensibly, since it is a global reset, the plutocrats can’t shelter their wealth offshore – – but they will find loop holes as always. The rest of us will become economic refugees, completely at the mercy of an electronic currency, which the NSA can freeze at the flick of a writ bit.

    Barter is a miserable substitute for currency, so most will become even more enslaved to the plutocrats. Without confidence to access savings from life’s work, most will also become disincentivized, ultimately over-burdening welfare state, and hence collapse and chaos. The alternative to currency reset: Hyper-inflation, which hits the least able the hardest.

    Please tell me there is a better way to “buy out” this debt/source of stagflation without such dire consequences. What is it that you discovered/said 4 years ago? I just began reading you this year.

    • Patrice Ayme Says:

      Dear Kathleen: Global Currency Reset? I have never heard of that. As it is now, the Euro is massively overvalued. So any GCR could only decimate USA industry. The USA has been blocking the destruction of tax havens that France wants. The obvious solution was used by President Eisenhower in 1954: no tax havens, and upper tax bracket at 93%. Of course neither Ike nor Truman were Whores In Chief. In other words, destroy the plutocracy.

      By the way, that Ike solution is well beyond anything proposed even by the extreme left of the Socialist Party in power in France, or negotiating future plans with Merkel in Germany.
      PA

      • Dominique Deux Says:

        Indeed, I am always astonished to see how the USA, entering the war only after robust prodding from their enemies (that from their allies counting for nothing), emerged from it with an unprecedented crop of top level statesmen, such as Eisenhower or Marshall. And Republicans to boot, to the eternal shame of today’s GOProstitutes.

        That is the reason why, despite the many errors (and crimes) perpetrated under the Stars and Stripes in the past decades, I still have to see the USA as a force for the good – on balance. Quite an act of faith at times. That was a natural choice in my boyhood years, and a reasoned one in my mature ones.

        • Patrice Ayme Says:

          This is not surprising at all. The top USA military men were an extremely tightly knit community, completely obsessed by doing their job well, and finding who, among themselves, were doing their jobs well. Actually the interpersonal relationships were fascinating. KING, a 4 star admiral was adamant that Marshall ought not to direct OVERLORD, because he had no (battle)field experience. he applied the same to him, when the sec of the Navy, Knox, suggested that he should command in the Pacific. Instead KING adamantly insisted that Nimitz had batlefield experience, but he did not.

          In turn Marshall, Leahy (4*), King (4*), Nimitz (4*), Halsey (4*), Eisenhower, and many like them, below them, inspired the politicians by their professionalism. Those, in turn interacted with super bright but less conventional characters: Churchill, De Gaulle, and below that the likes of Patton and Montgomery, and several super Pattons French generals: Koenig, Juin, de Lattre, Leclerc.

          Eisenhower said “the French were the factor causing him the most stress, even worse than landing craft”.

          The reason being that the French applied super blitzkrieg techniques, and did what they thought was right, whatever Eisenhower said. Especially after Juin was not obeyed at Cassino: he had a plan to finish the war quickly, in weeks, in Spring 1944, and it would probably have worked.
          PA

        • Patrice Ayme Says:

          Eisenhower ran as a republican because he had to run as something. Still the Dulles Brothers ran the foreign policy of the USA, 100%, a detail that probably did not escape John Kennedy, at the risk of the topology of his brain.

          A related point is that, although a meticulous professional military wise, Eisenhower was very careful to not disturb the established order. He waited the last moment to give his warning about the “military-industrial complex”, when he was safely heading into retirement. Kennedy got the bullets, and, ever since, the murderous clowns have run the show.

          I was listening to a Swiss show that said nobody would ever know the truth. Not so: computer science progress ought to help in the future. And, in particular settle the question of one shootist or not.
          PA

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