Cycles. Boom and Bust. That's Life. Or is it?
I am an editor of a really and wide-ranging newsletter read by local elected officials, non-profit heads and policy makers. We get short, sharp essays from some very good writers, who have studied the truth behind the hype of neoclassical and establishment economists who have made more errors in prediction and omission in the past 100 years than we can count.
Those errors (or the mirror-image errors in the old Leninist systems) have made life a living hell for billions world-wide.
Here, Ed Dodson a retired housing specialist for Fannie Mae gives his take on why we're here, and what we can do to get out from under, for good.
The origins of the current economic crisis are found in our systems of law and taxation.
These cause the so-called "business cycle" to boom and bust every 20 years or so. Since the 1940s, we have tried to rely on government regulations and on fiscal and monetary policy "fine-tuning" to prevent another Great Depression.
When the fine-tuning failed in the 1970s and we experienced stagflation, we voted in Ronald Reagan and a new found faith in deregulation, trickle-down economics and global corporatism.
It took awhile, but all of the measures advanced by successive Congresses
and every President beginning with Reagan brought the stresses on our
economic and social systems to the breaking point. Today, the concentration of wealth and income is higher than it was in 1929, on the eve of the Great Depression. In 1929, however, the federal government was not spending more revenue than was taken in to pay for public goods and services. Our federal government has now accumulated over $11 trillion in debt, costing over $500 billion annually to service.
Only a dramatic increase in the taxation of higher marginal incomes (which are for the most part associated with speculative investment rather than the production of goods or services) will stabilize the economy.
A combined national-state surtax on assessed land values would also have a powerful mitigating effect on the volatility of our nation's land markets. Such a surtax would also make it possible to lower or eliminate wage taxes on a large portion of our workforce, those earning $50,000 or less annually, for example.
Sadly, nothing in the current legislation focuses on root causes. After
the savings and loan crisis of the late 1980s, regulators put restrictions
on the lending available for land acquisition by developers. A similar
restriction applied to residential property should be considered.
Almost all of the losses experienced by the banks is occurring because land prices have plummeted. Restricting banks from lending on land will take much of the fuel out of the volatile residential land markets.