Keith, old lad, It was all analyzed in the 19th century and everything that has happened - is happening - can be traced to basic principles. You properly point to the great changes that have happened since then, but if the basics are correct - they will still apply. Just as "multinational corporations" wasn't a phrase back then, but now still uses the same basic 26 letters now that were used back then. If there were any light in the neoclassical economic darkness, perhaps your contention that the classical stuff is out of date would have credence, but they haven't departed yet from the "Let's try this and see if it works" ploys. Further, almost the entire attention of the political/economic fraternity is concentrated on the financial sector - which is not where the depression problems are. The financial skullduggery was certainly exposed by the earlier economic downturn, but nothing that initiated that crash is really being addressed. To remind you, Land Rents and their extension, land prices, press upward as people demand 'whatever the market will bear'. So long as the economy is advancing this upward pressure can be born. Also, inflation is the time honored "Band-Aid" that government uses to keep business on the edge operating, by making land costs less onerous if they can survive for a while. But their existence depends on the economy advancing. If the economy falters, business that is barely making it is in trouble. Their trouble spreads to others and the downturn begins. However, that's just a beginning. Banks, pressured by greed, and encouraged by politicians offer mortgages with suspect collateral. Banks can't fail if they protect themselves with proper collateral. That is collateral that "over-protects" the amount lent. If you have land and you want to build a factory costing $100,000, a bank could easily lend you (say) $70,000 with as much safety as anyone can expect. In the case of homes, the plot thickens. Before the crash, land costs were a large part of the total cost of a home reaching as much as 70%, (An Australian research study found average land cost under homes was 65% of the total.) It is usual for home-buyers not to separate land costs - though they may be aware that identical houses cost different amounts depending on location. They buy a $100,000 house as a package with a relatively low down payment. Let's say they pay a huge $25,000 down (an amount that became increasingly unlikely under pressure to. Yet, perhaps $50,000 of the loan collateral is land-value. Back in the days of 'prudent banking' - my favorite oxymoron - bankers would not lend on a land-value collateral because land-values were "too volatile". In the mad rush to get business not only did they support their loans with this dubious collateral, but pressed by Democrat politicians, they accepted lower and lower down-payments. This meant that more and more of the loan was protected by volatile land-values. Which crashed, as they have always done. The "Great Depression" was the 5th major Depression in 100 years. (See Homer Hoyt's history of Chicago.) So, now, the banks were faced with bad loans that were protected by collateral that covered only (say) 70% of their losses. They were in trouble. Confronting not an occasional bank failure, but a widespread disaster, the insuring companies were in trouble. And so it spread. Then, came to the light of day, the dubious, and perhaps criminal, operations of the financial sector and the politicians and economists swooped on to these exciting revelations. I've written this bit before but it is so appropriate. It concerns a fellow on his knees searching around in the kitchen. Asked what he was doing, he replied: "I'm looking for my contact lens." "Where did you lose it?" "In the hall." "Why don't you look for it in the hall?" "The light is better here." Obama's economic gurus are looking in the kitchen when they should really be checking out the hall. Until they do, we don't have a snowball's chance in hell of coming out of this "Great Recession" in the next decade - assuming a useful war is not in the cards. I'm gloomy today, but perhaps it is justified. Harry ****************************** Henry George School of Los Angeles Box 655 Tujunga CA 91042 (818) 352-4141 ****************************** From: [email protected] [mailto:[email protected]] On Behalf Of Keith Hudson Sent: Wednesday, January 05, 2011 4:28 AM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION Subject: [Futurework] The rise of miserity We're now living in a quantum world of superimposed states -- of Shrodinger's Paradox in which the cat is alive and not alive at the same time. Of inflation and deflation going on simultaneously. Of fabulous incomes for some but declining wages in real terms for most. Of enormous enhancements in efficiency but lower welfare for the needy. Of higher skills than ever before in history for some but of mass literacy and numeracy skills lower than a century ago. Of highly profitable multinational corporations but bankrupt governments. A new word needs to be coined -- "miserity".
Keith Keith Hudson, Saltford, England http://allisstatus.wordpress.com/ <http://allisstatus.wordpress.com/2010/12/> 2011/01/ <http://allisstatus.wordpress.com/2010/12/>
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