That’s the title of the newest work from Mason Gaffney(pdf), who doesn’t like all the credit-creating and deficit-expanding by which our rulers pretend the economy will be healed.
New money without real goods behind it means inflation, more imports with fewer exports, devaluation, and a real risk that our foreign creditors will rebel.
So how to free up credit?
pay down the national debt. It’s called “reverse crowding-out”
By raising taxes? Yes, but not taxes on productive activity.
Land value, we have seen, is fictitious capital, an asset and store of value for individuals that has no real social capital behind it. By taxing it and lowering its value we do not destroy any capital. On the contrary, we raise the owners’ propensity to save and create real capital to restore the missing store of value. We also raise revenues without suppressing or twisting the incentives of free markets, as generations of economists have shown and agreed.
And he concludes
The changes I propose are massive and radical, I know; but we have been massively, radically wrong, and the times call for equally massive, radical reforms. People will resist, will object, will twist and turn and contort in dozens of ways, as Washington now is, to protect banks and landowners and the current power structure, resisting the unwelcome inevitable. They have eaten, drunk and been merry on low taxes, cheap credit, foreign loans and rising land values. Meet The Great Reckoning: it is time to foot the bill. We can do it and turn America healthy in one stroke by taxing land values and rents to retire public debts.
Update 11/3/08: Mason’s paper(pdf) is now posted on his web site so I have removed it from this blog.