Climate change uncertainty

It seems the Obamatons are much like the Bushies in their ideological approach to scientific issues, just using a slightly different ideology. This story, which I found on slashdot, made it into the New York Times, though not onto NPR nor what’s left of the Chicago Tribune as far as I can tell. The suppressed paper is here.  I’m not qualified to evaluate it, but it does support my doubts that restriction of greenhouse gas emission will prevent undesirable climate change.

According to the Times article, it was released thru the “Competitive Enterprise Institute,”  which hardly enhances its credibility, but probably helped get it some attention.

Madagascar update

Last fall I mentioned a deal between Korean conglomerate Daewoo and the gov’t of Madascar, for the former to get half a Belgium’s worth of farmland at basically no charge. Turns out it was more controversial than I thought, caused a revolution, and the new government has revoked the deal. But, as the linked article explains, similar deals are proceeding in several other countries.

This information comes from farmlandgrab.org (“Governments and corporations are buying up farmland in other countries to grow their own food – or simply to make money”), via Alanna Hartzok.

You needn't mention Henry George…

…to be a Georgist. Michael Hudson’s analysis and forecast of bailout developments is helpful in understanding who benefits, and how it will be packaged to appear as homeowner aid.  One of his recommendations is clearly Georgist:

It is easy enough for fiscal policy to prevent a new real estate bubble. Simply shift the tax system back to where it originally was, on the land’s site-rental value. The “free lunch” (what John Stuart Mill called the “unearned increment” of rising land prices, a gain that landlords made “in their sleep”) would serve as the tax base instead of burdening labor and industry with income taxes and sales taxes. This would achieve the kind of free market that Adam Smith, John Stuart Mill and Alfred Marshall described, and which the Progressive Era aimed to achieve with America’s first income tax in 1913.

Hudson, like Kinsley and a few others, disdains the modern Georgist movement tho he seems to accept the validity and applicability of George’s (and modern Georgists’) analysis.

Thanks to Alanna Hartzok for the tip.

"There was no credit crisis"

This isn’t from some radical leftwing, libertarian, or Georgist journal.

One reason things didn’t fall apart when Congress didn’t immediately act as Paulson and Bernanke demanded [in September ’08], may be that there wasn’t any danger of a meltdown in the first place. So say three senior economists working at the Federal Reserve Bank of Minneapolis, who in October examined the Fed’s own data, and concluded in an article titled Facts and Myths About the Financial Crisis of 2008 that the claims that interbank lending and commercial lending had seized up were simply not true. “Bank lending to consumers and to non-financial companies had not ceased, and banks were lending to each other at record levels,” says V.V. Charri, an economist at the Minneapolis Fed.

— Dave Lindorff

Thanks to Econospeak.

Another plan for easing the meltdown

This one comes from U of Chicago Prof Luigi Zingales.  He wants homeowners to be able to swap part of their mortgage– equal to the percentage by which “house” prices declined in their zip code since the mortgage was issued– for a share of equity.  Debt declines but equity increases.  Homeowners would have the option to do this, or not, but if they do it then, when they sell, the bank (or whoever holds the mortgage) would get “50% of the difference between the selling price and the new value of the mortgage.”  Zingales would limit this option to properties in zip codes where the Case-Shiller index shows a decline of at least 20%.

He proposes a sort of similar solution for banks.  Holders of bank debt would be able to force the bank into bankruptcy, wiping out the existing stockholders but giving ownership of the bank to the debt holders.  To avoid this happening to solvent banks, stockholders would have the option of paying their share of the debt and keeping their stock.

Zingales notes that both of his proposals are simple standard ways of doing what more often involves hordes of lawyers and complex negotiations.  Foreclosure is a very expensive process, for both sides, and corporate bankruptcy is hardly simple.

It seems to me there’s another advantage, which is that this plan gets the incentives right.   Those who wrote inappropriate mortgages will suffer a cost, but, if they were correct that “house” values are increasing they’ll eventually come out well.  If they weren’t, they won’t.   And stockholders who failed to keep control of bank management will also suffer.

The net result would be people staying in their homes, with manageable mortgages, and banks with enough equity capital to make loans. At virtually no cost to the general taxpayer, by the way.   It’s not especially Georgist, and it does little to prevent a future repeat, but it’s a lot better than what is actually going to happen.

700-bank solution isn't better than nothing

Bob Matter’s thoughtful comments need a response, and I can’t figure out how to properly format one without doing a new post, so here it is.

1. Not enough to time to implement a plan of such scope.

There’s enough time to price and purchase opaque derivative securities but not to open 700 straightforward banks?  There are so many out-of-work bank staff– and more to come.  I agree that this is a considerable task, but there are lots of people who know how to do it, and would have started their own banks already if they could raise the capital.

2. Too much added expense. 700 more buildings to rent, heat, light, and maintain, 700 sets of phone lines to pay for, computers, personnel, etc. etc.

We have a banking infrastructure in place now. There is plenty of vacant commercial space pretty much throughout the country. Of course there will be a cost, but each bank is a billion-dollar institution before they even take a deposit; they could spend 1/10th of 1% for physical facilities and startup staff.

3. Even this plan would ultimately lead to failure. The core problem of allowing private ownership of real property needs to be addressed. Until that time we will just keep repeating the boom-bust cycle. Interested parties can read the solution to today’s financial “crisis” in _Progress and Poverty_ by Henry George.

Henry George explains the root cause of economic meltdowns, and they will not be avoided until something like his proposal is put into effect. If he were here today, what would he propose as a way out of this depression?
I claim only that my proposal is far better than what the authorities propose.  I don’t claim that it is better than doing nothing, which would result in considerable inconvenience but probably a quicker recovery than what we’ll get.

What’s really encouraging now is how much opposition is appearing to the whole idea of any bailout.  I wish that meant it was unlikely to happen.

The 700-bank solution

Georgists know why the economic meltdown was unavoidable.  It could be postponed and, to some extent, redirected, but it was inevitable as long as big profits could be anticipated from speculation in privilege including landownership.

And furthermore, we know what needs to be done to avoid the next meltdown.

But what do Georgists say should be done to facilitate the recovery from the present economic distress?  I will offer my suggestion, a pragmatic approach to what’s already underway. Continue reading The 700-bank solution

Taxpayers give a gift to U. S. Sugar, or some of its shareholders.

Associated Press reports that the state of Florida will give U. S. Sugar $1.75 billion to take 187,000 acres out of sugar production and give it to the State for Everglades restoration. An “environmentalist” is ecstatic:

“In the old days, you didn’t just beat your opponent, you also ate them,” he said. “Today, we’re eating U.S. Sugar.”

This works out to about $9,000 per acre, considerably more than the price of good rural midwest farmland. According to the article, it’s become increasingly difficult to make a profit in the sugar industry– leading one to imagine that a similar result might have been achieved had the State spent nothing.

The article states that the 1,700 employees will lose their jobs– but the companies web site says that it is an employee-owned company– with 1700 owners.  Looking at it that way, it’s about a million dollars per displaced worker.  Tho I doubt that each gets an equal share  of what amounts to a gift from the taxpayers. The San Diego Union Tribune says employees own only 30% of the company.  That source also says that the company’s 30,000 acres of orange groves are included in the deal.

And according to the New York Times, insiders have been squeezing the employee-owners out.  So there may be even more sleaze here than at first appears.

Homeland Security trumps responsibility

Ever heard of the “Support Anti-Terrorism by Fostering Effective Technologies Act of 2002?”  Known as the “SAFETY Act” (Can’t they even keep their acronyms clean?)  it limits liability for “almost every conceivable technology” related to homeland security.  According to Washington Lawyer Brian E. Finch, even transit [August ’07 Metro Magazine, page 24]  and amusement park security guards can be protected from liability under this act.

Feel safer now?