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It’s because of their red braces

The dissection of the economic crises gathers pace with a flood of articles on the web sites of the press. It is, apparently, all caused by greedy traders in the City and Wall Street. The ones with red braces. Nice idea to blame these unlovely people and easy to do but…

People will always seek to obtain the maximum return for least effort. A journalist will not spend 20 hours writing an article if the newspaper will accept and pay for one that only took 20 minutes. If perverse incentives are built into the system, then perverse consequences will ensue. If you were paid by the number of sentences you wrote, then you would write very short sentences. If you were paid according to the number of times you used the letter Q, your writing would be queer.

To blame the disaster on greed is to beg important questions. Greed could in other circumstances lead to positive and beneficial outcomes. It is a matter of what ground rules are in place. The tax system encourages gambling on the price of assets and land speculation, which is the same thing, which in turn encourages the banks to lend money for land purchase and people to borrow it imprudently. Thus the politicians of all parties are as much to blame. Even more to blame are the people who elect them – us. Even more to blame still are the academics in places like Oxbridge who have been regurgitating dud economic theories for the past 100 years and misleading future generations of politicians, journalists and businesspeople.

The boom that led up to this crash was caused by lending money to pay for land purchase. It was predictable and predicted by Fred Harrison. You can read a review of the book here.

Harrison is the man to keep an eye on. Nobody should comment on the present economic crises until the have understood what he is on about. Harrison also predicted the 1992 crash. Things will get a lot worse before they reach the bottom in 2010. The preventative is land value taxation, an ad valorem tax on the rental value of all sites, ignoring buildings and improvements, which, if levied correctly and at a substantial rate, makes pointless and self-defeating to engage in the land value game. It will also get us out of recession quickly when it comes.

At the root of the problem is the dire state of economic theory, which ingores the key role of land in the economy. Unless people are clear about this, they will not be able to appreciate what is going on. They will pick on all sorts of people they don’t like the look of, and blame them. Men in red braces. Freemasons. Jews. It has happened before. And the actual problem will remain. You can prepare for prolonged recession, a boom in the early 2020s, followed by bust in 2028. With huge social, political and economic unrest in the meantime. Or you can get to grips with the problem, propose solutions that can be expected to work and insist that politicians implement them.