Free Market Housing Valuations

Here comes a story that highlights the nonsense of much economic thinking...

The world’s superrich own around $3 trillion worth of owner-occupied residential properties, more than the gross domestic product of the U.K., France or India.

Well, yes... we tend to undervalue production, because it is closest to transaction value, and we tend to overvalue assets, because we can get away with it.  We have a system when someone overpays for a house, all of the other houses in that class are likewise re-assessed in value, as if every house would sell for that immediately.  Banks want to loan as much of their EZCredit as possible, and demand an "appraisal."  Since the banks are the heart of government, this over-pricing is the base of the taxes collected.  It is a nasty combine.

I watched interest rates drop from 9% to 6%.  People who could afford payments on a $200,000 home at 9% could afford the same payments on a $300,000 house at 6%.  Did they buy a $300,000 house?  No.  They paid $300,000 for a $200,000 house.  What did they care?  payment the same.  Except their tax bill just went up 50%, for nothing.  That realization comes later.

It's like the $15 an hour minimum wage.  With 30% in taxes, who wins?  Not the workers, who find less openings.  I personally know family businesses that will shut down over this, they simply cannot stay in business paying those wages.  The person who manages to keep a job?   Well, the go from making $10, $7 net after taxes to $15, $10 net after taxes.  Better?  No, because those who can raise their prices and stay in business will do so, needfully.  So when the person now "making" $15 an hour, net $10, goes to buy groceries at Safeway, so long wage increase benefit.

But hey, recall the government that was mulcting $3 and hour is now getting $5 an hour off the workers back.  Kaching! The communists in the USA city governments know this, and it is always their goal: destroy small, independent business as they make it harder to find work outside the state corporations, like Google, Starbucks and Boeing.

There is a simple solution to "mark-to-market" problems, and that is

1.  No one owns land.  No real reason in an economy to have real estate property rights.  We could learn from the American Indians, and Hong Kong.  No one in Hong Kong can own land, neither before under the King of England nor presently under the ChiComs (the only exception is the ChiComs respect the Church of England's title to the land under its Cathedral in Hong Kong.)  Nonetheless, four of the top ten billionaires in Hong Kong (Hong Kong has five times the billionaires per capita of billionaires then the USA) made their money in real estate.  It is leases of land and development thereof, not ownership of land, that is where the money is.  Also, relatively little of Hong Kong is paved over.  Who wants to own land when you don't really need it?  Build up.

In the USA many tribes do the exact same thing, lease land productively rather than mess around with "real property rights."

2. All is for sale... if we are going to be as barbaric as to have government, and real property rights, and we are going to pick losers by taxing their property, then to be fair tax it based on what the owner says the property is worth.  A declaration of what the property is worth is also an offer to sell at that price.  That is to say if I say my house is worth a million dollars to me, my next door neighbor may say his property is worth $5000.   We both pay 5% taxes.  I pay $50,000 a year, he pays $250.  Fair enough.  But anyone can come in and buy either property at the value stated.

No more eminent domain lawsuits.  if the government wants to take property to give to another private party, as they always do, then they have to pay what the seller says it is worth, not some "appraisal" company.

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Zippy on Usury

Finally, another Catholic who understands usury is wrong.  This anonymous blogger has an encyclopedic site explicating the teaching on usury, and his work is overwhelmingly good.  He is a much better writer than I am, mostly because he is pithy in explaining how we get to such confusing ends.  For example, check out 29) I know that usury was traditionally considered an execrable mortal sin. 

I'll be studying his site thoroughly, for he has spotted some important parallels, such as Church teachings on contraception and usury.   Now, having said that, he is also dead wrong on at least one key point: that corporate bonds are legitimate.  He does note he has an MBA, and has been involved in "investments" so this sounds like special pleading.  "Yes, usury is an execrable mortal sin, except in the work I do."

19) Is a corporate bond usury?
No. Investors who lend money to corporations cannot pursue individual shareholders for return of principal. The claims in a corporate bond are claims against property which actually exists in its own right: the corporation.  Corporations are themselves property: they can be bought and sold and their employees – the workers who “farm” the property – sometimes change completely from one set of people to another.  Like a farm, a butcher shop, a farrier business, a hunting ground, etc. a corporation is property which can be alienated from particular persons.
Sale of claims against property – claims bound to specific property and only that specific property – is a sale of something that actually exists. It is still possible for the prices of those claims to be unfair, etc: see Question 11.  But contracts like corporate debt are not usury strictly speaking, as long as they are bounded: as long as they are claims against specific property and do not assert any personal guarantees by specific persons.
See also Question 31.

A modern corporate bond is nothing like the medieval licit census, it is a squishy comparison at best.  A bond pays interest (usury) on a loan.  That there are underlying assets to the loan does not mitigate the damage done.  Further, those underlying assets are usually already under some perfected security agreement, so technically not so.  And the point is diversionary, whether or not there are underlying assets does not make or break a case of usury.

Bondholders usually have first place in a liquidation, over the equity holders.  Bondholders are made whole (if possible) against the assets of equity holders.  Bondholders normally lent credit, which is no thing (nothing) and equity holders put in their savings.  Here again, as is the case in usury, usury is wrong not because anyone says so, but because it does damage.  And not only is it wrong for being a case of usury, it is also probably fraud.

In a licit census, you get a percent of the product, not a fixed amount, plus no recourse.

In a bond there is risk, but recourse to assets.  In a licit census, there is skin in the game, and the game is a cut of the production.  In a licit census, crop failure and you get nothing.  With a bond, business failure and you get the equity holders shares in the business.

Vix Pervenit is Latin for the first words of the encyclical...  "No sooner than we had answered.... (we get yet another question...)  Claiming corporate bonds are legitimate is just the sort of sophistry (or casuistry in the negative sense) that so aggravated Benedict XIV.

And to rely on Noonan to support the position on bonds?  Fie!

Apparently he is also a devotee of the "intellectual property rights" fiction, so I'll be reading that as well.  But the bottom line, he is doing excellent work in the empty field of anti-usury.

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Endangered Wild Rice

The pipeline projects are threatening wild rice production in USA...

“The Headwaters is one of the greatest rivers in the world,” Smith said,
Native American tribes have opposed the project because it cuts through sacred wild rice beds.
“Prime Anishinabe wild rice beds would be right by the pipeline,” he said.
Smith said $2 billion in property values in the Fishhook watershed are potentially at stake from Hay Creek to downtown Park Rapids, if a pipeline were to burst.

Once upon a  time there could been no eminent domain takings by government for private use.  Once upon a time there could be no pollution from one property spilling over to another.  But in democracy, you get chaos.  Instead of patterns and practices which fundamentally curb malinvestment and misallocation (sands fracking and pipelines unneeded) we get sinecures built on maintaining pollution (carbon offset.)

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China and Frankenfoods

This suggests a huge opportunity for USA organics...

Compared with the United States and many South American countries that have freely adopted GM technologies, China has shown a marked reluctance to do so.
Though there is no evidence that GM crops harm human health or the environment and most Chinese know little about these technologies, they seem overwhelmingly to regard them with great suspicion.
Many of the most outspoken critics in the country are celebrities, such as national TV presenter Cui Yongyuan, and their high profiles have helped the campaign against GM organisms gain strong support.
However, in a speech to the Central Rural Work Conference last year, Chinese President Xi Jinping suggested that genetically modified organisms will finally be accepted in China and the technology should be allowed to develop in the country so long as the right caution is exercised.

This is complicated:

1.  I am a life member of a organic food co-op, whose management had people sitting on the federal committees for 40 years setting organic standards, only to watch, defat after defeat, the terms become meaningless as defined by the hegemon.  Well, I could have told you that 40 years ago.  So now, organic must be defined by the producer (anarchy again) and substantiated with transparency and traceability.  Happily both cost near nothing now.

2. The reports noted above claim no evidence of GMO harm to humans.    Right, we've seen this before in USA.  The evidence is plentiful, but suppressed.

3. The Chinese consumer remains skeptical, but like USA, if it is plentiful and unmarked, it will proliferate among the masses.  The skeptical with money will prefer proven wholesome food form USA.

The big threat to USA exports of food to China in the gross was one of two things: outlawing GMO or import substitution.    China is, I believe, accepting GMO now in anticipation of import substitution.  So, in the gross, exports from USA will be diminished, but that category of specialty food will be all the more in demand.

We'll see....

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Very Cool Doll House

With a trio of daughters, I've seen many doll houses in my time, but this I think is exceptional.  The post is actually about the furniture, but the doll house would incite such imagination and no doubt be a corrective to all those parents currently destroying their childrens' (or should I say "childs') minds by allowing them access to the internet.  There is no pedagogical advantage in a child having access to electronic devices, and if it is connected to the internet, then it is positively net negative.

If you love your children, then you'll appreciate this:




I find the title of the post curious:

One of a kind designer furniture you will love to share with your little monsters

Yes, this is common.  Children are so despised in our culture that even to mention them must be couched in negative terms.  People who love their kids are obliged to speak in code.

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Import Targeting - Reshoring

The talk of "reshoring" is nonsense, for the reasons we buy from overseas have to do with tax-avoidance, de facto money laundering and management efficiency, and never labor rates or logistical issues as envisioned by the boosters of reshoring.

There is a fact-based means for a given trader of a given product to target a market.  Reflect:  if it is imported, then it implies a market... and to proffer goods to an importer who already has a customer base is a fine shortcut to a test market...

Take a place like Russia, which has since their recovery from socialism, had a residual welfare state of selling raw materials to pay for social welfare.  Under this system, buying imported anything was cheaper better than making in Russia to sell to Russians.  The sanction USA put on Russia for USA destabilizing the Ukraine has had some effect, but mostly lower prices for raw materials, the bust, is making Russian made more viable, plus creating an opportunity for Russians to compete worldwide with Russian made goods.

But immediately, a Russian can see what was once imported from USA to Russian (or another exporter to Russia) look at the quantity and price, and then need only get competitive making it in Russia and selling it in Russia.  Still a lot of work, but one prodigious shortcut, plus better then shivering in the dark.

So doing the usitc.gov research and analysis as I lay out in my courses, the entrepreneur can begin to target opportunities based on information that no one else has.

These are fine times to get started.

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Health Care Options

The one largest inhibitors to new business start-up is a socially conditioned issues:  "health" "care" "coverage."  Why anyone would worry about this is beyond me, but there you have it.

As a kid, I was often in the emergency room being sewn up after one adventure or another.  I have prodigious scars all over my body, and plenty-o-teeth have been left behind.  And happily I lived in a very mixed neighborhood economically, for when I took a skull fracture, the consensus that I "walk it off" was countermanded by a neurosurgeon down the block who ordered me into the emergency room. One week hospitalization.

The cost was never a concern.  There was no such thing as "health" "insurance" outside the blue chips, and it had began in WWII only to get around wage and price controls.  My parents paid cash, but then hospitals were run by Catholics who relied on God to make up the difference between what they took in and what went out.

All that is gone now, crowded out by cheap EZ credit and destroyed by the overinvestment/bankruptcy game, plus regulation to keep out competition.  The crisis that followed is "solved" by romney/obamacare, soon to be replaced by Hillary Single Payer.

For the time being, there is a working alternative, in fact several, now priced at what the fine for non-insurance under romneycare/obamacare.  These plans are cheaper and better than romney/obamacare, yet exempt from the Hegemon's plan.

It is the genius of USA politics to allow conscientious objection to eliminate opposition, and then when the deed is done, to come back and wipe out this remnant.  I suspect this exemption is temporary, especially when a politician made of sterner stuff, Hillary, demands total compliance of all her subjects, or she will Libya them, like an ambassador.

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When Import Substitution is Good

A correspondent objected to my endorsement of "import substitution" as a policy, but neglects to recall, as an anarchist, I have no use for policies.  He referred to the baleful results of the import substitution policies of fascist Italy.  Just so.  Policies....  in part my reply to Rv:

It fails as a government policy, because the state never picks the right winners and losers...    USA grew on import substitution, that is producing our own instead of importing what we want... but it was never a policy, it was organic.
The Soviets wiped out the 3rd best economy in the world when they moved to command economy...  After the reversion, the Russians maintained the welfare state and paid for it selling raw materials...  it ain't the sanctions, it's the prices that are causing the problems...  till now imports were cheaper than anyone could make, now anyone can make money making things in Russia...  by letting the ruble go to hell (depending upon which side you are in the trade) Russia is creating the conditions for organic import substitution.
Not surprised the fascists screwed up a policy.  They are so overrated in capitalist circles...
John

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Islam Begins to Embrace Usury

Islam is about 250 years behind the West in the process of legalizing the destructive process of usury.  At least they are debating the question.  But they are making up for lost time fast...

For his part, Sheikh Mahmoud Ashour, the former deputy imam of Al-Azhar and a member of the Islamic Research Academy, stressed that banking interest is subject of dispute among scholars. He told Al-Monitor, “A Muslim should listen to his heart. There is nothing wrong with following those who believe banking interest is halal. He may also refrain from using banking interest if he wishes to follow those who believe that it is haram.”

I wonder how something expressly forbidden can be a matter of dispute?  "Do your own thing..." is quite the modern opinion in this regard....

Ashour pointed out that the Islamic Research Academy issued a fatwa legitimizing banking transactions. He recommended dealing with state-owned banks, saying, “Usury is concluded between individuals. There is no usury if the transaction is between an individual and a state-owned bank, as there is no usury between the state and its citizens.” 

That is exactly how usury became entrenched in the West, the Church said they had no say in what the state legitimatized.  God forbids usury because it does damage, not because He says so.  Whether a person or a state is doing the damage does not make a difference, either way, it does damage and is forbidden.    Interesting to watch Islam follow exactly the same path as Christians by the exact same arguments.  Perhaps this will become an song for usury ads....



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All Hail Greek Debt Repudiation!

You'll find the few young people who manage to find a classics program in which to study bewilderd at how, when studying the ancients, we have seen all this before.  Just so.

The reason Latin and Greek studies are being starved is just that reason, today the exact same scams are being run that were run 100 times before.  And the solution is exactly the same....  Since the Greeks have seen this 100 times before, they are the first to do the obvious, and that is repudiate the debts their abusers claim.

The single most influential event in the history of finance occurred shortly after the great Athenian lawmaker Solon was elected archon, or chief magistrate, in 594 BC. Solon instituted a debt reform law called the “Seisachtheia” or “shaking off of burdens”.  This cancelled all debts, freed those that had sold themselves into bondage to work on their own former land when they became bankrupt, and reallocated the land back to the families that had held it since the foundation of Athens.
Syriza’s policy in Greece today can be seen as a Seisachtheia for the modern age. There has been much discussion of how Syriza intends to cancel Greece’s debts to foreign governments. What is less widely appreciated is that Syriza has also discussed cancelling the debts of individual Greeks to each other. Indeed, there appears to be some evidence of Greeks already deliberately falling behind on their mortgages and other debts, anticipating Syriza cancelling them.

Read on for more on usury in this.  Note that the Greeks will be repudiating the debts they owe to each other.  Very good.  The sooner the slates are wiped clean the sooner the reconstruction begins, hopefully with a change in the patterns and practices that led to these baleful results.

All of this harm flows from the lending of asset-free credit at interest.

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Song Discovery - New Business Opportunity

The Song Dynasty produced some stunning pottery, to this day an inspiration for much of Japanese aesthetic.  And now they have found a sunken ship over 800 years old.



One could begin a career selling reproductions of this shipment and the history around it.  Splendid!

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Canadian Yield Curve, USA Recession

Mish is singular in noting the portend of recession, the inverted yield curve in Canada.

The Bank of Canada called the rate cut "insurance". Insurance from what? If they think it will halt a recession, it won't. The recession is here. There is no need to wait for another quarter of declining GDP to confirm. A Canadian recession is underway.

The Canadian dollar dropped to US$0.79, which means things in and from Canada are getting real cheap.

And comes a question from Cal:

On Jan 31, 2015, at 7:28 AM, cal wrote:

Hey John ...  I just watched your San Francisco lecture-  recorded just after the 2009 crash.Your videos are very informative but they were also done about 6 or 7 years ago.  This leads me to the question about what you see for today ? We are still in a statist caused depression - how have the importers/exporters weathered the crunch?  Are people starting to buy again or ... ?

Is it still a good season to begin an EXIM business now - or are people still bankrupting in the international markets ?

Thank you for your time.

Hey Cal...

These small businesses are too organic to worry about economic conditions... we change too easily to worry about anything that happens in washington or on wall street...

It's gotten far worse than 6 years ago (and it is not Obama's fault, it would be no different with Mccain) and when the crash does happen it will be much worse than last time...

Swizterland, Russia and Greece are taking the right steps; USA no...

But it doesn't matter, we are a row boat in the ocean ...  much more oppty out there than we need...  I don't care if there is 25% unemployment, we'll sell to the 75% employed.

You did say bankrupt...  meaning more debts than income, unpayable, and that is one area I have some contemporary things to say in week eight of the seminar...

Otherwise, not much change...  compete on design.

If anything the pendulum is swinging back...  McD sales down... big chains closing stores.... good for small biz...  getting better, swinging our way.

John

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Obama's Precision Medicine Initiative

You can go back 15 years at least in my online class transcripts a find my monologue on tailored medicine, something so radical I was criticized for the idea.  Now comes the president of the USA:

Most medical treatments have been designed for the “average patient.” As a result of this “one-size-fits-all-approach,” treatments can be very successful for some patients but not for others.  This is changing with the emergence of precision medicine, an innovative approach to disease prevention and treatment that takes into account individual differences in people’s genes, environments, and lifestyles.  Precision medicine gives clinicians tools to better understand the complex mechanisms underlying a patient’s health, disease, or condition, and to better predict which treatments will be most effective. 

This is nothing new.  He wants $215 million to get in front of this.  We need exactly zero dollars to make this happen.  If we were to deregulate medicine, this is exactly where we would go, and it would revive the USA economy just as a deregulation-lite of telephones back in 1982 gave us the unforeseeable "new" of cheap cell phones and the internet & www.  Countless unemployed would find work immediately, our exports would boom, meritocracy would win out.  But when they want $215 million, they want it for lockdown, not for expansion.

What militate against this in USA -

The FDA...  the FDA is a regulator captured by the regulated.  I has hundreds of millions to spend on terrifying people that innovation will maim and kill them.  Their job #1 is to keep America safe for big medicine.

USDA... deregulation in medicine would extend to livestock, veterinarian medicine.  It is a crime to test for mad cow disease as a part of an export program.  It is a crime to acquire a mad cow disease test kit that was not gained by licensed permission from the USDA.

Patents...  Orwell warned the USA would use totalitarian thought control, Huxley warned it would use totalitarian medicine control.  50 years ago the question was which one was right?  Turns out both.  patens regime is existential in USA, and if medicine is for one person, then patents are moot.  That will never be.

We have draconian medical secrecy laws, not for patient benefit, but as usual, to hide Hegemon wrongdoing, such a the Tuskegee experiments.  A critical part of this will be checking the reliability of valid claims, to achieve science and progress, crowd sourced science (and experiments need crowd to become science.)  There is nothing to keep people from volunteering their information, but there will be Hegemon interference with people freely exchanging it or storing it.

Further, to benefit most USA would need to be a welcoming destination for medical tourism.  Under totalitarian fascism, our airports and country is in travel lock down, both ways.  Try leaving USA anonymously.

This is a non-starter if the government is involved, except to deregulate.  On the other hand, some other country that is trending toward freedom, say India, China, Russia, may very well create the milieu in which this will work, and attain the benefits therefrom.

This degeneration of the USA is a self-inflicted... as we applaud violence and welcome choices in our elections such as Bush/Clinton yet again, we just go deeper and deeper.

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