Land Value Taxation Campaign

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Interest rate cuts taking us nowhere

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These ongoing interest rate cuts are obviously achieving nothing, so why persist with them? People who are in debt and feel insecure about spending their money are not suddenly going to rush to the shops to buy things that are not essential, and certainly not with borrowed money, at any interest rate. In fact, anyone sensible person enjoying an interest rate cut will continue with the same repayments and clear their debt quicker.
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Captains of industry get begging bowls out

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Brighton - New England development Britain's Captains of Industry have always been foremost amongst the advocates of free market economics, but not, it seems, when they themselves are in trouble. Now they too have joined the queue of benefit claimants and have got their begging bowls out. The Society of Motor Manufacturers and Traders (SMMT) and the Retail Motor Industry Federation (RMIF) have sent a joint letter to the chancellor, the Rt Hon Alistair Darling MP, and business secretary, Lord Mandelson, regarding the impact of the current economic crisis on the UK motor industry. The letter suggests a number of initiatives, designed to stimulate the UK vehicle market and mitigate the short and long-term effects of the economic downturn throughout the sector. The industry is calling for special measures.
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Interest rate slashed

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The Bank of England’s monetary policy committee slashed its key rate by an unprecedented 1.5 percentage points to 3%, the lowest since 1955, emphasising its growing concern over a contracting economy. The ECB cut rates by half a point to 3.25%. But after allowing for inflation, interest rates are already negative and that is before tax. How much lower does anyone imagine they need to go to have any effect? Since it is land prices and rentals that are the real problem any effect of cutting interest rates will be next to nothing. Inflation (=theft of people's savings) will help by reducing real land prices by depreciating the currency. But the underlying problem is that land prices are sticky downwards because we do not have land value taxation.

Why is everyone doing just about anything apart from dealing with the real problem? And the silence from the two opposition parties is deafening.
 

Negative growth

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"Negative growth" means contraction. The UK economy shrank by 0.5% in the 3rd quarter of the year. Who has become worse off and in what way? Some people have lost their jobs, their homes, or their life savings. Things seem set to get worse.
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Mass unemployment returns

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Idle Land Idle Men posterVery soon there will be a couple of million involuntarily idle people. There will also be a rash of derelict sites as vacant commercial buildings are demolished to avoid the business rate. There is a connection between the two.

Whilst Britain's flexible labour market has been much vaunted, there has no attempt to make Britain's land market flexible. On the contrary. Increased demand creates a shortage and prices go up, but if demand is decreased, eg due to recession, the price of land does not fall to market-clearing levels. Soon, therefore, we shall see a rash of derelict sites and boarded-up buildings. They will stay derelict for long enough to allow the buddleias to grow into big shrubs. Owners tend to prefer to  wait for the upturn than accept the going rent or price.

The usual explanation for recession is "lack of demand", but human demand for goods and services is unlimited. If people are willing to work, the potential supply is present. But work can only be carried out on land. Every street trader knows that the right pitch is essential. But if land is locked out of use, then labour is locked out of employment. It is that simple. Idle land means idle men, as was pointed out in the 1910 election poster.

Added to this is another consideration. For every £ a worker receives in take-home, an employer must pay a further amount of about 85p to the government, nominally PAYE income tax, and employer's and employee's NI. In effect, these act as a heavy payroll tax, and explain the paradox of how Britain became a high labour cost/low pay economy. This needs to change. The taxation of labour has to stop.

And to get vacant, hoarded land into use requires a further tax reform, the introduction of an annual ad valorem tax on the rental value of land, to discourage owners from holding onto it whilst locking labour out of work.

The implication is that we do not have to endure prolonged recession and unemployment. It is a policy choice.

See here for a detailed explanation.
 

Are things going to be all right now?

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Now that the immediate problems with the banks look as if they have been solved, is everything going to be all right? None of the commentators seem to agree, so we shall not venture to make predictions. The continuing wild fluctuations on the stock market suggest that nobody has a clear idea about how things will go. What is being done does not sound right but we could be wrong.  We can only wait and see. We are adamant, however, in our assertion that the banking problems are an effect.
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Paul Krugman wins Nobel Prize for economics

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Paul Krugman, New York Times columnist and University of Princeton professor, has been awarded this year's Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. His speciality is spatial economics, and one might have thought that he would be strong on Ricardo's Law of Rent and possibly even an advocate of land value taxation. But whilst, unusually amongst economists, he puts an emphasis on the influence of geography on economics - which is why he has been awarded his prize - he has come at the subject from what appears to be a Keynesian direction and seems not to have picked up on the concepts presented by this campaign and similar bodies. You can read about his ideas here and follow his blog here - you may feel inclined to engage with him by responding with comments.
 

British bank rescue

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The latest £50 billion bail out of the British banks may be unavoidable. But to judge by the stock market reactions and the comments made on press and radio, few seem convinced, even after several days. There seems to be no real understanding of what is going on and what the effect of any particular policy will be. We make no claims either in this regard, but making credit more readily available is pointless if businesses have no confidence that there will be a market for their products and services. It is also the case that governments are going to be short of cash. There will be increasing demands on that cash to pay not only for these bail-outs and rescues of people's savings, but also to cover the cost of index-linked state benefits such as pensions, and a growing bill for unemployment benefit. These are the first steps in setting up the positive feedback loop which leads to hyperinflation, yet nobody has warned of the danger in public. Perhaps they have been asked not to spread panic, but silence is not going to prevent it. It is not inevitable, but is more likely to creep up on us through a refusal to contemplate the possibility. More positively, there seems to be a growing understanding that the problem was related to the housing market or "property", but the recognition that it is a land issue is one step too far to grasp.

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