Thomas, caused / triggered – same difference, really. My point is bad MONETARY and bias FISCAL policy is what trigger/caused our present problems. Oil spiked in 1979 but did not cause a recession, it spiked in 1990 but it did not trigger a recession, it spiked in 1998, 1999 and 2003 – no recession. This is because land, not oil, drives the boom bust cycle. I suggest Fred Harrison’s “Boom Bust” which shows how land contributed to stagflation and the 1983 recession as well. Oil may have a indirect transmission effect, but it is the malinvestments in land which cause consumption and investment to slump.

As for your money question – it comes from several sources. First, “internal debt” i.e. government bonds, issued to corporations or the citizenry in OUR country’s currency and existing monetary stock; here, the government simply borrows money at a rate of interest from its people OR some financial institution (like the Commonwealth). Otherwise, securities are issued (i.e. assets owned by the government are sold or rented out e.g. Crown land or stocks). Internal debt lowers the risk of inflation as it does not print money *wildly* (hence, while printing money is easier, it has many side-effects). Second, government can borrow money from oversea banks i.e. “external debt”. Here, foreign borrower’s i.e. foreign banks, IMF, World Bank (all overseas banks). Of course, all this means we –the people – need to pay back the debt when the economy is productive again or government can simply *print more money* by pressing print on a computer. It’s that simple. Essentially, government funds itself the same way you and I do if we need money – through credit. Except, government can do what we can’t: force others, namely, taxpayers to pay back its debt. I recommend these sites: http://eh.net/encyclopedia/article/noll.publicdebt and http://en.wikipedia.org/wiki/Treasury_bills

Wing Ah Ling – the world is headed for deflation – not good! Hence, the spending. Mind you, I agree the spending should be less, at least here in Australia. The implied point is a betterment levy would mean no deficit - either because the boom bust cycle would be severely reduced, even eliminated OR there would be plenty of cash around (like in Hong Kong)to stimulate the economy without the need for a deficit.

As for your question, there would be *no* capital gains or stamp duties or any other major taxes under my model – capital gains would be abolished. The phrase "capital gains" is, of course, a contradiction. Capital does not gain. It depreciates. This is because land is not capital - try transporting a piece of land from Sydney to London! Anyways, I get what you mean. "Capital" gains which involve no work or effort on the part of the proprietor are taxed (i.e. the unearned increment due to windfalls). Not wages or profits. This was the way the Sydney Harbour bridge was funded - through windfalls. Capital gains in LAND I.E. THE DIRT, the soil is the result of the community (population growth, government projects and location, location, location, location) BUT capital gains on the property are due to owner (e.g building a big, modern house). LVT encourages the latter. The way to distinguish this difference is discussed in the article. We are talking about the land only. Community creates land values, owners create property value - this is why a vacant patch of dirt in the middle of Sydney - who nobdy owns or has a property builter over it - is worth more than a vacant lot of the same size in the desert, in the middle of no where.

Whig98
You are either obtuse or stupid. Semantic simianese is not a reply.
If you don’t know the difference between cause and stimulus what kind of economist are you? If In fact you have any qualifications at all other, than an obvious public circus background.
If I wanted a lecture on grade three economics I would ask my daughter.
Now let’s talk tin tacks.
The world is in recession (something I predicted, the author predicted and, you didn’t). Yet you blithely rave on about the revenue capabilities of the government, whilst their budgets are falling about their ankles.
The question was rhetorical. In case you don’t know what that means, in your submissions it means BS.
Don’t waste my time replying it obviously took you too long to try and weasel your way out of the last comment.

To AustralianWhig89,
You write an interesting article but please get your facts right. Land Tax "exemption for commercial use", in fact commercial users pay the bulk of Land Tax in NSW. Same applies to family members. Schools, church & rural are exempt. In NSW, the tax is 1.6% after a $368000 threshold.
In NSW, negative gearing is a dead duck. The stagnant property market makes it a loss maker. Also, the new rules to superannuation make salary sacrifice to super a better proposition than negative gearing for many people. Expect to see more properties purchased by self managed super funds which still pay 1.6% tax but miss out on the threshold.
I am wary of making comparisons between Australia and the US. America produced a massive oversupply of housing with very poor lending practices. Many people have now lost their homes and many suburbs remain unoccupied. The high home ownership and low rents in Pittsburgh were probably caused by the property bubble which has now deflated.
"Sorry, I don't get why renters have to look elsewhere". Well, I let two properties and half of my tenants are also landlords. Their properties are located elsewhere or temporarily inappropriate. Other tenants have left to buy their own property when they had saved enough. Others want to travel and don't want the commitment of a mortgage. Home ownership is a good policy but not everyone wants it.
The landlord wants to let and tenants wish to rent but the government intervenes and taxes the property to the point where it is no longer economic for the landlord and you say this is in the best interests of the tenants because the same tenant can now buy the property!

Thomas, semantics are a better reply than pointless ad hominems. It doesn’t change the fact bad monetary policy, not oil, triggered the bust.

I blithely rave on about government expenditure because all their policies will do is simply ignited *yet another* recession in the future. Infrastructure projects cause land value to rise, which emits price signals to banks, investors and speculators, which prompts them to OVERinvest in real estate. Who wouldn’t invest in something which has turnovers of 30% per annum? When the slump occurs, however, due to debt, investment plummets (due-to-falling-assets-and-collateral values) as-banks-won’t-lend-to-those-who-even-have-a good-credit history to maintain the integrity of their balance sheets: http://www.foldvary.net/works/geoaus.html As Prof Fred Foldvary notes, “John Maynard Keynes argued for .. public works to stimulate aggregate demand….government stimulus is needed to correct what they believe to be a "fundamentally flawed, non-self-correcting market economy” is IRONIC, since such public works (like Rudd’s), combined with credit expansion, so often induces speculation in the real estate market, with its resultant booms and busts. Every increase in government expenditure that has social value creates an economic shock in the form of a rapid increase in site values if it is not offset by a collection of the economic rent generated or expected.” Railroads and the canals of the 1830s are a classic example. These increased should be recycled and used to fund Rudd’s projects, NOT MY WAGES!

So, you say “If I wanted a lecture on grade three economics I would ask my daughter” – well yes – her views on economics would probably be as fallacious as those of Keynes, but still beter than yourself.

Ps. You say “the world is in recession (something I predicted, the author predicted and, you didn’t)” – erm, contradiction right there. *I am* the author of the piece – thanks for the compliment, but how can I have predicted the world recession and yet didn’t? My point is I use the 18 year land wave cycle to predict recessions. Hence, there should be another downturn around 2025, and a midcycle downturn around 2017-8

Hi Wattle,

When-I-said-commercial I meant private schools etc in-the-sense-they do-exercise-*commercial-activity*-on-their-premises, *but*-fall-under-one-of-those-cited-categories-(eg rural)-due-to-zoning-decisions-OR- write-down-the-value-of-their-properties-to-less-than-$368000. I’m sure-there other loopholes e.g. a-father-can-shift-a piece-of land-to his-a-wife. The ARE-HEAPS-of-other-loopholes.** LVT is very low: 1.6%. Hardly-enough-to-offset-increased-capital-gains-from-either-foreign-investment-demand-OR-population-growth-OR-infrastructure windfalls. As noted previously, I-can-still-own-8-properties-and-pay-no-LVT-*if*-they-are interstate. That's alot-for-one-person! Hence, the tax does not catch out clever-speculators.

Your-LVT-bill-will-plummet-as-land-values-plummet-further. However, 7 reports-found-that-LVT-alone-and-with-all-other-taxes abolished-(like the tariffs and GST would *don’t* see), people DO pay-less-tax: http://economicboom.info/empirical_studies.htm The higher the-LVT-the-more-cheaper-the-property becomes:a 100% tax on land would mean the capitalisation-price of *land*, NOT-the-property-though, would-be-$0. This-is-not-to-be-confused-with-the-*rental*-price-(the government levies on the land like your local rates). I-don’t-advocate-land values-falling-*that*-after-over-time.

Actually, Pittsburgh’s-and-New Hampshire’s-house-prices-went-up-only by 7% over the decade, not 100% nationwide, because of its high LVT-policy; monopoly influence are not around, hence no artificial scarity. These-two-states-are-growing, not-slumping - they-had-no-housing-crisis. The cited-homeownerships-rates-are-*ongoing*-i.e.-have-been-high-since-the early-1980s (so-that-dispels-your-property-bubble-thesis). It has more-to-do-with-affordable-housing. LVT encourages that idle-sites-be USED, increasing-supply. Under the-status quo-however-people overbuild-because as rents and values go up, they-expect-to-reap-huge-gains from such developments, as they lease or sell their premises. The market emits positive price signals. Hence-what-happened-in-America-today-&-in-Australia-during-the-1980s-commercial-property-boom. Eventually, builders-realised-they have-produced-too-much, raising-vacancies, reducing-rents. Rent-inflows-do-not-match-the-debt. Speculators-buy-when prices-are-low-and the cycle reignites. Under-LVT over-production-does-not happen. Why-not? Because *buildings-are-built-to-promote-high-demand-needed-for-legitimate-*commerce*, not because they expect to reap huge-speculative capital-gains on them, false prices are no longer factored into the equation; they-are-sucked-into-the-public-perse. This-reduces-bad-debt-&-malinvestments i.e. it-stops-the-creation-of-buildings-no-one-*currently*-wants. It makes construction sustainable (as money is funnelled, not into the home, but unto it) and not subject to erratic boom busts due to slumping land values.

I agree-not-everyone-wants-to-own-a-home(although *most* would like the “dream” of owning their own home;lower prices would make them *more* willing to take out a mortgage). My point-is-1) it is rational to own rather then rent-why-should-I-pay $170 p/w x 52 for 30 years when-I-can-buy-a-place-for-$100 000?-2) the tax,if high enough, cannot-be-passed-onto-tenants-and-3)even-tennants-won’t-loose out as rents will be lower due to the “substitution” effect–more people buy homes, hence lower-demand-on-renting-sector. Indeed, this is good for the tenant-the landlord would simply have less of a turnover (which in and of itself does not hurt wages or profits, in fact, my ownership would increase reduce-my-business-marginal-costs).

I-also-agree-superannuation-and-shares-ought-to-be-promoted-as-*A*-better-investment-than-real-estate. They-should-also-be-tax free, like-peoples’-wages-and-business-profits–at least they contribute to sustainable growth, via savings and investment which-is-not-funnelled into-dirt, but-output:http://economicboom.info/ability-to-pay.htm

ps-Dw-if you-are-over-55-you-won't-be-affected-and-would-pay-no-taxes. Remember, it's-a-generational-*change*.

pps-the-ABS-found-in-2004-that-24%-of-investors-bought-property-just-because-of-negative-gearing-it-does-INCREASE-demand.

** http://www.sro.vic.gov.au/sro/srowebsite.nsf/revenue/8315B358D3EEDA1CCA256FAB001FDF2F/$File/publication-LTX-005.pdf

http://www.dtf.wa.gov.au/cms/uploadedFiles/FACT%20SHEET-%20EXEMPTIONS%20RELATING%20TO%20PRIVATE%20RESIDENCES%20LT%20(07_08).pdf

http://www.dtf.wa.gov.au/cms/uploadedFiles/FACT%20SHEET-%20EXEMPTIONS%20RELATING%20TO%20PRIVATE%20RESIDENCES%20LT%20(07_08).pdf