A New (dis)Order?: Financial Design in the Aftermath
2 years ago
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36. A New (dis)Order?: Financial Design in the Aftermath
2 years ago
As signs increasingly point to a recovery in both the financial system and the real economy, it increasingly appears that a repeat of the Great Depression has been averted. The prevention of complete economic collapse appears to be one of the few certainties. Critical issues such as the reasons for the collapse, the nature of the recovery, and even an assurance that the recent crisis will not be repeated are far from resolved. Financial Design in the Aftermath, a conversation among some of today’s most prominent economic thinkers, will examine these issues by exploring five central questions:
* Have the central factors behind the crisis been identified?
* Do the current proposals for a new financial design sufficiently address the causes of the credit freeze?
* Are the conditions for a new financial crisis building?
* Will the recovery be characterized by a V, U, or W growth pattern?
* If the U.S. does not recover in a U or V pattern, what implications will this have for the global economy?
With Emanuel Derman, Columbia University; Joseph Stiglitz, Columbia University; Yu Yongding, Director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences; and Luigi Zingales, University of Chicago.
* Have the central factors behind the crisis been identified?
* Do the current proposals for a new financial design sufficiently address the causes of the credit freeze?
* Are the conditions for a new financial crisis building?
* Will the recovery be characterized by a V, U, or W growth pattern?
* If the U.S. does not recover in a U or V pattern, what implications will this have for the global economy?
With Emanuel Derman, Columbia University; Joseph Stiglitz, Columbia University; Yu Yongding, Director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences; and Luigi Zingales, University of Chicago.
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Would there have been a rush of speculative investment in housing and other real estate if there had been a heavy tax on land values? NO
Why? Because the profit from cashing in on rising real estate, i.e. land, values would have been siphoned off to pay for government services instead of being pocketed by speculators thus eliminating speculative incentives.
Are states with higher property taxes like Texas (of all places) experiencing significantly less fall off of property, i.e. land, values in this depression and are far few people losing their homes to mortgage foreclosure in those states? Yes
Why? Where property taxes are high and reassessed as property values are bid up there is less incentive to investment only for quick profit instead of actual use so property values do not grow as high and as in states such as California with minimal property tax. In states with high property tax less money has to be borrowed to buy properties and when the bust comes land values fall less so that property values do not fall below the balance of mortgages. Yhis results in far fewer mortgage foreclosures. Compare foreclosures in Texas with high property tax to California, Ohio and Florida where the property tax has been undermined. This is especially true of California's Prop 13.
Was Prop 13 sold in 1978 as a way to protect home owners? Yes
Did Prop 13 protect home owners in California? No.
Why? Just the opposite because removal of the property tax allowed property to be speculated with more vigorously resulting in rapid rise in property values, necessitating the borrowing more money from banks to pay for speculatively high prices and setting all late buyers up for massive land value price drops when the market busted.
To not speak about the effect of property taxes on land values taxes and on the boom bust cycle of real estate/land speuclation leaves all explanations and proposals for solution incomplete and mostly incomprehensible. To include the effect of property taxes on land values would make economic models complete. Google land value taxation.