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Archive for September, 2014

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” Our vast, corrupt and unsustainable political economy would just have to collapse from its own internal contradictions… ”

That’s a quote from my Homepage.  ~R

Here’s extracts – from a long convoluted trail – Zero Hedge, Submitted by Tim Price via Sovereign Man blog

Touching on the similar idea from an alternative perspective.

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On The Breakdown Of Nations

Leopold Kohr  was born in the village of Oberndorf in central Austria (population approx 2,000).

Kohr went on to study  with the likes of fellow Austrian thinker Friedrich von Hayek.

In 1938 he left Europe for America, a place he would make his home for the next 25 years.

In September 1941  Kohr wrote the first part of what would become his masterwork;  The Breakdown of Nations.

In it he argued that Europe should be “cantonized” back into the sort of small, political regions that had existed in the past, and that still persisted in democratic hold-outs like Switzerland.  It all comes down to scale.

As Kirkpatrick Sale puts it in his foreword to ‘The Breakdown of Nations’,

“What matters in the affairs of a nation, is the size of the unit.

“A nation becomes too big when it can no longer provide its citizens with the services they expect – defence, roads, post, health, coins, courts and the like – without amassing such complex institutions and bureaucracies that they actually end up preventing the very ends they are intending to achieve, a phenomenon that is now commonplace in the modern industrialised world.

“It is not the character of the building or the nation that matters, nor is it the virtue of the agents or leaders that matters, but rather the size of the unit: even saints asked to administer a building of 400 floors or a nation of 200 million people would find the job impossible.”

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Kohr showed that there are unavoidable limits to the growth of societies, in the real world, there are finite limits beyond which it does not make sense to grow.  Kohr argued that only small states can have true democracies, because only in small states can the citizen have some direct influence over the governing authorities.  When asked what had most influenced his political and social ideas, Kohr replied: “Mostly that I was born in a small village.”

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The euro zone in particular is an object lesson in an unwieldy, oversized, dysfunctional political construct haphazardly cobbled together among irreconcilable cultural entities.

Wherever something is wrong, wrote Kohr, something is too big. The answer is not to grow, embracing even more disparate states within a failing currency union with make-it-up-as- you-go-along rules. The answer is to stop growing.

The answer to the ‘too big’ problem lies not in ever greater union – but in division.

“We have ridiculed the many little states,” wrote Kohr, sadly; “Now we are terrorized by their few successors.”

……..

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Of course it is in the nature of bureaucracies to grow – uncontrollably, like a cancer.

And there is a degree of power (military and financial) that comes from being bigger.

Hence our current  Too Big To Fail  problems.

But I would argue that it isn’t just our macro institutions, but the regular ones as well that would benefit from being broken up and downsized.

That would certainly be seen as a threat by many who work in these areas, but they would also be the first to admit that the job they are supposed to be doing, gets swallowed up in the bureaucratic requirements of “accountability” (sic).  The paperwork reporting they have to do, takes more time than the actual job.  Teaching is a classic example here, but they strenuously resist any move to change the system (I’ll concede that a part of that is because the ‘change’ often offered, comes with a whole raft of other hidden agenda issues…)

Yes, change would be difficult, but seriously what is the alternative.  Too big to fail hospitals, schools and militaries for example – that still fail anyway.

By any measure they fail already.

Some sort of version/variant of Cantons has to be imagined, tried, tested and implemented.

At least then if a part fails, it can be addressed and fixed.

Too-Big-To-Fail, means they are Too-Big-To-Be-Fixed as well…

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And nothing but the truth.

We are as I write this, in the middle of a General Election silly season here.

And we recently had a Leaders Debate on TV.

Normally I would have stuck forks in my eyes rather than watch that sort of thing.

However, due to circumstances, I did actually end up watching a fair part of it.

And watched the politicians dance right up to the truth… and then dance away from it again.

So OK – if they don’t want to touch it, I will.

 Here is the TRUTH – (whether you like it or not).

  • Housing is unaffordable.
  • And the trend is tracking worse.
  • And it is the result of deliberate government policy.
  • And unless that policy is reversed, then housing will continue to get more expensive and unaffordable.

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The politicians danced with several facts.

They are allowing and encouraging foreign ownership of land here.

They would like to appear to be doing something about locals being priced out of the property market.

But when asked about whether they were prepared to stand at the end of the driveway of a property owner and say – “you cannot sell your property for what it would reach in an ‘OPEN’ market, and will have to accept less by selling to what a local is able and prepared to pay” – then the ducking and diving began…

BUT – that is EXACTLY the correct answer.

The way to make housing/property affordable – is to make it cheaper.

Not by implementing assistance schemes, etc.

All that is designed to do is prop up the existing price of assists, while hopefully also making it somehow possible for locals to leverage (borrow) into the market.

It is completely arse about face – that cannot and will not work.

The best that could come from that, is to ensure that whatever assistance is offered, will be the amount that housing will next go up by.

And if they can’t see that (or won’t see that) then the politicians are either Lying, or Incompetent.

Either way, they shouldn’t be allowed to run a country.

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But the beauty of our “Democracy” is that we get to choose – between Tweedle Dum, and Tweedle Dummer.

And nothing will change – certainly nothing that matters.

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And if you can’t afford to buy a house in your own country – Then that means YOU don’t matter.

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What matters is propping up the bubblicious price of housing and property.

(and maybe also helping it along with a little ‘gentle’ [sic] inflation of housing too – the survival of the Banks’ depends on it don’cha know…)

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And – the Damn truth part:

The price of housing is a consequence of deliberate government manipulation of the structural environment in which the market operates.

It is the whole point of government – to interfere in the market mechanisms. So as to ensure the desired outcome…

If you can’t afford a house – that is the desired outcome.

Just not your desired outcome – but we have already determined: You Don’t Matter.

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And finally – here’s the Nothing but the truth part:

To make housing affordable – requires collapsing the price of housing.

Actually, that is pretty easy to do – on the one hand…

On the other hand – it is politically impossible to do.

A reformed policy and structural environment could collapse the housing market pretty much over-night.

Getting such a change made against the monied interests of those invested in the property market is the real trick.

Short of a War or Revolution – it ain’t gonna happen.

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Which is why I pay scant attention to the babble of the politicians.

They will try and sooth us with pablum.

But until they come out, stand at the end of your drive, and say:

NO, you cannot sell to whoever you like.

NO, you are not going to be able to sell to the highest (international) bidder.

NO, you are not going to make money out of the sale of your property.

NO, you are going to have to accept a loss of value/price.

No, sorry but property prices are too high and you are going to have to eat the bitter pill…

… then nothing is actually changing – whatever they may try and tell you.

The status-quo is going to continue:

Rising Prices.   http://www.nzherald.co.nz

Increased foreign ownership.

Decreased domestic ownership.

Decreasing affordability.

A life time of renting and dependance.

……………………………………………………..

Just as a note to all this:

To collapse the price of housing and make it affordable to (all) locals, can be achieved by a pretty easy and limited range of tools.

And they all rely on making property ownership LESS appealing to buyers.

A limited market (smaller buyer pool), and less money chasing assets (no financial return) – equals a drop in prices.

There is no other formula for it – and it is exactly that simple.

Housing has to be for shelter, not for investing purposes.

And these things would do it:

Prevent foreign ownership of property (real estate).

Require foreign (non resident) owners to sell, this includes Corporations/businesses. (But they could lease business premises for example)

Prevent foreign owners from renting out properties.

Require all rental houses to meet a fairly strict “Warrant of Fitness” standard.

Require that any property that is classed as a rental property, must be sold on as a rental property, with the existing tenant holding the right of residency for as long as they choose to stay there.  Renters may not legally be evicted, in order to sell a property.

Take away tax breaks for owning rental properties, or any property.

Open up the provision of housing to include a wider range of options.  Take away the barriers to offering and building smaller houses.

Increase interest rates.

Let/encourage the exchange rate to float higher.

Work on lowering the cost of the bill of materials for new houses:   i.e. taxes, duties, monopolies.

Restrict the lending practises of Banks.

Work to institute “deflation” as a general national policy – not “inflation”.

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These set of rules would make it undesirable to invest Capital in property – and so it would flee the property market.

And that is a good thing.

Hot money should not ever have been allowed into Housing – period.

(or the necessities of life generally)

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If you are still not happy with how much this set of rules has pulled back the price of real estate – then there are still more radical measures that could be implemented to drop the price.  These would restrict further the ability to buy and sell, and the cost of doing so. And also the marginal/incremental cost of  owning more land.  Larger/additional holdings would be taxed at a progressively higher rate.

Why would you buy property if it is so hard, there is no money in it, and there are added costs for doing so.   And that’s assuming you are a local – foreigners would be shut right out.

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And if there WERE tax breaks and incentives for moving your money out of Real-Estate, and into commerce and industry (where it COULD actually benefit the Nation and the economy) – – – then why wouldn’t we be doing that instead…???   Just a thought.

(and until the politicians start talking along these lines, then you know for god-damn sure they are talking shit).

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