Use Land Value Capture to help fund the Inner City Rail Link

It was disturbing to hear Minister Stephen Joyce suggest on RNZ today that public land near the rail hubs be sold to private investors to help fund the Inner City Link. That is exactly the land that needs to stay in public hands.

The Jubilee Line Extension of the London underground, built during the 1990s generated huge uplifts in land values for the properties within 1000 meters of the hubs. A study showed that whereas the cost of the extension was £3.5 billion, the benefits to these property owners was £9 billion.

The practice of capturing at least part of this uptake in land value to fund the Inner City Rail Link could easily be applied to Auckland. Land Value Capture has contributed to the funding of the Sydney Harbour Bridge and the Melbourne inner city rail. If the Far North District Council uses this practice to build remote roads, why can’t Auckland?
Helpfully today the Mayor issued a media statement outlining the exact businesses that stand to gain from the City Rail Link construction here. Yes it will bring business that is true, but wow what an increase in the land value they will all reap!  Nice. Public funding brings private gain. Sweet as.
A couple of years ago I had the privilege of meeting Rick Rybeck, a city planner from Washington DC who, after their council had taken out one of the hubs from a plan for such a link, came to him and offered him a huge sum if they would change it back. He eventually worked out their land value would have risen at least twice this. He now works as a consultant on Land Value Capture. http://www.justeconomicsllc.com/experience.html

Global currency is declining, huge things happening

The slight blip when Janet Yellen hiked interest rates by a tiny amount had an enormous effect. Look at where base currency is suddenly diving, looks like about September 2015. This is a ten minute watch but will give a good global picture of where the global economy is now. Lots of good charts. We have a long, long way to fall in this crash, says Mike Maloney. Stockmarket is tightly correlated with base currency. Lots are sitting on the exit button waiting to get out of the stock market. “We are in for something very dramatic. 2016 is going to go down as a record year. The top is in and stocks are not the place to be any more.”

The 08 crash it took a year and a half to go down, this will be faster.


Minsky a good economist but missed Henry George and Silvio Gesell

Why Minsky matters : An Introduction to the Work of a Maverick Economist by Randall Wray.

My thoughts after reading this nice clear book are that Hyman Minsky, with his yearning for full employment, more equality and a stable financial system, would have revelled in the books of two non-economists – Henry George 1879 and Silvio Gesell 1906. Henry George’s writings would have given him answers to the eternal social justice conundrum and satisfied his curiosity about why Keynesian solutions tend to be inflationary. The route to full employment and more equality would then be staring him in the face. He wouldn’t  have had to struggle round arguing against a payroll tax when George had argued for a logical tax system so well. Minsky doesn’t quite get there. Wray merely implies he approached it when he said Minsky ‘did not see public purpose in discouraging work.’  And while he knew that boom and bust were inevitable, with exposure to Fred Harrison’s writings or those of Bernard Lietaer he would have understood the underlying causes.

Nor did Minsky get currency design, though he did say, ‘Anyone can create a currency. The problem is to get it accepted.’ Silvio Gesell would have provided a fundamental understanding of the importance of currency design. The idea that people can design currencies for different purposes is new to most people and, given Minsky’s mainstream education, he was probably never exposed to that. I think he would have been excited to read Gesell as it would have turned his knowledge of capital formation, interest rates, risk and banking upside down. But Minsky had to earn a living and couldn’t afford to stray this far from orthodox economic thinking. It was enough to argue against mainstream beliefs of macroeconomics like that the economy is naturally stable because the market moves it back to equilibrium. That was a life’s work.

Minsky is a clever mainstream economist, educated in universities that didn’t expose their students to Henry George or Silvio Gesell or even Bernard Lietaer. But within those limitations Minsky in 1987 predicted the explosion of home mortgage securitisation that eventually led to the Global Financial Crisis. He leaves us with a legacy of sentences and phrases like ‘Stability is destabilising’, ‘that which can be securitised will be securitised’, ’money manager capitalism’ and prescribes clear methods of reintroducing bank regulation. He explained debt on debt on debt layering, leveraged buyouts and many other otherwise obscure terms.

Well done Randall Wray for explaining the work of Hyman Minsky to the general public in such readable form. I am conscious that I have not read the original Minsky so hope I will not have been mistaken.