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The Land Story Behind Inflation (Stagflation) That So Many Fail to See

Updated: Dec 1, 2023

All the issues we face today, inflation, inequality, labour shortages, and high and rising land prices (and rents), have their cause rooted within the land cycle.

A few months ago, I interviewed Warren Mosler, the founder of MMT (Modern Monetary Theory), for Cycles, Trends & Forecasts subscribers. We discuss his views on inflation, the monetary system, and, more importantly, why we should have a ‘property-only tax’!

You can listen to the interview below.

Warren is a smart man.

He is advocating a single tax — similar to the activism of 19th-century political economist Henry George, who wanted all taxes abolished other than a tax on the economic rent of land.

There are sound reasons for doing this, which we discuss in the interview. It was also great to hear that Warren has an acute understating of the need to tax land to prevent a boom/bust cycle.

But it’s unlikely to happen any time soon, simply because just about everything that comes out of the MSM (and many economic textbooks) about tax and inflation is pure fiction.

As it is, the myths surrounding money, tax, and inflation are branded into the minds of the majority to protect the wealthy rent-seekers and confuse the masses.

The mainstream narrative regarding tax revolves around the mistaken premise that we need to raise ‘revenue’ to fund programs like the NDIS.

Equally, there’s no discussion of what we’re losing through mandated tax policies!

Let me explain: It will help you better grasp the drivers behind the land cycle that were not discussed in our interview.

A few years ago, when I was preparing to give the 125th Henry George Dinner Address on taxation costs, I had a conversation with Fred Harrison.

He wrote to me:

Catherine, can you get a breakdown of what the taxes are in Australia? Can you get me the full equation of what they are at a state and federal level? Get me the full tax take and we’ll work out the deadweight costs.

For those unaware, deadweight costs (or excess burden) attempt to put a dollar amount on the productivity losses stemming from 99% of taxation.

Noting that the only tax that doesn’t carry any deadweight loss is a land tax!

This is because a land tax encourages owners to ‘employ’ land into use, increasing building activity (productivity) and lowering the price paid at the margins.

But other taxes are extremely destructive to the economy.

For example, it’s estimated that for every dollar of income tax collected, a dollar is lost in economic activity.

Not just through the discouragement of workers or employees.

But through compliance costs and misappropriated labour (i.e., the number of accountants employed to assist punters in reducing and avoiding taxation).

Various studies have been undertaken in Australia in an attempt to calculate the deadweight losses, but they’re all blind to the role of land.

The costs are, therefore, invariably underestimated.

This was Fred Harrison’s point and thus his request to me.

I’ll come back to it in a moment.

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