Classical/Neo-Classical Economics: Skill/Privilege & Wages/Rents – “We have been distracted from the economic principles that effect our lives!” – video
This is an Australian produced film, but the principles carry. – I would not focus on land to the exclusion of financial assets like stocks, and other vehicles for producing income and capital gains, that allow speculators to game the system. (which is subsidized by the wage earner.
Watch video at bottom of this post.
The US internet bubble for example. had nothing to do with land per se. And the Florida land boom in the US preceded by several years the stock market boom that led to the Crash of 1929.
And it was financialization, the application of fraudulent valuation and securitization leverage, that gave the US credit bubble its kick.
Financialization permits the transmission of the speculation to a broader audience, in the most recent collapse a global audience, and widens the scope and duration of the Ponzi scheme through its interlocking web of counter party risks.
The most common thread in destructive bubbles is official complicity, often seen in regulatory capture, and the almost willful suspension of disbelief achieved through influence in the media and the steady application of messaging, often so intense that it borders on overt propaganda.
Certainly it does involve the silencing of whistleblowers and critics through access denial, ridicule, and other forms of soft censorship. And if it is followed by the obstruction of justice so that the perpetrators may go forward unimpeded, they will work their cons and carny magic on something else again.
If this simple explanation of speculation does not have a sufficient pedigree, perhaps this more refined and weighty pronouncement from the Bank of England may serve to persuade.
“Under one equilibrium, patience wins the day. When long-term investors start in the ascendancy, prices tend to correct towards fundamentals. The performance of untested investors pursuing momentum strategies falters, while those pursuing longterm strategies flourish. The fraction of long-term investors rises. The self-correcting tendencies of market prices are thus reinforced, further supporting long-term investors. The patience gene thrives, the impatience gene dies. Natural selection results in a self-improving cycle, as with dieting, happiness and exercise.
But there is a second equilibrium where this cycle operates in reverse gear. With a large fraction of momentum traders, prices deviate persistently from fundamentals. Among untested investors, momentum strategies now flourish while long-term fundamentalists fail. The speculative balance of investors rises, increasing the degree of misalignment in prices. The patience gene falls into terminal decline. Natural selection results in a self-destructive cycle, as with drug, alcohol and food addiction.”
Andrew G. Haldane, Patience and Finance
And it is the government and the regulators, the Federal Reserve and the Bank of England, the FSA, SEC and CFTC for example, whose sworn duty it is to protect the financial markets from the ravages of rampant speculation and fraud.
And such a destructive condition cannot occur over a period of time unless they do not honor their oaths, for whatever reasons and rationales they may wish to provide.
The reliability of self-regulation is a fairy tale for dreamers and fools. Self-regulation requires an extraordinary moral nature, to hold itself virtuous against the temptation of concentrated power without impartial oversight. Quis custodiet ipsos custodes? It has NEVER worked, and is the guise assumed by wolves as they mingle with sheep. Trust us.
When speculation is allowed to flourish unchecked, whether through laxity or complicity or both, there is the inevitable and corrosive mispricing of risk that leads to disparity of fortune between the perpetrators and their marks, and the inevitable economic collapse as rude reality intrudes once again.
Didn’t quite catch their trick that last two times? Watch as they do it again.
And for whatever it may contribute, speculation in land and other means of production is but a child’s toy, as compared to the powerful engine of destruction, the destroyer of wealth, that is engaged by the systematic abuse and debasement of a nation’s currency, much less the premier currency of the world.
While greed and gullibility act in partnership, the allure of easy money never gets old, and recurs again and again throughout history.
“The commercial world is very frequently put into confusion by the bankruptcy of merchants, that assumed the splendor of wealth only to obtain the privilege of trading with the stock of other men, and of contracting debts which nothing but lucky casualties could enable them to pay; till after having supported their appearance a while by tumultuary magnificence of boundless traffic, they sink at once, and drag down into poverty those whom their equipages had induced to trust them.”
Samuel Johnson, The Rambler, January 7, 1752
“No free government, or the blessings of liberty, can be preserved to any people, but by a firm adherence to justice, moderation, temperance, frugality and virtue, and by frequent recurrence to fundamental principles.” – George Mason, The Virginia Declaration of Rights
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