Monday, December 23, 2013

Why it pays to be uncompetitive.

Trade advantage replaced by rent extraction

Hudson on form. He says 75% of family budgets go on housing, debt service, taxes and medical care. No longer does the price of grain/bread determine the price of labour (as in Ricardo). Relevant now is a rent theory of international trade instead of a cost of production theory of international trade competitiveness. The 1% make capital gains and interest by owning land and lending money. 'Economies of scale' now means the ability to control the market and extort economic rent. Every country is trying to be high cost (and uncompetitive) because being high cost means that somebody can borrow money against expensive assets and leave somebody else holding the bag, And now when bankruptcy looms the 1% (bondholders) are first in line for payment, ahead of depositors and pension funds.

Posted by icarus @ 07:12 PM (3225 views)
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5 thoughts on “Why it pays to be uncompetitive.

  • Decent article, no mention of the UK as it focuses on the US, however the article linked to at the bottom (third para from end – in red), is more detailed. This second linked article expands on this one to cover the US and Australia and highlights how large private equity firms have been targeting areas in the US to buy up foreclosed property for cash using financial vehicles called ‘rental backed securities’, concentrating their buying power within their targeted areas has the added advantage of artificially driving prices upwards and the ‘market and rental value’ of the properties they now own and rent.

    This type of quite frankly immoral activity would be ideally suited to the UK, especially in large urban areas with London being the prime example.

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  • “This type of quite frankly immoral activity would be ideally suited to the UK, especially in large urban areas with London being the prime example.”

    And especially with the apparently very high tolerance threshold the 99% have for being milked.

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  • Large scale public housing programs would put a stop to this parasitic behavior overnight. Even just announcing one would make these funds back down.

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  • Thats why property ownership, or perceived ownership, needs to be at around 65%. To be fair though, the people without homes would extract exactly the same unearned rent if they had the chance. Its a failure of government ironically introduced by the supposedly supporting -Labour- party.

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  • mark wadsworth says:

    “Every country is trying to be high cost (and uncompetitive) because being high cost means that somebody can borrow money against expensive assets and leave somebody else holding the bag”

    Excellent point well made. I hadn’t thought about it like that.

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