Reverberations Between Immoderate Land-Price Cycles
and Banking Cycles
[GroundSwell, January 2012]
(This paper was delivered at the Annual Meetings,
Association for Evolutionary Economics (AFEE), Chicago, January 8,
A. Major Outline
- The Pecora Hearings, 1933. Another 10 days that shook the
- Hearings sponsored by a dying Republican Congress. Role of
Hoover, seeking scapegoat. Role of Senator Norbeck of S.D., an
echo of earlier progressive Republicans of the Bull Moose Party.
- Pecora was a surprise, brilliant, effective, and lethal. He
forced leading bankers under oath to admit not just to forecasting
errors, but self-dealing and breach of trust. His 10 days set the
stage for FDRs 100 days.
- A major flaw, though, was to narrow his subject to banking and
securities - the paper economy. This has narrowed policy
reformers and macro analysts ever since.
- The academic clerisy has purged much of the real economy from
macro studies by compartmentalizing its work. It has sanitized
macro from at least the following:
a. Real estate and its endogenous cycle of about 18 years,
established and documented by Hoyt and others
b. Austrian analysis of the structure of production
c. Institutional economics
- Quality of Credit is the obvious link between banking and real
estate, and at the core of current banking troubles. Yet the
leading Chicago economist Friedman early on ruled out Quality of
Credit as a public concern, that would be improper intervention
in free markets. Only Quantitative controls are permissable.
- 1945-50 or so, postwar gloom capped land prices. Affordability
was high, e.g. in housing and farming. Loans were mostly for
production and use: price/earnings ratios were low, payoffs fast.
All kinds of taxes remained high, stifling any Reverberations
á la 1920s.
- What are these Reverberations? Effects echoing back
and forth between land prices and expansion of bank deposits,
forming and exaggerating an up-down cycle.
a. A peace dividend, plus magnetic institutions,
attract immigration of labor and capital, as in booming California
b. Banks begin shifting from strictly commercial loans to taking
real estate as collateral, and lending for longer terms
c. This surge of new demand raises land prices
d. Investment demand for land, always lurking, swells
into a major element in the demand for land
e. With higher prices, buyers need bigger loans and longer terms
to buy land. Banks create new deposits to lend on the swollen
collateral values. THIS IS REVERBERATION. There is no
corresponding rise of production, just a rise of land prices.
These echoes bounce back and forth.
f. With longer term loans, loan turnover falls, cutting bank
sources for making new loans.
g. Meantime, sprawl floods the land market in a cartel-like price
umbrella effect. Land is fixed and cannot move to the market, but
the market moves to newly accessed lands. Territorial expansion
accompanies bank expansion.
h. Positive Reverberations turn negative; cumulative crash
- Why land prices have to fall
a. The U.S.A. is vast. It only seems crowded because of
institutional bias to substitute land and capital for labor
b. Land prices based on irrational exuberance cannot continue
because land lasts forever and prices cannot, and never have,
- When did the 18-year land cycle resume after W.W. II?
a. The normal peace dividend deferred by Korean War, 1950-53,
plus the worldwide Cold War, larger and longer
b. Minor peace dividend after 1953 opens door to mild prosperity
and the Soaring Sixties, ending in rash of urban riots
nationwide, flight from older cities, Viet War, draft riots,
Watergate, etc. These dramatic events overshadow and accompany
fall of urban land prices about 18 years after peace dividend of
c. 1971-90, land prices head back up, accelerating after victory
in Cold War, Reagan tax cuts, Jarvis victory over local
property taxes, etc.
d. 1990, major post cold-war crash of real estate. Lessons were
quickly forgotten, however
e. 18 years later, Great Crash of 2008.
f. 2026? Probably, because there are no signs of remorse, of
- Lacking and needed today:
a. A new Pecora
b. Moral indignation, as once supplied by FDR
c. A new sense of the role of land pricing in macro, along with
general decompartmentalization and integration of economic
B. Full Text, Reverberations between immoderate land-price
cycles and banking cycles
- We begin with the Pecora Hearings of March 1933. Ferdinand
Pecoras were another ten days that shook the world,
but Pecoras ten days shook the very temple of capitalism,
Wall Street itself.
- These were the dying days of Hoovers Administration and
the Republican Congress. Herbert Hoover was desperate to find a
scapegoat for the disasters he had overseen, yet holding back
safely short of challenging the system, or the cartelization of
American industry he had sponsored. He focused on an alleged plot
by short sellers who were selling America short. Few
bought this political play on words, so he pushed the lame duck
Senates Banking and Currency Committee to investigate Wall
Street and gin up some more scapegoats to save Hoovers face
and reputation. Chair of the Committee, through Senate seniority
rules, was Peter Norbeck of S.D., a residue of old prairie
Populism via T.R.s Bull Moose Party, and an unreconstructed
Progressive. Norbeck knew little of Banking and Currency -
Wall Street Republicans stigmatized old prairie populists as Sons
of the Wild Jackass. Norbeck sought a savvy prosecutor for
Few wanted the job two weeks working for a lame duck
Congress , making powerful enemies. Far down on his list Norbeck
came to Ferdinand Pecora, a mere assistant D.A. for New York
County. Pecora likewise knew little of banking and currency, but
was a quick study with remarkable energy, high ambition, lethal
aim, and little awe of pedigreed bankers with Ivy-League degrees,
and intimidating miens. Pecora pushed his inquiries well beyond
what Hoover or even Norbeck had dreamed, and forced so many famous
bankers to disrobe under oath that the hearings made banner
headlines and are still known by his name.
- Pecora had only ten days to put Wall Street under oath, but he
seized the public spotlight with his sense of drama, his aim for
big players and big issues, and his knockout punch. Pecoras
ten days preceded FDRs 100 days, and built a springboard for
New Dealers to vault into reforms like the SEC, the FDIC, the RFC,
Glass-Steagall, production credit for farmers, and federal
intervention in credit markets through FHA, S&L subsidies,
FNMA, and later the VA.
Before Pecora bankers were already under fire for bad judgment;
after Pecora they were banksters, disgraced for bad
faith, breach of trust and self-dealing. Several were to face
criminal charges. Pecora dislodged bankers from their economic,
political and social pedestal atop high society and government
bureaucrats, and turned the world of finance upside down. FDR
could not have asked for a better springboard.
Not since the Pujo Committee revelations of 1912-13, and Louis
Brandeis classic book thereon (Other Peoples Money),
both at the acme of the Progressive Era, had anyone penetrated so
deeply through Wall Streets opacity to publicize its
villainies. And not, tragically, has anyone done so since.
- There was, however, a basic flaw and lacuna in Pecoras
brilliant and dominating performance. He saw the Great Crash as
mainly a matter of money and securities, the paper economy, if you
will. This view has narrowed and confined reformers ever since,
both in politics and academe. Macroeconomics has become synonymous
with Fiscal and Monetary Policy (FMP). Y = C+I+G is the template.
Everything is expressed in its terms it dominates the
language, hence the thought. The Left wants more C and
G; The Right wants more I and its own kind
of G. Within G, The Left generally wants
more welfare, and The Right more military. Both lean
more towards hardware than software. Within those confines the
same tired sermons echo back and forth endlessly. This is its own
kind of reverberation, but not the kind my title
means. This is the long-term effect of Pecoras lacuna.
One major change came along with Reagan-Cheney and their Laffer
staffer after 1981. The Right, long a bulwark against
deficit finance, converted to it. Instead of taxing the rich, the
idea now is to borrow from them, and pay them interest, leading to
an explosion of Gini Ratios in real estate, stocks, bonds, income
(personal and corporate), estates, and nearly anything that gets
measured. Concentration has grown so extreme there is no longer
much need for anything as nuanced and comprehensive as a Lorenz
Curve or a Gini Ratio: it is now the 1% vs. the 99%.
- Meantime, other scholars published a distinguished body of
research into topics equally or more important, matters of the
real economy. The academic clerisy has purged most of these from
macro by compartmentalization. One may study them at length, but
only within accepted confines. If one spills over the boundary
lines of ones compartment one is overambitious
or swellheaded or spreading himself too thin.
When submitting work for publication one is required to
self-classify it by pigeonhole, taken from a standard list we have
all seen. There is an implicit hierarchy of little boxes, with
macro on the commanding heights.
Thus the clerisy sanitizes macro from contamination from at least
a. Real estate and its endogenous cycle of about 18 years, firmly
documented from primary sources and established by Homer Hoyt in
his classic, 100 years of Land Values in Chicago, 1833-1933. Other
writers reinforced and replicated the findings: Ernest Fisher and
John J. Holland in Michigan, Phillip Cornick in New York, H.D.
Simpson in Chicago, Lewis Maverick on subdivision cycles, Arthur
H. Cole on cycles in sales of public land, Harry Scherman on
foreclosures, and others.
Hoyt carried this back no further than 100 years because there
was no Chicago before 1833, but 18 years before Chicagos and
Andrew Jacksons great crash of 1836-37 there was Monroes
crash of 1819. 21 years before then was Hamiltons crash of
1798, when Andrew Jackson lost his lands and William Morris and
William Duer went to debtors prison. Before that one can
find crash before crash before crash in the annals: the
Mississippi Bubble crash of 1720; the Dutch crash of 1630 or so,
synchronized with the reverse migration from New England after
1630; in the 15th Century it was the Fugger bank in Augsburg that
went down with the fortunes of imperialistic Spain; the Florentine
and Medici-banker bust of 1494 leading to Savonarolas
Bonfire of the Vanities; boom and bust around Orleans following
its liberation by Joan of Arc in 1429; and so on back and back.
Apart from the endogenous 18-year cycle, major peace treaties can
be shown to generate irrational exuberance for future land rents,
and to release funds to the private sector where they are used
again to bid up land prices. The interplay of these two cycles
explains much of cyclical economic history.
b. Austrian economics, analyzing causes and effects of the
time-structure of capital and the pace of capital turnover. Oddly,
many economists who should know better identify Hayek with the
Chicago School because he once taught there, but he was never
welcomed in the Department of Economics. Frank Knights many
learned articles attacking Hayeks capital theory were an
obsession, carrying on J.B. Clarks vendetta against Eugen
von Böhm-Bawerk. Knight, like Clark, could not abide the
Austrians concept of a period of production
because it implies a sharp distinction of capital goods, which
have one, and land, which does not. Keynes, too, put down Hayek
and von Mises and drove them from macro dominance in England.
Hayek and fellow Austrians finally found happiness and support
with libertarian foundations and other wealthy patrons, by
attacking regulations and contra-cyclical fiscal policies of all
kinds, to the applause of Chambers of Commerce, but they remain
outliers In the profession. Roger Garrison remains one of the few
self-called Austrians who publishes on cycles, and
even he attributes the bias to over-long periods of production
exclusively to central bank policy, ignoring all the other causes
inherent in tax policies and land policies.
c. Institutional economics, the heritage of Veblen, Commons,
Ayres, Montgomery, Means, Thurman Arnold, Corcoran and Cohen, the
TNEC investigations, and Senator Harry Trumans hearings on
arms profiteering in the early 1940?s. Dominant figures in the FMP
camps, both Keynesian and Chicagoan, diss and dismiss such work by
compartmentalizing it as mere structural reform,
unworthy of attention in the greater world of Y = C+I+G. Studies
of Industrial Organization and cartelization and market power have
dwindled to a shadow, although Joe Bain, Frederick Scherer and
others produced excellent texts on the subject.
- The obvious link between FMP and real estate is the quality of
credit. Hoyt emphasized how subprime (which he called shoestring)
financing had waxed in the boom phase of every one of the 5 major
land cycles he documented in detail from 1833 to 1933. The
commercial loan school of banking, dominant in the Progressive
Era, helped save us from a crash that was due in or near 1911,
following the 18-year cycle from 1893. In the roaring 1920s such
old fashioned caution was cast aside, and deposit expansion was
again used freely to pump up land and stock prices. These
reverberated with deposit expansion, in the manner to be shown,
leading to The Great Real Estate Crash starting from 1926,
followed by the stock crash of 1929.
And yet, Friedman and his school of monetarism, as
they rose to dominance, ruled this out of consideration, both in
theory and practice. They damned Quality Control as bureaucratic intervention
with private bankers. Only Quantity Control was permissible.
Ignoring Pecoras revelations, Friedman et al. knew that
profit-seeking bankers, proven survivors in free markets, must
possess sounder judgment than nosy governmental officers. Pecoras
findings were not refuted or denied, which would remind people of
them. They were not even compartmentalized and buried in low-level
pigeon holes, but just quietly ignored, thrust down the memory
tubes of history.
- With such notions regaining ascendancy, what kept us out of
serious trouble for so long? After 1945, nearly everyone forecast
a postwar depression. The standard FMP line was (and is) that only
wartime spending had jolted us out of the Great Depression, and
peace would spoil the party. This postwar gloom capped land
prices. Affordability of land ran high, e.g. for housing and
farming. Ambitious young entrepreneurs and home buyers could
borrow to buy cheaply. Loans were mostly for production and use;
price/earnings ratios ran low, payoffs were fast. All kinds of
taxes remained high, stifling any kind of long-term irrational
exuberance, and any Reverberations between land prices
and bank expansion, á la 1920s.
Soon came the Cold War, the Korean War (1950-53), the costly
Interstate Highway Program, urban sprawl with need for new
infrastructure, the boom in airports, the Central Valley Project
and the California Water Plan in California, huge new Big
Dam Foolishness and reservoirs on the Colorado and Missouri
and Tennessee and Saint Lawrence Rivers, all costing huge sums and
presaging continued high taxes, meaning continued low land prices.
Politically and socially, the disgraces of Senator McCarthy, Spiro
Agnew, and Richard Nixon, along with social programs supported by
the Warren Court, presaged more social spending and continued high
taxes of all kinds. The result was to keep stifling irrational
exuberance and resulting high land prices.
As to credit, S&Ls got favored access to housing lending,
keeping banks of deposit in their proper place. These banks were
fed a steady diet of Treasuries, considered non-defaultable,
keeping them out of real estate which had proven so unstable
- What are these Reverberations that led to the
crashes of 1929 and 2008, with lesser ones in between, and earlier
to the 18-year cycles of the 19th and earlier centuries? The basic
idea is simple:
a. Something sparks recovery and growth. Something is
often a peace dividend following a major peace treaty, as for
example the Mississippi Bubble followed the Peace of Utrecht,
1713; the first railroad boom followed the Treaty of
Guadalupe-Hidalgo, 1848; the second such boom followed Lees
surrender in 1865; or the boom of the 1920s followed the Peace of
Versailles. It also helps when a polity has magnetic
institutions that attract people and capital, and/or a vast
reservoir of empty lands to fill.
b. Banks of deposit begin to shift from commercial loans,
short-term and self-liquidating, to lending on real estate
collateral for longer terms.
c. This surge of new demand raises land prices.
d. Rising land prices evoke prospects of further rises, and a new
kind of demand for land no longer just for early use, but
for investment, i.e. for a store of value,
for resale, for flipping, and for speculation of various kinds.
This new kind of demand is always a factor lurking in land prices,
more than in other prices, because land lasts forever, and its
quantity is fixed. But in a rising market it evolves into a bigger
element in demand, often surpassing and outweighing the discounted
cash or service flow from the current use.
e. With higher prices, buyers need bigger loans and longer terms
to pay for the same land. Banks create new demand deposits, taking
the higher-priced land as collateral, and so on back and forth:
THIS IS REVERBERATING, with echoes bouncing back and forth many
times. Some also call it an upward spiral; or positive feedback.
By any name it is disequilibrating and unstable and a major factor
in boom/bust cycles.
f. Its not only new buyers who use land as collateral. Old
owners borrow on the swollen collateral to spend more on
g. There is no rise of production, just a rise of prices of the
h. With longer-term loans, loan turnover falls, making new loans
harder to get. Credit ratings fall, regardless of recorded
interest rates, so the pool of eligible borrowers falls even as
the supply of loanable funds falls as well.
i. The upward spiral turns downward. Reverberations become
negative. A cumulative crash follows.
- Why do land prices have to fall?
Land is fixed, leading to a belief that effective supply is fixed
as demand rises. This is illusory, because access to land for
higher (more intensive) uses expands into wide open spaces. There
are dozens of stages of more intensive use: from hunting and
fishing to trapping, from lumbering to tree farming, from that to
sheeping to beef cattle, from grazing to feeding, to dry-farming,
to plowing, to small grains to maize, to horticulture, to
irrigation, from flood irrigation and irrigated pasturing to salad
crops and vegetables, to vines and groves and orchards, from
deciduous fruits and nuts to citrus and olives and avocadoes, to
country estates, to subdivisions and housing, to low-rise
apartments, to commerce and industry, to high-rise condos and
offices and hotels, with many stages of intensity along the way.
J.S. Mills Principles has a chapter on Influence of
the Progress of Industry and Population on Rents, Profits and
Wages. In Article 4 of this Mill stresses that progress may
be land-saving, not just labor-saving and land-using. Mill said
that growth of population lowers wages, but progress in the arts
may offset this, and may even raise wages. When labor is dear,
capital goes into saving labor; when land is dear, capital goes
into saving land, and developing new lands.
Credit is due rather to the arts of architecture, construction,
planning, and engineering that crafted the elevators, ventilators,
pumps, central heating, load-bearing supports, plumbing and
sanitation, etc. Men taught themselves these arts, by the way, in
deep mines before they used them to build skyscrapers we
learned to build up by building down into our home, The Earth.
(May economic theorists profit by the example.) Thus the system is
more self-equilibrating than many later writers and investors have
assumed, but this occurs over such a long cycle that rational
perceptions often give way to irrational exuberance.
Fully built-out towns like, say, the Milwaukee near-in suburbs of
Shorewood and Whitefish Bay, house 10,000 people per square mile
in spacious comfort in single-family homes on tree-lined streets
with curbs, gutters, parkways, and sidewalks, with parks and golf
courses and even a band of mansions along the lake shore. At that
density the U.S. population of 300 million souls needs 30,000
square miles, an area contained in a circle with radius of 100
miles do the math. 100 miles is the distance from downtown
to the outlying suburbs of any major city today, and 30,000 square
miles is just about the area of South Carolina, and 1% of the area
of the U.S.A. The posh upper east side of Manhattan has about
80,000 people per square mile, or 8 times the density of Shorewood
or Whitefish Bay. The crowding may repel some people, but others
prefer it as shown by their paying several million dollars for a
strata title to a condo with 5,000 square feet of
floor in a slab of space 50 stories up above 49 lower strata
titles with which it shares the ground below.
a. The U.S.A. is vast. It only seems crowded because of
institutional biases that make us substitute land for labor and
capital, and that gum up the land market. John Stuart Mill
perceived this 160 years ago in his Principles
b. These biases lead to territorial expansion. The kind most
observed is urban sprawl, spreading cities and their
infrastructure over many times more land than they need. There is
a kind of cartel price-umbrella effect where underuse of the best
lands pushes settlement out to inferior lands, connected by
capital tied up in infrastructure, premature in time and scattered
c. Even if there were well-oiled land markets and rational
expectations lacking irrational exuberance, land pricing based on
expected higher resale values cannot continue long, because land
lasts forever and prices cannot reach, or even approach, infinity.
d. Along with simple urban sprawl there is continental sprawl,
urged on by works like the Interstate Highway System,
interregional transfers of water, oil, gas, electric power, and
the network of airlines and airports.
e. The cartel price-umbrella effect dominates many other
activities and industries, as documented in the literature of
industrial organization which modern quants and abstract
theorists, second-rate mathematicians posing as first-rate
economists, lose and hide almost completely behind their complex
equations with undefined terms and complex a priori theorizing
untested by reality. One proof of that pudding is the sensational
failure and bailout of Long Term Capital Management (LTCM), the
brainchild of Nobel Laureates Robert Merton and Myron Scholes.
- When did the 18-year endogenous cycle resume after 1945?
a. The incipient peace dividend following the surrenders of
Germany and Japan hardly got started when the Cold War intervened,
plus a hot war in Korea, 1950-53. There was no scope for a peace
movement like that of 1918-38 when Mellon could hold down tax
rates and pay down the national debt at the same time, feeding
capital into the private sector by a process of reverse
New capital in the private sector might seem like a key to
prosperity. However, we saw above that in practice it triggers off
the Reverberation process as described in #8 and #9
above, so prosperity carries the seeds of its own crash. The cycle
is quicker than Marx the phrase-maker envisaged, or the slow
cycles of Kondratieff, but well documented by Hoyt et al.
After 1953 there was a bit of slack for a mild boomlet, damped,
however, by gnawing fears of an inevitable nuclear holocaust .
Hard as it is to believe today, many people were sinking big money
digging and lining and provisioning bomb shelters in their back
yards. John von Neumann, pioneer computer genius and game
theorist revered and emulated by mathematical economists and
institutionalized in The Rand Corporation hard by and linked to
economists at UCLA, was advising Presidents Truman and Eisenhower
to wage preventive war with a sneak First Strike
nuclear attack on the USSR. Even Bertrand Russell joined the
movement for preventive war , his former pacifism
evidently overpowered by von Neumanns new mathematical
Following the damped fifties, came a headier boom in the soaring
sixties with JFKs morale-lifting face-off with
Krushchev in the Cuban missile crisis. Ikes Interstate
Highway program, intended to link cities, was used to facilitate
white flight and urban sprawl. Hellers form of business
Keynesianism created a deficit by allowing fast write-offs
on new investing rather than by raising spending. LBJ promised a Great
Society with Civil Rights and a War on Poverty, but it ended
in a funk with Viet Nam, the OPEC embargo, gas lines, rampant
environmentalism, Browns Age of Limits, urban
riots, urban removal In lieu of renewal, Watergate,
and The Phillips Curve. High tax rates tempered the amplitude of
the cycle, but the period was about the same old 18 years.
b. In about 1973 a new upsurge of land prices began. Nixon had
declared We are all Keynesans now, and Republicans,
traditional budget-balancers, faced about gradually to embrace
both devaluation and deficit finance. President Reagan,
campaigning on Laffers Curve and Cheneys
military-industrial complex took deficit finance to new heights.
Cheney, embracing Robert Barros new theories and Sargents
rational expectations, memorably declared that Deficits
dont matter. Even Milton Friedman, the prime
anti-Keynesian and monetarist guru, endorsed Barros new
rationale for deficit spending. It was Democrat Fritz Mondale,
challenging Reagan in 1984, who urged balancing the budget
and lost. As the British band had played at Yorktown, the world
turned upside down, although it has taken years for many to see
This new upsurge, untempered and uncapped, led to the Crash of
1990, a big crash, reminiscent of Hoyts 19th Century Chicago
history. With remarkable facility and amnesia, however, Americans
promptly forgot its obvious lessons and launched eagerly into the
next cycle, deregulating everything in sight by underfunding the
regulatory agencies, and dismantling most of the New Deal reforms.
President Clinton provided the cover of a Democrat in office, but
his policy of triangulation and reverse
crowding-out merely deferred the debt skyrocket that went
wild from 2001-09.
c. The period 1990-2008 saw a perfect 18-year cycle of peak,
crash, recovery, boom and another bust in real estate, right out
of Homer Hoyts playbook. Cause and effect reverberated back
and forth between soaring land prices and expanding bank deposits.
Congress repealed Glass-Steagall in 1998, and Clinton signed on.
Banks loaned loosely and freely on mortgages, and invented many
new ways to securitize them, concealing the underlying collateral
under pyramids of paper with misleading and confusing new names.
Capital flowed southwestwards from rustbelt regions to growth
regions like California, where Prop 13 had removed the former
tempering effect of property taxes on land booming. In Riverside,
California, land prices rose about 8-fold, 1990-2008 - heady
stuff for householders and other landowners who could cash out
without even selling, by using lines of credit, living high
on the old homestead.
Where were leading economic forecasters and advisers during the
runup to 2008? Most of them were chanting This time is
different! The Washington Posts main source on the
housing market was David Lereah, chief economist for the National
Association of Realtors, who also penned a 2006 bestseller Why The
Real Estate Boom Will Not Bust and How You Can Profit From It.
Michael Mandel, Chief Economics Editor of Business Week, published
Rational Exuberance, whose title telegraphed its message, but
which he pounded home with the unsubtle subtitle Silencing the
Enemies of Growth and Why the Future is Better than You Think. The
White House Budget Director, Jim Nussle, declared that the nation
had avoided a recession. Ben Bernanke said we had
entered The Great Moderation. The troubles in
the subprime sector seem unlikely to seriously spill over to the
broader economy or the financial system, he said on June 5,
2007. Christina D. Romer, Obamas first pick to chair his
Council of Economic Advisers, proclaimed that we had conquered
the business cycle. Charles Ferguson, Director of Inside
Job, said, I found (Larry) Summers everywhere I turned
that includes the repeal of Glass-Steagall, one of the many
calamities he engineered.
- What are the prospects for another endogenous 18-year cycle,
peaking and crashing in about 2026? When will they ever
learn?. Not yet, apparently, because now in 2012 politicians
and bankers and land speculators are already seeking to start
again on the same trajectory, the only route to prosperity
they know. Already The Rijksbank has awarded the latest Nobel
in economics to Thomas Sargent, the rational expectations
man. Public policy at every level is bent to sustain and revive
land prices, equated with recovery and prosperity. Banks too
big to fail are bailed out, and no bankers jailed. Summers
friend Tim Geithner remains Treasury Secretary. There are no signs
of remorse, of lessons learned.
What are lacking and needed today are at least the following:
a. A new Ferdinand Pecora
b. A renewed sense of moral indignation á la FDR
c. A new sense of the key role of land pricing in macro cycles,
along with decompartmentalization and integration of land
economics with macroeconomics, so establishmentarians can at last
begin to connect the dots.