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Land is not a commodity: it is a factor of production or source of value. Location, and the capital invested in it. has a use value over time, aka rental value. The fact is that two thirds of 'fiat' money in existence is people-based (the loan is to the owner, not the land) and is backed by a claim over land - a mortgage.

If you think about it, the sale price of land & buildings which backs mortgages is effectively the net present value of future rentals.

If you have a state issuing currency then this currency is redeemable in payment for taxes.  The problem is that very little tax is actually levied on unearned income from land, and most of it is levied on earned income from labour.

But if one were to have land-based currency this would not be through the ability to redeem it against ownership of land but rather against the rental value of land. This is actually quite straightforward to do, by having land held by a custodian (which could be the existing owner) and enabling the issue of units redeemable in payment for (say) £1.00's worth of rental value.

If the Unit is issued at 80p the result is a return of 25% upon redemption: but what determines the rate of return is the time of redemption, and this may depend on many things.

The broadening of redemption may be achieved through paying dividends of units within communities; enabling occupiers to pay rentals in 'sweat equity', and so on.

Also, note that land-based currency would be just one - geographically fungible  - currency. Others could include currencies backed by energy, and by Labour.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Oct 20th, 2011 at 10:04:02 PM EST
[ Parent ]
Sorry, Chris, I'm just an old peasant.  When I see "land-based", I think land.  What you're describing there is backing the currency with an income stream, which seems more modernly orthodox and flexible.
by rifek on Thu Oct 20th, 2011 at 11:59:11 PM EST
[ Parent ]
But the main income stream Chris is talking about is a land rental value stream.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Oct 21st, 2011 at 02:49:10 AM EST
[ Parent ]
True dat

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Fri Oct 21st, 2011 at 08:27:10 PM EST
[ Parent ]
And this is apparently where I'm getting confused.  The US$ is already significantly backed by land-based revenue streams, which is what the ability to buy into a REIT or other real estate holding entity is.  What is this proposal adding?  REITs for government land?
by rifek on Sat Oct 22nd, 2011 at 12:05:06 PM EST
[ Parent ]
It seems to me that what you are proposing is simply a needlessly convoluted way to shift taxation from labour to rental value, by requiring the sovereign - or some proxy for same - to take all land into custody and rent it out, thus substituting its new rental income for the current tax income.

The incidence of taxation is an expression of political power. If you have the political power to move to a monetary system that requires the state to collect and/or tax away a greater proportion of the rental value land than it does today, then you also have the political power to just tax landowners (unless you wish to assume that landowners are stupid - for which there may be a case to be made).

And if you do have the power to tax landowners, then taxing them will be superior to your proposal, because your scheme will not break down gracefully if power swings back to the landholders: A reprivatisation of the land will allow landholders to hold the monetary system hostage until you go off the land standard. That encourages a positive feedback loop going in the wrong direction, to borrow one of ATinNM's stock phrases.

You're basically proposing a fiat system in a cheap tuxedo and with an open back door for takeover by landholders as well as banksters.

Do. Not. Want.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Oct 24th, 2011 at 05:42:58 AM EST
[ Parent ]
Who said anything about the custodian being the sovereign?  A plague on sovereigns.

That may be the case for Hong Kong, but their system is defective in many ways: it just happens to monetise (indirectly via the government as intermediary) far more land value than virtually anyone else.

Which I think is a Good Thing tax-wise.

What I am proposing is essentially a loan direct to the land, not to the owner.

The difference is that in this loan, no money is paid for the use of money, but rather, money is being paid for the use of the capital invested in a particular location, both publicly and privately.

I can demonstrate conclusively that - as should be intuitively obvious - a funding cost that does not include compound interest is lower than one which does.

Also, I think that a currency redeemable in payment for such a rental payment would be generally fungible in a location.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 1st, 2011 at 09:33:46 AM EST
[ Parent ]
Who said anything about the custodian being the sovereign?

Managing the monetary system is a sovereign function, because the sovereign is the only economic actor within its jurisdiction that is solvent by fiat rather than balance sheet.

Making a monetary system without a sovereign that's actually sovereign is - eh - not wise, as the EU has been quite instructively demonstrating for the next best thing to three years now.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 3rd, 2011 at 06:20:53 AM EST
[ Parent ]

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