Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.
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John Quiggin 
Financial multitool
I’m in Rio for awhile,where Lu has family business to sort. To keep myself useful in her flat, I bought a cheap multitool from Amazon Brazil. I would rather have spent the money in any of the dozens of small hardware stores within walking distance, but the search costs sent me online. Here it is: https://www.amazon.com.br/Stanley-92-841-Alicate-Multiferramentas-Amarelo/dp/
I draw your attention to the price: “R$76,90 […] à vista no Pix e boleto (9% off) ou R$ 85,44 no cartão de crédito”. Pix is the very popular instant payment system launched by the central bank of Brazil in late 2020. A “boleto” is an older bank transfer system. The difference is remarkable, though I make it 10%. In Europe the credit card cartel manages to stop retailers from offering discounts for cash, but in Brazil they are competing with a staggeringly cheaper alternative launched by the banking regulator, so the cat of their monopoly profit is out of the bag.
It is theoretically possible that Amazon are discriminating in favour of lower-income customers, or currying favour with a left-wing government, but noblesse oblige is not their usual style. The prior is that 10% simply reflects the difference in total transaction cost to Amazon. For payment by a credit or debit card, this includes the fees of the bank issuing it, those of the Visa/Mastercard duopoly, and the forgone interest from the slight delay in payment, significant to a corporation that sells $1.4 bn of stuff on an average day. It doesn’t include any standing charges that banks may levy on cardholders, or the usurious interest charges on credit card debt.
The Central Bank of Brazil publishes an accessible report in English on its thriving infant: https://www.bcb.gov.br/content/estabilidadefinanceira/pix/relatorio_de_gestao_pix/pix_management_report_2023.pdf I liked the section heading: “4.2.2 The (r)evolution continues”.
This fat document says practically nothing on how much Pix costs to run. Google threw up this citation: “According to the Central Bank, Pix cost is expected to be R$ 0.01 for each 10 transfers.” That makes a fifth of one US cent per transaction. It is unclear if this is the system cost, or – more probably – merely the share of the central bank, which hosts the database of customer identities and aliases, as well as the secure messaging system. Retail banks are allowed to charge fees to merchants, but not individuals. There is no imposed scale, but the major banks are required to participate and their customers expect low fees. The large Banco de Brasil, for instance, charges legal persons 0.99% for payments with a floor of R$1 and a ceiling of R$10.
Lu quickly learnt how to operate in the street with Pix. In a store, the cashier generates a one-time QR code for the sale on a POS terminal and shows it to her. Lu opens her bank’s app on her phone, selects the PIX option, scans the QR, and confirms. Bingo, the transfer is made and confirmed on both terminals. In taxis, the driver’s alias is either a tax ID number, an email address, or a phone number, previously registered with the bank. Lu has to enter this manually on her phone. The taxi driver could save time by creating and registering a static QR code and display it for scanning on their phone, but we have not seen this in the wild. I dare say the Apple and Google payment apps are smoother, but neither Lu nor the taxi driver are sending undeserved tribute to conceited Silicon Valley billionaires, and the taxi driver knows the money is in his bank account before we get out of the car.
PS: The man responsible for creating Pix is said to be the central bank official Carlos Eduardo Brandt. He is more likely to be remembered in 2050 than Sam Bankman-Fried. The future of the payments system does not lie in a flight from government into an untrusting high-tech anarchy but in more government, replacing unaccountable financial monopolies by public services run at low cost, kept honest and secure by a culture of professionalism reinforced by democratic checks and balances.
The current housing crisis in eastern Australia/Tasmania has many causes. One structural cause is the underemployment of land. It not the supply of land that is the issue. It is the hoarding of land that makes it very difficult to alleviate the housing shortage in the short to medium term.
Hobby farmers take up as much as 30 acres of land per farm. These hobby farms have only one dwelling. But land that size in or near cities could be used to build at least sixty dwellings. The hoarding of land serves no useful economic purpose. Most hobby farms carry fewer than ten head of stock. They aim at self sufficiency but rarely achieve this goal. Instead they are a burden on the economic infrastructure without returning any significant increase in GDP.
Then there are the landowners who leave landed property idle. These are not strictly economic resources as they are unavailable for use. These properties may have dwellings on them or they may have other buildings on them that are locked up. Any addition to GDP from this land is forestalled by the hoarding of these land assets.
Finally there is the land held in reserve by government agencies. This land may have a use some time in the future but is currently unemployed. Sometimes it turns out that the land is never needed for its planned future use.
The underemployment of land extends to commercial farms that under stock paddocks for various tax advantages. These landowners are not adding to the GDP by as much as their land holdings would indicate. Tax concessions, tax shelters and tax deductions allow these “Pitt Street” land owners to underuse land assets.
As long as land assets are underemployed, tax revenue obtained from total landed income ( like RENT) will be much lower than possible. This lost revenue will restrict the funding of social housing. The absence of physical supply available for housing and the reduced tax revenue will continue to making the housing crisis centre of stage for the long term living standards of many in this country.
“The current housing crisis in eastern Australia/Tasmania has many causes.” – Gregory J McKenzie.
Agreed. We could list, in no particular order, some of the causes:
The tax and finance causes often distort market incentives. I am not much of a fan of markets but at least if we have to have markets, let us have undistorted markets; ones free of perverse incentives.
As a little land-hoarder myself (6,000 sq. m. or almost 1.5 acres with 1 house on it) I must be part of the problem. The Georgist take, and not just Georgist, would be that I am not paying enough land tax. That’s as may be and maybe I could pay the tax if it were levied. (We won’t get around all the wealth effects that allow some people to hoard stuff unless we change the wealth accumulation process as well.)
However, I am being taxed in another way. In my green naivety, I protected native trees already on my block. I added to them by planting more natives, in the scores, if I count trees and shrubs while not counting plentiful small plants and ground covers. I did cut down a few trees to protect my house from falling trees and make a still inadequate firebreak around the house. But I planted other slips and saplings to counterbalance this.
Now I find the state government and local council have extended the environmental protection area over my block. Previously it covered 1/3rd. Now it covers 2/3rds of the block and comes right up to my house. I have no immediate right to chop down any of the trees or bushes involved, including ones I planted years ago. Some are towering trees now and a couple could damage my house badly if they fell. But no current right exists to cut them down. I face a minimum fine of $10,000 per tree if I cut trees down. I face greater costs of course if one falls on my house. This is all on my freehold land.
There does exist a right, apparently, to develop and submit a bushfire plan and seek permission for a firebreak around the house. If granted, I could cut down trees for a perimeter to a distance of 1.5 times the height of the trees. I would not take quite such draconian action as 1.1 times the height would do me. I have no idea yet of the costs and nuisance this application would involve me in. My guess is quite a bit.
This issue amounts to a kind of tax or impost on my property and probably a loss of value in the eyes of buyers who do all due diligence (if I were selling). My point? Well, there are taxes and there are taxes. Land owners can face limitations and losses of various state-imposed kinds which are not measured by all the obvious taxes. I am not saying such environmental legislation should not exist but if, for example, a land tax were put on people would it be just to have a law to waive some or all of that tax on such freehold yet environmentally protected areas (wildlife islands and corridors) which currently are provided by owners free, gratis and for nothing to the state and the public? Note, none these areas existed or existed on my property when I purchased 25 years ago. They have been added since without notice or consultation.
Gregory
People don’t “hoard” land. They hold it as an asset that can be best sold off into development when it attains its highest valued use. Provided markets are competitive enough this will realize a social optimum. Land is an exhaustible resource that needs to be optimally allocated over time – not used up in one go. The land is retained as a reserve until it is most socially valuable when it is converted into a higher-valued use. If you want to advocate policies for hastening up the development of vacant land you need to identify the market failures that create the need for such policies. We live in a market economy and, generally, not a socialist state.
Telling people they cannot have hobby farms or that they wrongly hold properties vacant or telling farmers that they are stocking at insufficient density ignores basic economics as well as being intrusive. People purchase hobby farms because they pay the market price for such land. Indeed I think one such property is held by a regular contributor to this blog. Why are such prices the wrong ones from ac social viewpoint? Keeping properties vacant when you could be earning rents likewise reflects decisions based on the owner self-interest – flexibility advantages, expected maintenance costs etc. Rules restricting a landlords rental options (“Tenants rights”) are likely to increase such non-rentals. Otherwise landlords will naturally pursue the income from renting rather than getting nothing. And who knows better than farmers themselves what appropriate stocking densities are on their land. A state political bureaucracy? Nuh!
The reason for high land prices is the surge of population into major cities – largely driven by immigration. In 2022/23 634,000 people were added to the Australian population of which 92% went into the cities of Melbourne and Sydney alone. Supply constraints on tradies have arisen partly because state governments employ so many on public infrastructure projects. Why build homes when you can get much higher wages working for profligate governments building roads, railway crossings and new football stadiums?
The genius of the current government is to grow our population at 2.4% annually when we are in the midst of a housing-rental crisis. It will be a train-wreck.
Harry Clarke
A public housing proponent said that Australia currently has more houses per head than it ever has . She also said that in the heyday of home ownership here (the 50’s to 70’s i guess ) 1/3 or renters lived in a government built house and 1/4 of homes purchased were government built .
My house in Sunshine Melbourne has been in private hands now for generations but it was built by the Housing Commission .The main ingredients were Mountain Ash timber from the forests west of Melbourne ,roofing tiles and ceramic pipes made in Ballarat ,and Australian made fibre cement sheeting (containing asbestos) .It was a wreck when I bought it .Its restored and renovated now and it could last another 100 years or more .It probably wont though ,on current trends it might be bulldozed to make way for someones crappy grand design after I am gone . Its a different world now .
There is much to unpack in the land hoarding claim. Tax policies and other imposts can change market incentives. I choose the term “change” over “distort” because “distort” assumes there is a least one possible non-normative market construct. This can never be the case. The purely free market is a hypothetical construct only. I am not much of a fan of markets but if we have to have markets, let us have markets reasonably free from perverse incentives. One can raise the issue of perverse incentives without needing to posit that a true free market exists or can exist. I won’t pursue this issue here.
As a little land-hoarder myself (6,000 sq. m. or almost 1.5 acres with 1 house on it but not a hobby farm) I must be part of the problem. The Georgist take, and not just the Georgist, would be that I am not paying enough rates/land tax. That is as may be and maybe I could pay extra tax if it were levied. That would not remove all the wealth effects that allow some people to hoard stuff. We would need to change other wealth accumulation parameters as well.
However, I am being taxed in another way. In my green naivety, I protected native trees already on my block. I added to them by planting more natives, in the scores, if I count both trees and shrubs, while not counting plentiful small plants and ground covers. I did earlier have a few trees cut down to protect my house from falling trees (when this was still legal) and to create (a still inadequate) firebreak around the house. I planted other slips and saplings to counterbalance this. (I have a Kauri grown from a seed of a large Kauri in Anne Street. I have Bunyas grown from the seed of Bunyas in Victoria Park.)
Now I find that the state government and local council have extended an environmental protection area over my freehold block. (Matters of State Environmental Significance or MSES). In its first iteration this covered 1/3rd of our block. Now it covers 2/3rds of the block and comes right up to the house. (Through the house actually.) I have no immediate right to chop down any of the trees or bushes covered, including any that I planted years ago or very recently. Some of the former are towering trees now and some (not ones I planted) could damage my house badly if they fell, having grown mightily in the last several wet years. But no current right exists for me to cut any such trees down. I face a minimum fine of $10,000 per tree if I cut trees down in the MSES area. I face much greater costs of course if a tree falls on my house. With the recalcitrance of insurance companies these days, one wonders if they would ever pay out.
To reemphasize, this is all on my freehold land and involves many original trees I protected and also many trees I planted. I could have had all or most existing trees on the block bulldozed / chopped down when I built over 25 years. Instead, I chose to protect and augment native vegetation everywhere I could. The same has happened on adjoining blocks, though some owners have simply left standing and self-sown trees but not planted new ones. This has created a wildlife island, not a wildlife corridor, in our case. Then the legislators came along (in the pockets of the developers no doubt) and declared our “island” to be an MSES area, I think to protect koalas primarily but birds and possums also.
In the days when we still had koalas and kangaroos visiting our block, the council decided to permit a further suburb development up to the boundary of our back neighbour’s block. That bush had been a true wild-life corridor, very wide and with an intermittent little creek running through it. The developers clear-felled absolutely everything. It had been dry sclerophyll re-growth of decades standing, scrub but with good big trees. I am sure the original bush was cut down to run cattle some time between Tom Petrie’s day and mine. Following the clear-felling, the birds of the area were enormously disturbed and the various species fought for months. Many nest and habitat trees were gone of course. The koalas and kangaroos visited less and less often after this and then those visits dried up.
So, the state and local governments give developers blank cheques (or they can pay for environmental offsets, so-called) and then the developers can clear-fell. On the other hand, residents who buy a bit of land and protect habitat at their own cost are then rewarded (sarcasm) by having draconian MSES protections slapped on all trees right up to their house. These environment laws are jigged and rigged to permit endless development while householder patsies pay the cost.
There does exist a right, apparently, to produce and submit a bushfire plan and seek permission for a firebreak around the house. If permission was granted, I could cut down trees for a perimeter to a distance of 1.5 times the height of the trees. I would not take quite such draconian action as 1.1 times the height would do me. I have no idea yet of the costs and nuisance this application would involve me in. My guess is a lot. Where is the common sense in this arrangement? Surely the default, now that we are seeing more and more serious bushfires in dry spells, should be that MSES area boundaries end at 30 meters from the house with greater distances available upon successful application in individual cases?
This issue amounts to a kind of tax or impost on my property and probably a loss of value in the eyes of buyers who do all due diligence (if I were selling). My point? Well, there are taxes and there are taxes. Petty land owners (ordinary freehold house owners) can face limitations and losses of various state-imposed kinds which are not measured by all the obvious taxes. I am not saying such environmental legislation should not exist but if, for example, a land tax were put on people would it be reasonable then to have a law to waive some or all of that tax on such freehold yet environmentally protected areas (wildlife islands and corridors) which currently are provided by the owners free, gratis and for nothing to the state and the public? Note, none these MSES areas existed, or at least existed on my property, when I purchased the land over 25 years ago. They have been added since without notice or consultation that I am aware of.
People will note I often give personal anecdotes to illustrate issues. Well, everything is connected. The public reaches into the personal. The personal reaches into the public. People in some circles seem fond of saying “It’s just business.” They usually say this when they are screwing you. It’s not just business. Every bit of business, market and political, affects people. Ultimately, it’s all personal, to someone. Our environmental laws have been made into enabling fig-leaves for politicians, mid-size business and big business (all in cahoots under neoliberalism) to screw and trash the poor, the (dwindling) middle-class and the environment, while making the political and mid-to-larger business and investment classes richer.
Gaza
From the press reporting on the Gaza disaster, you would think that the resposibility for providing humanitarian assistance to the population of Gaza lies with the international community, specifically the UN and its agency UNWRA, supported by the ICRC and a host of other NGOs and individual states like the USA. Israel is culpably obstructing their access to northern Gaza in particular, and famine – not malnutrition but large numbers of people dying of starvation – has already begun. https://www.who.int/news/item/18-03-2024-famine-in-gaza-is-imminent–with-immediate-and-long-term-health-consequences
This is not quite right. Since July 6 1951, Israel has been a party to the Fourth Geneva Convention of 1949. https://ihl-databases.icrc.org/assets/treaties/380-GC-IV-EN.pdf Article 55 reads:
“To the fullest extent of the means available to it, the Occupying Power has the duty of ensuring the food and medical supplies of the population; it should, in particular, bring in the necessary foodstuffs, medical stores and other articles if the resources of the occupied territory are inadequate. […]”
Israel became the Occupying Power in the parts of Gaza controlled by its soldiers on 28 October 2023, as soon as they crossed the border. The Occupying Power is responsible for avoiding famine – not the UN, not NGOs, not a nebulous “international community”. Israel has no confidence in UNWRA. Fine. So it has to find other partners, or do the job itself. Deliberately starving an occupied population is an open-and- shut war crime.
The duty is expressed in very strong terms, but is not absolute like say not killing PoWs. A state or non-state group fighting a war may be constrained in its practical ability to feed and provide basic medical care to its temporary civilian subjects: think of the parties to the civil war in Sudan. This obviously does not apply to Israel in the Gaza conflict, a rich country with ample resources and exemplary organizational competence. It is choosing not to carry out its obligations, choosing mass death over human decency. The dreadful provocation of 7 October cannot excuse this.
Footnote: the UN Security Council has adopted three resolutions on the Gaza war, 2172, 2720, and 2728. Text of the last here, with links to the others: https://www.jns.org/full-text-un-security-council-resolution-2728 They all mention international humanitarian law without specifically citing Article 55 of GC4, though 2720 recalls “the duty, as applicable, of ensuring the food and medical supplies, among others, of the population.” It is not believable that the IDF general staff and the Netanyahu government are unaware of the obligation they are trashing.
I’m glad you brought up Gaza, because I don’t understand what I see on the news. I am one of the people who does not tend to give 100% credence to anything that comes out of the UN, or any affiliate. Sorry, but I don’t.
Having said that, I can’t understand what Israeli officials could be thinking, if it turns out to be true that they are being obstructive on aid. (Another thing that I, who am as you recall waaaaay up in the bleachers, do not recall in reasonable memory, is Israeli officials being dishonest much - though, I think maybe Netanyahu perhaps is, sometimes. It is too bad that he is the leader now.)
On Amanpour’s show, the IRC guy complained that trucks with “dual” use items were being rejected. Well, who is putting those items in the darned truck? Like, could they maybe stop doing that? Or at least get permission?
Why would the Israelis say they are not the ones obstructing, if they are? It can’t be kept a secret for long, one way or the other, I would not think. So, I really don’t understand. And I am very concerned too.
Plus, no, sorry I do not agree that Hamas is somehow excused. No. I view pretty much all of these needless deaths as being their fault, absolutely. I can see being angry - many of us are, for many reasons. Yet I don’t understand what they could possibly have thought could come from this that could justify all this death.
So, as far as being upset, I am right there with you. This is very bad.