Links: 2010-02-18 – fallacies of composition, housing bubbles, taxes and more

By Edward Harrison On Feb 18, 2010

A few thoughts on the links here

Notice Michael Tomasky’s calls for higher taxes. He says:

If there is one core attribute that makes Democrats Democrats, it is that they believe in government, which means you have to believe in taxes, which in turn means that you especially believe in taxing the incomes of the rich, which is only logical because, as the depression-era criminal Willie Sutton explained when asked why he robbed banks, "that’s where the money is".

And, that’s exactly why I am not a Democrat – and that goes for a lot of other people as well. People want lower taxes, not higher. Hello? Now, maybe I’m misreading him, but it sounds like ‘soak the rich’ to me. What would be more productive is an end to tax loopholes (including mortgage interest deductions, by the way). But, I see this whole ‘tax the rich’ stuff as a losing political strategy for the reason Tomasky himself later gives.

Some other thoughts: the Toronto real estate piece shows you that Toronto (and Vancouver) are two bubble cities that are way overpriced. The day of reckoning is coming. And then you have the Australian boom time piece. Yet again, I am thinking real estate bubble when I read it.

Last thought: the Worthwhile Canadian Initiative piece doesn’t make a lot of sense to me. Can someone explain this one to me, please? Loans create deposits – not the other way around. This is why the Fed has been pushing on a string. So when Nick Rowe says “Changes in the stock of money are always supply-determined, never demand-determined,” I would say “Changes in the stock of credit are always demand-determined more than supply-determined.” And I care a lot more about credit than the money stock when excess reserves are piling up by the hundreds of billions.