Friday, February 06, 2009

The Land Standard:

Libertarians have long advocated the federal government selling all of the unused land it currently owns. See for instance, Jim Lindgren's post where he proposes the federal government sell its land and lists some statistics.

After all, the federal government owns over half of five Western states and over 40% of nine states:

Nevada 84.5%

Alaska 69.1%

Utah 57.4%

Oregon 53.1%

Idaho 50.2%

Arizona 48.1%

California 45.3%

Wyoming 42.3%

New Mexico 41.8%

Colorado 36.6%

Around the time of the beginning of the financial crash, libertarians debated whether sound currency and fractional reserve banking was the cause of the crisis. I don't think it's feasible to go back onto a gold standard. I don't think America has enough gold and it would be too difficult to get enough to go back onto a gold standard. I think Milton Friedman was right that the Gold Standard is one big pain in the butt in the sense that if you want to increase the amount of dollars in circulation, you have to get more gold to hold in your treasury reserves.

But, one thing government has lots of excess is LAND. So I thought perhaps fix the price of currency to the undeveloped land the federal government owns (obviously, per acre would be much less than the value of developed land). One thing about the gold standard, or at least the gold exchange standard established at Bretton Woods, that made the US dollar solid was that foreign banks could exchange US dollars for gold at $35 an ounce. Likewise foreign banks or Americans wishing to buy land from the federal government should be able to exchange their dollars for land. That would be a de jure "land standard."

Now, some may remark, much of the land the federal government owns is worthless and undevelopable. True, but you can't tell me all of it is. And even if only a small percentage of the land the federal government owns IS developable, think of how many millions of the population in the United States cluster in and around relatively small metropolitan areas and their suburbs that surround them. Clearly at least some of what federal government owns, it would only take a fraction, could be developed into the next New York, LA, Chicago, or Philadelphia.

But, because the land the federal government owns is developable to different degrees perhaps it doesn't make sense to "fix" US currency to government land. Perhaps we should simply endorse the libertarian solution of the Federal government selling the unused land it owns.

So why the rigmarole with the "land standard"? Because if the federal government did this in the way I will describe below, it will amount to a "de facto" land standard thus making US currency solider and something in which foreign governments will have more confidence.

I keep Peter Schiff in mind when I write this. I think he's too much of a doom and gloomer. But, he did predict, in 2006, the financial crisis. He thinks the problem was US was borrowing too much, consuming too much with borrowed money. Both government debt and private debt are to blame. Thus, interest rates need to rise (not stay artificially low), we need to go through a terrible recession and eventually saving and production need to rise after a period of intense pain. The Stimulus will make things worse. Eventually we'll see terrible inflation, probably followed by wage and price controls (which will lead to shortages of commodities). Schiff talks of how terrible it is that China owns so much government debt and US currency that if they wanted to they could buy every stock in the S&P 500. But ultimately, that wouldn't work because the day China wants to dump all of its US currency, said currency will be understood worthless and face hyperinflation.

Again, let me note, I think Schiff is too much of a gloomer and doomer and I don't think the problem is that bad. However, my proposed solution, again, would make US currency solider and one in which foreign governments would have more confidence.

The solution is this: Put the undeveloped, unused US land that the Federal government holds up for sale. But don't expect US entities to buy most of this land (though they'd be free to); rather expect foreign governments that hold much US debt and currency to buy this land. If they want a place to dump their US currency, dump it here. But why is that land valuable to foreign governments who hold excess currency reserves? Because it must come with not only the right, but also the expectation that those countries can emigrate their population to develop that land.

Here are the figures from Wiki on the nations that hold excess US currency reserves:

Monetary Authorities with the largest foreign reserves in 2008.

Rank Country/Monetary Authority billion USD (end of month) change in year 2007
1 People's Republic of China $ 1905 (Sept) 1 +32.9%
2 Japan $ 997 (August) +8.7%
- Eurozone $ 430 (November) +16.6%
3 Russia $ 386.5 (29 Jan 2009) 2 [1] +53%
4 Republic of China $ 282 (August) [2] +2.7%
5 India $ 238.3 (2 Jan 2009) 2 +64.4%
6 South Korea $ 231 (December) +9.7%
7 Brazil $ 201 (Jan 2009) 3 +105.9%
8 Singapore $ 175 (July) +19.1%
9 Hong Kong $ 158 (August) +14.6%
10 Germany $ 137 (August) +20.3%

We could set a limit of for instance, 1 person and his or her immediate family (according to current US immigration law) for each 1/2 acre of land purchased. That's just an example, perhaps not the right number. Perhaps the market could better determine the right number.

Now, I'm not sure if the Western European nations would really care about buying up land so their excess population could emigrate. Some developing Eastern European nations might (regardless of what their issues are with population, their people likely wish for the higher standards of opportunity and freedom the US affords). But, particularly with China, and to a lesser extent, India, they have excess population (and US currency & debt), many millions of them would love to come to America because of the freedom and economic opportunity we afford.

Likewise both of those nations are rapidly developing and significant portions of their over a billion population each are well educated middle class folks (the kinds of folks America should wish to attract). And as rapidly developing industrializing nations, China and India are ones with which we need to keep close relations as key allies (as we are with Europe and Japan).

Ideally, those governments (mainly China, but also India and others) would buy up billions if not trillions of dollars of undeveloped land the US government owns and emigrate tens of millions of their citizens to America to develop that land (perhaps middle class Chinese and Indians would be required to buy that land from Chinese and Indians banks who bought it from the US if they wanted to emigrate).

On the matter of immigration as a whole, I think legal immigration has been a net plus because most immigrants come here looking for work and that is always good. I worry about immigrants coming here for free government services and believe in Milton Friedman's first best world where if we abolished the welfare state, open borders would work (though Friedman's ideal was formulated before the age of the "war on terror" and vital national security concerns).

Ideally immigrants from 1) nations that hold excess US debt and currency and 2) have large sectors of their population who wish to emigrate to the US would be "rational" and "industrious" -- the exact kinds of folks John Locke believed made the industrial world go round. They would come here to produce, develop, settle and build up large parts of America and consequently would further American ideals. I don't worry about America changing its racial or ethnic demography (that's inevitable). I do worry about immigrants who want to take advantage of government welfare. And I do want to preserve the modern democratic, industrialized, productive, free capitalistic way of life.

Likewise to address the concerns of folks like Schiff and others who oppose Keynesian stimulus ideas and argue real, actual production must precede real economic recovery, development and growth -- what is more productive than turning undeveloped land into developed, livable cities and suburbs?

Unproductive immigrant populations will probably not be able to take advantage of this program. But even if, worst case scenario, nations like China, India and others buy up undeveloped land, send over lower class, lesser productive members of their population, and do little with the land, 1) the land would remain undeveloped, just sitting there as it currently is, hence no loss; 2) excess population of immigrants would enter the US and settle in areas already developed, a current fact of life, albeit exacerbated, and perhaps some negatives associate with this; 3) but, unlike the present case with lower skilled immigrants coming to the United States, foreign nations would have to PAY for sending their people over. You want to send us "your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore?" You'll have to pay a particular amount per acreage of land the Federal government owns, and in turn you or your immigrants will have all of the rights and responsibilities that inhere with being a "land owner" in the United States.

And I for one would much rather have nations like China buying up and developing American land, and sending over their population yearning for political freedom, the right to have more than one or two babies per family, than buying up all of the American businesses on the S & P 500.