The Binary Circumstance

It appears that Washington State legislators are considering a couple of property tax bills. It is unclear to me how they are related and according the Seattle Times, copies of at least one of the bill is unavailable.

OLYMPIA — State lawmakers during a special session Thursday will consider helping struggling homeowners by letting households earning up to $57,000 a year defer part of their property tax.

Gov. Christine Gregoire called the special session to reinstate a 1 percent cap on property-tax increases that was recently thrown out by the state Supreme Court.

The governor on Monday outlined a second measure that would let some homeowners who meet income guidelines defer up to 25 percent of their annual property-tax bill, with restrictions. Copies of the legislation weren’t available.

The governor noted the deferral would be temporary. “When the house is sold, the state will be reimbursed,” she said.

By discussing a deferral which would have to be paid back with about 7% interest according to Gregoire, they are acknowledging that their taxes are driving people out of their homes. For anybody committed to freedom and individual rights the discussion would stop there. Our legislators would ask themselves. Since when does the state have the right to tax people out of their homes? Maybe the growth of the state’s budget and the size of government has become a violation of basic human rights they would conclude.

But Gregoire and her team have come up with a plan to allow the homeowners to defer payment until the property is sold. Then the state would collect a hefty 7% interest rate on it in addition to the back taxes. I wonder how much it will cost to administer this new program and which individuals with political connections will get the jobs.

Then there’s this:

The cutoff of $57,000 is roughly the current median household income in Washington. The state estimates about 7,500 people would take advantage of the program. Gregoire said local governments would not lose any money because the state would cover the lost revenue.

If the state can cover the lost revenue then why raise taxes at all? Doesn’t that mean they already have too much money?

Check out Paul Grignon’s 47-minute animated presentation of “Money as Debt.” (Via Metafilter)

It covers much of the same material as G. Edward Griffin’s The Creature from Jekyll Island which I have referenced in many past postings. But it’s a lot easier to understand and more entertaining than a 600 page book.

Griffin has different solutions in mind but defines the problem in much the same way as Grignon. Griffin advocates a return to the gold standard and Grignon proposes that only the government create money and that it be permanent and interest-free. That would give the government total control of the money supply which is inconsistent with a free economy.

Their central points are the same, however: without debt there is no money and fiat money enslaves the masses to a few.

I found this article from the Washington Post regarding the falling dollar. It is an interview with Brad W. Setser, Council on Foreign Relation’s fellow for geoeconomics and an expert on currencies.

It doesn’t address problems inherent in fiat currencies but it does give some insight into how fluctuating currencies impact trade.

Are countries in East Asia concerned that a falling dollar will hurt their exports?

Countries that peg to the dollar are seeing the value of their currencies fall against the euro and are seeing a rapid increase in their exports to Europe. So for many countries, the concern isn’t that a fall in the dollar will lead to a fall in their exports. It’s that economic weakness in the U.S. will spread to Europe, and that the broader reduction in global growth will lead to a reduction in their export growth.

Now there are specific concerns in countries like India and Thailand that have let their currencies appreciate against the dollar and the renminbi–they are a little worried that China will undercut them in global markets. As a result, they’ve been resisting further appreciation in their currencies. But I would put a great deal more emphasis on concerns that U.S. weakness may be the leading edge of a broader global slowdown. Specific Asian economies, particularly those like China that are doing very well and are pegged to the dollar, worry that there’s a growing difference between the domestic needs of their own economies–their own economic conditions likely call for probably higher interest rates and a stronger currency–and the economic and monetary policy that they’re importing by virtue of their peg to the U.S. dollar.

There are also some interesting comments about China’s accumulation of dollars and what they might do with their huge reserves.

According to the Seattle-PI, Seattle townhouse prices have softened more than other sectors of the market.

More and more, homes of all types in Seattle are chasing a buyer pool that has become smaller and more cautious over the past year. But real estate agents and sales statistics show that the slowdown in townhouse sales has brought price cuts out of proportion with the rest of the market.

“What we are seeing is these huge price reductions, where a guy’s asking $600,000 one week, then $550,000 the next week and $500,000 the week after that,” said Ryan Thompson, an agent with John L. Scott Real Estate.

Greg Bartell, a Re/Max Mutual Realty agent who specializes in townhouses, says he has seen particular slowing since August.

“I think the most apparent thing is prices coming down,” he said. “I’ve seen some come down $90,000 off the list” price.

Seattle townhouse prices were down from the prior year in six of the first 10 months of 2007, with October’s median townhouse price of $358,594 down 13.6 percent from October 2006, according to the Northwest Multiple Listing Service. The median price for all single-family homes (including townhouses, but not condos) has not declined in any month from the same month in the previous year.

This is very interesting given that the Seattle market has been consistently stronger than the market in other regions of the country this year.