InFi: the Future of Finance

By listener request, Bob reviews a proposal to implement Henry George's land value tax (LVT), in order to reduce taxes on labor and capital. Among other problems, the Georgists ignore the social function of land speculators.

In episode 157, Bob Murphy takes on the growing push for Georgism — the idea that we should stop taxing labor and capital and instead tax only the raw, unimproved value of land. Bob walks through the Georgist case fairly, then dismantles it.

What you'll learn in this episode:

• What Henry George actually argued in Progress and Poverty — tax location value, exempt buildings and improvements
• The Lars Doucet essay "Does Georgism Work Five Years Later?" (Astral Codex Ten) and the Center for Land Economics model brochure "The Problem with Land Speculation"
• Why a revenue-neutral swap — lower income taxes, higher tax on ground rent — still distorts the economy (the tax interaction effect)
• Why vacant lots, surface parking, and even untouched nature preserves are NOT proof of market failure
• Why vacancy is healthy: the housing market has a natural vacancy rate just like the labor market has a natural unemployment rate
• The social function of speculators: how holding land vacant over time is the same as ranchers holding cattle, oil storers holding crude, and workers searching for the right job
• How private call options on real estate could fund public goods — and why a 100% land value tax would sabotage that solution

If you've heard that Henry George proved land speculation is parasitic and the single tax is painless, this is the Austrian rebuttal.

Related:

• https://www.astralcodexten.com/p/does-georgism-work-five-years-later
• https://landeconomics.org/problem
• https://blog.landeconomics.org/p/enacting-land-value-return-in-your
• https://www.econlib.org/library/Columns/y2012/Murphycarbon.html
• https://mises.org/mises-daily/social-function-futures-markets

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Murphy dissects the recent commentary from analyst Luke Gromen. Murphy argues that Luke was inconsistent, in that his arguments about interest expense (with higher rates) would mean Fed rate cuts would be Deflationary, and yet Luke argued they weren't. Murphy thinks we should distinguish fiscal from monetary policy at a conceptual level, even though in practice they can be intertwined.

Related: - https://www.youtube.com/watch?v=9dUte6c7ZcM

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Murphy analyzes several clips from the Q&A session of the new Fed chair's latest press conference, arguing that Warsh was refusing to give any assistance to the public on what to expect from the Fed in the future. Bob then explains why the hike surprised so many analysts: with ~$32 trillion in debt held by the public, fiscal dominance theory said the Fed couldn't hike, and why this move may have been symbolic to prove Fed independence from political pressure.

Related: - https://www.youtube.com/watch?v=Nkmrr7P5gW4 - https://webhome.auburn.edu/~garriro/natneut.pdf

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Perry Metzger returns to the podcast, this time to bring a dose of cynicism to the recent warnings coming from Anthropic employees, including CEO Dario Amodei. Metzger agrees that evil humans can use new technology in nefarious ways, but argues that the good guys likewise need to develop AI tools for defensive purposes.

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Intrigued by the combination, Bob analysis a recent Trump social media post in which he warned the Fed to cut interest rates, or else Trump would eliminate trade with those countries who currently enjoy a trade surplus with the US. Bob concludes that in general such a drastic move would raise US interest rates, but perversely if it caused a global financial crash, it conceivably could keep rates low on US Treasuries specifically.

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Bob explains that Treasury Secretary Bessent's policy of buying back long-dated securities will lower the government's interest expense in the short run, but makes it more vulnerable to future rate hikes.

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Murphy explains the massive joint US/Japan operations to prop up the yen and draws lessons for the US. In short, massive government deficits and central bank easy money are not the path to prosperity.

Murphy breaks down Japan's recent currency and bond market moves, including the yen falling to a 40-year low against the U.S. dollar and the intervention by Japanese authorities in the foreign exchange market. He reviews the scale of that intervention, compares it with earlier episodes, and explains how market participants may have responded afterward. He also examines Japan's inflation history, from years of deflation and very low inflation to the recent move above 2% and 3% CPI readings. He then turns to rising interest rates and bond yields in Japan and the U.S. and discusses the effects on financial institutions and the fiscal costs of higher debt servicing.

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A popular objection is that capitalism requires exponential growth, which is incompatible with a finite world. Bob critiques both premises.

Related: - https://infineo.ai/resources/blog/Expectations-About-the-Future-Affect-Price-Today-Part-2-of-3 - https://mises.org/mises-daily/law-property-rights-and-air-pollution - https://www.youtube.com/watch?v=5CWHfPlXX14 - https://www.youtube.com/watch?v=U-zjYmq6B-c

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Bob uses a recent tweet from Steve Keen to weigh in on an old controversy. Government deficits don't cause price inflation per se, but they often encourage the central bank to create more money, which is inflationary. The distinction matters: a deficit is a fiscal phenomenon, but the inflation mechanism requires monetary policy—specifically, central bank accommodation of government borrowing. Bob unpacks why Keynesians, Austrians, and MMT economists talk past each other on this question, and where each school gets the causation right and wrong.

Related: - https://x.com/ProfSteveKeen/status/2083718398119166163 - https://cdn.mises.org/Making%20Economic%20Sense_3.pdf - https://mises.org/quarterly-journal-austrian-economics/deficit-myth-modern-monetary-theory-and-birth-peoples-economy - https://www.youtube.com/watch?v=oaUlKM1z4kI - https://link.springer.com/article/10.1023/A:1027301323209

Chapters: 0:00 — Intro 0:20 — Steve Keen's tweets on deficits + What deficits are (and are NOT) 6:00 — The role of the central bank: monetizing the deficit 9:40 — Why "deficits cause inflation" is imprecise 13:10 — MMT vs. Austrian economics on money printing 16:50 — Real constraints vs. fiscal constraints 20:05 — Can a government ever run out of money? 23:30 — Historical examples of deficit-driven inflation 27:00 — What Steve Keen gets right (and wrong) 29:35 — The takeaway: deficits, money, and your wallet

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Bob explains the numerous flaws with NYC Mayor Mamdani's proposal to have government-run grocery stores sell key items at 30% below retail. Bob also explains the problem with a popular meme asking why people pay taxes if the government can just print money.

MAMDANI MARTS — WHAT COULD GO WRONG?

NYC Mayor Mamdani wants to open five city-run grocery stores selling a core set of items at 30% below typical retail prices. It sounds like a win for struggling New Yorkers — but the economics tell a very different story.

Bob walks through the cascade of problems this creates: - The Competition Problem - The "Savings" Illusion - The Shelf-Stripping Problem - Who Actually Benefits? - The Opportunity Cost - Better Alternatives Exist

Bob then responds to a Libertarian Party-retweeted image asking why people pay taxes if government can print money, warning it echoes MMT-style misconceptions: at current spending levels, replacing taxation with money printing would trigger massive inflation and currency collapse, similar to financing everything by borrowing without taxation. He cites the Fed's balance-sheet expansion during COVID and the ensuing high inflation to illustrate limits of monetary financing.

Watch the video version of this episode here: https://youtu.be/U9p7sJjQOvY

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