That rental income, when tied into loans linked to land as collateral, will flow out of Russia and thereby tilt the tax system further against the workers. Because the multi-nationals dodge their tax liabilities, the fiscal burden falls mainly on employees. Page 2 Rent-privatisation will ruin the chance to create a fair and efficient economy in Russia, says Michael Hudson. Banking on Rent MOST debt in the modem economy is mortgage debt. This is because the land, natural resources and other real estate is by far the largest asset.
Creditors are eager to lend money against such collateral, because it is the most valuable asset.
This transformation of rent into interest has occurred in every major industrial economy, from America to Japan. As the land becomes mortgaged, bankers convert the rental revenue generated by farms and forests, mines and oil wells, office buildings and residential housing into interest and amortization payments. As the home market for such credit is exhausted, lenders remit their earnings abroad to continue the process wherever incomes or asset values remain unpledged to creditors. The transfer of earnings abroad will gain momentum as foreign banks and financial institutions establish subsidiaries. Inasmuch as financial capital knows no country, it tends to flow to wherever in the world interest rates are highest and free income remains unpledged for debt - today into Russia tomorrow out of it.