Summary
Foldvary’s landmark 2007 pamphlet (second edition) predicted the 2008 depression with striking accuracy, citing the 18-year real estate cycle discovered by Homer Hoyt. He argues two causes of the business cycle operate together: monetary expansion (low interest rates enabling speculation) and the real-side land cycle (rising construction and land prices). The cycle turns when high land costs and rising interest rates choke construction — triggering the depression. Foldvary proposes that replacing taxes on labor with a land-rent tax would eliminate the cycle.
Key Claims
- The 18-year US real estate cycle was documented by Homer Hoyt (1960): “The urban real estate cycle was approximately 18 years in length.” — confidence: high [Source: Foldvary, The Depression of 2008, 2007]
- Historical peak table: land-value peaks at 1818, 1836, 1854, 1872, 1890, 1907, 1925, then post-WWII resumption: 1973, 1979, 1989, 2006 — demonstrating the cycle’s regularity — confidence: high [Source: Foldvary, The Depression of 2008, 2007]
- Two exceptions to 18-year regularity: WWII (military disruption) and the 1970s oil shock/high-inflation stagflation — confidence: high [Source: Foldvary, The Depression of 2008, 2007]
- “The next major bust, 18 years after the 1990 downturn, will be around 2008” — written in 1997, proved accurate — confidence: high [Source: Foldvary, The Depression of 2008, 2007]
- Fred Harrison’s cycle formula: 2 years peak→trough + 2 years recovery + 14 years construction/land build-up = 18-year period — confidence: high [Source: Foldvary citing Harrison, The Depression of 2008, 2007]
- Policy solution: shift taxes from labor to land-rent (Geo-Austrian prescription) — would eliminate cycle by removing land speculation incentive — confidence: high [Source: Foldvary, The Depression of 2008, 2007]
Notable Quotes
“There are two causes of the business cycle. One is financial and the other is real. The financial cause is the expansion of money and credit by the banking system… The real side of the business cycle is this increase in construction and in real estate speculation.” — Foldvary, The Depression of 2008 (2007)
“Hoyt, however, did not fully understand the economics of the real estate cycle… He thus thought that the real estate cycle had been eliminated by 1960, whereas in fact it had already resumed.” — Foldvary, The Depression of 2008 (2007)