Saturday, September 27, 2008

Ahoy there mateys

The housing market was hyper-inflated by excessive future borrowing. It's going to crash and a lot of people who have borrowed too much are going to get burned.

This is going to happen, the best that can be done is to put measures in place to protect the most vulnerable members of society and by that I mean the poorest. If you've been investing in property, it's unfortunate but it probably wasn't worth what you paid for it.

The "toxic" assets in the banking system mean that few banks are lending to each other creating problems on the money markets. Most of these weak banks were being torn apart through shorting but we've stopped that happening and furthermore we're exposing ever more tax-payers money to cover bankers failures.

In my view, this is just plain wrong.

We own a mortgage and loan bank - Northern Rock - and we should be directing all taxpayers money through it. The government should have bought out Lehman's European operation and combined the two to create an institution that competes aggressively on the financial markets as well as in the mortgage and loans business.

We should certainly allow the shorting of institutions as we should be looking to see what other bargains we can pick up. Despite what the popular press might say, shorting is not some evil act responsible for all the world's gloom. Bankers are responsible for the mess that many banks find themselves in and you shouldn't blame the cassandra's of the financial world for exposing the lie which some banks have been telling. If individual banks are weak then let's turn that to our advantage.

The government's job is to serve society, however it would seem as if we are being told that our only options are to bail-out or the banking system fails. This is clearly not true. I certainly don't mind my taxes being used to buy-out banks particularly when assets are cheap and they can turn a profit in the future but I do have a real problem with bailing out bankers for their mistakes.

The banking community wouldn't miss a heartbeat before making a quick buck on treasury bonds or bleating about how they need help or how the government interferes too much and they'll happily crash the pound if it helps them too.

However, it's not just bankers that our government should take a real interest in. The huge land banks, the suggestions of acting like cartels, increasing unemployment in the building trade and the claims that our three million new homes target won't be met should pique our interest.

There is an easy solution - a national building company. A quick bit of legislation to force open auctions on any land which has uncompleted planning permission or is vacant, mixed with a healthy dose of short selling on a builder and any other trick we can find in order to snap it up cheaply and we could be well on our way. Flood the market with cheap and environmentally friendly homes and most voters will thank you, especially if they can get a decent mortgage from their friendly national bank. It will also give a much needed boost to employment.

However, we can do better. Since all the banks that have gone bust or needed emergency funding had their accounts signed off by one of the big four accountancy firms, it is quite clear that tax auditing isn't working as it should. So let's nationalise that industry too by introducing new legislation such that the tax office is the only one entitled to audit and sign off accounts. It's an entire new revenue opportunity for the government.

Why are we being so soft? The government should be embarking on pillage and plunder of the banking, building and other communities and not handing over pots of gold to them. The government could really clean up here and get some quality assets at knockdown prices. With a bit of cunning it could probably get them for free.

The tax-payer shouldn't be seen as an easy option but instead a ruthless operator. Ask yourself what would happen if the government finances were run by Warren Buffet. Do you see Berkshire Hathaway offering to bail out the industry or is it using the current situation to make handsome investments. Why should the government be any different?

Now we're involved, we should stop acting like villagers and start acting like pirates. We want a good return on any investment we make.
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