I understand today that the Bush administration is about to contribute vast sums of US tax-payers’ money to some large financial institutions in an attempt to avoid domestic economic melt-down, largely attributed to their struggling real-estate market. Recently the UK government colluded in a similar exercise (similarly motivated?) to save Northern Rock. It is rumoured that our treasury is considering following these precedents.
As I read the news, I discern that financial institutions seem to have nothing to sell but bad debts. Would you buy one? Should they be on Ebay?
The market is supposed to be self-regulating. Adam Smith must be turning in his grave!
JMK might have something to say too:
What more evidence do I need to demonstrate that governments/politicians (I generalise) are motivated by self-interest, money, and are in the pockets of big business establishments?
Consider this: if I purchase a dodgy domestic appliance from a retailer, I may have some protection under trading standards legislation. There may be a manufacturer’s warranty. Understandably, there is a time limit on such guarantees. Beyond those limits, when my dodgy washing machine breaks down, I have no redress. It is my responsibility to finance its repair/replacement/disposal. Hopefully, I will not have bought a dodgy washing machine in the first instance, but if I have, do I expect the government to bail me out?
The debts being traded by the financial institutions have little assurance of being repaid. Mortgage terms are measured in decades. Security is nothing more than the negotiable equity in some one's property. These financiers do this knowing the risks of long term and historically catastrophic variations in the market over which they have little direct control. So, as they fail, they now receive a reassuring message that governments will throw tax-payers’ revenue at them!
Maybe I misunderstand this stinky-poo situation and I acknowledge my good fortune in having minimal immediate personal exposure to banking institutions. But, I pay tax!
There are certain things governments must do: look after the political and material infrastructure of the nation, oversee education, health-care provision, law and order. These things they do, unless you live in Zimbabwe, with some degree of debatable competence.
There are other things that governments historically have not done well at the tax-payers expense:
like wage wars
..............................................................................................
There, I’ve got that off my chest. For a change I’m being serious. Perhaps I’ll copy this post in a letter to the Guardian.
OH, God, is St. Anley a Guardian reader?!
2 comments:
My friend, Berry, sent me an email following this blog. It reads (somewhat sensibly) as follows:
... Whatever, I just wanted to point out a couple of things that you seem to have missed.
We are, all of us, used to buying things that aren't worth what we just paid for them. Witness cars & your own washing machine example. However, you still have to pay the agreed amount don't you, regardless of the depreciation. Why should houses be any different. Although a beneficiary of the peculiar British system of house price appreciation, I have long thought it particularly immoral. Other nations don't do it. However, it does induce the spin off that investors are most likely to spend out on their property and keep it up together. That they do this with even more personal gain in mind is actually a trap because, beyond a narrow price band, most properties are stuck regardless of the actual condition. Extensions & improvements are not always self financing after all.
So these loans are unsecured are they? No-one can MAKE the debtor pay up. If you can't raise the wind in the sale then the debt can't be covered. So they still owe the balance then. It's that simple. If it goes unpaid then interest accumulates. What's the problem all of a sudden?
Possibly it is a Western ploy to unsettle China & India who are a major threat to world resources. If you wind in the very real problems of global warming - (and if you don't believe it now, there's just no hope for you), - perhaps this is the long awaited political initiative that will save the planet. I have often wondered if mankind had as much power over events as he would like God to think! Frankly, this latter-day confidence and lack of humility appals me. The rule bending and moving of long established goal-posts is the modern way of making everything be just the way one needs it to do whatever one likes. I call it "brattism"
I have been appalled at the greed that mankind exhibits. I am disillusioned at the way politicians have encouraged people to act thus and throw away the long established values of yesteryear. Let it be said, for those who have been plainly greedy I have no pity. Who on earth could take a £2M / ann. salary plus bonuses? Why the chief exec of the Halifax that's who! The word I use for that is obscene. Why I doubt he funds his own car nor even his pencil.
Now I don't enjoy being the bearer of bad news, but I can't help wondering if your immunity from current events is really as good as you believe. Surely your income from savings, pensions, rentals or whatever, is tied to the wellbeing of our monetary system. I think we are all going to suffer now. It's been coming and here it is!
Regards, Berry
Yes, Berry, I'm suffering. Isn't that why I was sent on this earth?
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