photo credit: kimberlyfaye
Around the world, pubs and bars are full of insightful conversations, democracy at work grass roots style, as we try to make sense of the global financial meltdown. 19/10/08
“From neo-liberalism to neo-handouts, the pyramid purveyors know how to baffle the masses” scowled Maxxy. With the financial meltdown moving at a rate of knots, policy makers and armchair critics alike are scrambling to keep up with the plans of the vested interests.
Some estimate that $45 trillion has already been wiped from the global economy.
“The world of monopoly capitalism has quickly reverted back to ‘privatise the profits, socialise the losses” said Maxxy to his ole sparring partner Ruth.
Their Sunday arvo beer garden sessions looked into the eyes of the philosophical times we live in. “How can governments worldwide fall for it?” said Ruth. “To think that the banks deserve cheap money spoon fed from central banks is just unworldly. The handouts for AIG palatial parties are just the beginning. The old hands from Goldman Sachs have been given the reigns to handout the money”
“What? Are Goldman Sachs working for the government now?” exclaimed Maxxy.
“No – but the revolving door between Goldman and Treasury didn’t stop with ‘Paulson the panicker’. He bought over three of his minions. They are the ones on the sub committee deciding who gets what from the $800bn bailout.” professed Ruth.
“Och that bankers bailout – bailing out the wealth gap! Shock Doctrine in effect. How many trillion have been pumped on those printing presses Ruth? I hope they’re using recycled paper on all these new dollar notes!” joked Maxxy.
“Well you know my story on that one. ‘If you owned all the money in the world and I owned all the land, how much do you think I’d charge you for your first night’s rent?’” asked Ruth.
“All of it!” she shrieked.
Maxxy looked deep into his ale as the thoughts slotted into place. “Policy makers couldn’t make any more mistakes if they tried. For years we’ve heard that the market knows best. Yet right now, at it’s time of calling, when the proverbial has hit the fan, the powers that be do all they can to avoid the market. Corporate welfare corrupts….even the most influential ideologies.”
“The bailouts will act to keep the market in bubble mode. Has 15 years of record economic growth made the average aussie any better off? Rents have grown faster than wages by at least two to one! The lower interest rates announced over the last few weeks have given property investor’s an extra $200 per month in savings. Do you think they will pass this on?” jabbed Ruth.
“For years the tax cuts given to property speculators have acted as a carrot for over-investment. Now we hear stories of ghost estates, whilst people live nearby in cardboard boxes.“ she said as she waved away the flower salesman working over the bar.
“To think we can put man on the moon but can’t put man in a house! When will Australia’s young people stand up and realise they are paying more than twice in rent what other generations paid?” pleaded Maxxy. “They leave uni with a $30K debt, equivalent to a deposit on a house, then spend the next decade paying rent to baby boomers and tax to a government ruled by corporates. Ruth, I heard a new term recently – lobbyocracy: where 1 vote, 1 value has been replaced by 1 dollar for 1 decision. Kinda sums it up eh?”.
“Yes well I believe that the property bubble is ‘the effect’. The ’cause’ to the meltdown was that people got lured into property speculation by a tax system nodding its head to paper shuffling rather than creative, productive, sustainable activity. This pushed land and property prices above what people could realistically earn. Once a number of yanks realised they couldn’t afford to pay what the predatory loan sharks conned them into buying, the number of property’s listed for sale out-numbered the buyers.”
“This pushed down the price of land. From this the great shock hit. Banks had to write down the value of their assets, which meant that they had less room to leverage and then less money to loan.” said Ruth.
“Yes but if that’s true, then why is the government pumping all this money back into the banking system?” said Maxxy.
“They feel that once credit is restored, the market will return to it’s growth mantra. But they are missing the big cahuna. If we spend too much on rent, then there’s little left for food or saving. Small business suffers too as they can’t pay much in wages or investment.” claimed Ruth.
“So the background motivations are to keep land prices high so banks can lend more credit? That is madness. Didn’t Japan suffer a 16 year recession because it tried to prop up banks and their buddies in real estate? And this is where Ben Bernanke cut his teeth working amongst the bonsai, watching the Japanese economy implode!” stated Maxxy.
“Japan’s economy didn’t start growing again until land prices had dropped to a reasonable level. And just as economic theory states, once land prices fell back to what can be realistically earned living on that site, there’s money leftover for the productive side of the economy to develop.” said Ruth.
“Is this what we are witnessing Maxxy? The neo-liberal agenda of encouraging speculation over productive activity, when combined with lax lending rules, has built this bubble up to epic proportions. And now money has been handed to the banks to in effect prop the real estate market up? Huh?!! Business wont want to invest with the uncertainty that high rent places on future profits.” claimed Ruth.
“Well the plan maybe to keep rents high, brains drained of energy, work hours booming so that we forget about climate change. Who’s going to vote for a carbon tax when we can’t keep up with the latest banker’s handout?”
“So what should they do Ruth?”
“I should clear my throat for this bit! Mmm, mmm. The smart thing would be to turn off the lure of speculative profits. Governments should switch taxes off our incomes, off the goods we buy, and place them onto natural resources. A Resource Rental system would see all resources such as land, oil, coal, carbon and water used sparingly, rather than hoarded for easy, paper shuffling, speculative profits.”
“Then the land bankers can’t fat cat along making easy profits. All landowners have to pay a fee to the government each year, meaning that they must either rent the site out, start a business on it or sell it. All these things either increase wages or push down rents. Imagine if business spent time planning how to use land efficiently instead of with their accountants dodging taxes like it’s some sort of sport.”
“When you think about it, who says rising property prices are a good thing? It’s all relative. Sell one to buy another. The banks are the only one’s who truly clean up with the higher lump sums borrowed meaning higher interest bills. Yay for some!”
“But let’s go further. All this grandstanding by Big Oil and their funding of climate denying scientists is just a slick diversionary tactic. These delays are effectively creating a ‘barrier to entry’ for small inventors, whilst Big Oil’s well funded R & D departments develop renewable options to grease their own wheels.” said Ruth.
“So you’re proposing a massive change. I gather you can’t hide land in a tax haven. More urban density, more walkable communities, something that inherently values the role of the earth in all that we do. Gee maybe we wouldn’t have to work so much if land prices dropped. I’ll say ‘me too’ to that!” finished Maxxy.