Bail out home owners, even if it means buying their homes and reducing rents and property prices to realistic levels.
Make the speculators unemployed, with jail time for the most obvious offenders.
Place a small extra tax on all speculation and a larger tax to discourage capital flight.
The crisis is moral - Wall St is full of slimy opportunists who have no ethical sense. Why is anyone surprised that you can't trust bottom feeders of poor character with money?
Coring out the banking system and replacing it with an operation which is clearly trustworthy would put a floor on the death spiral and lay the foundations for a future recovery.
An international conference to rework the rules, as per Bretton Woods etc, might be somewhat useful too.
you are the media you consume.
Witness the re-bound of the Mercosur economies after they enacted sane economic policies. Far from being crippled by capital flight, they are now more stable and prosperous than when they were taking orders from the IMF.
And if (as it looks like) the Americans will need to do a complete overhaul of their currency before the fat lady sings, that would be an excellent time to institute some constraints on capital mobility - after all, you'd have to redeem your old dollars in US banks. Sure, they'll lose some € and Yen in the process, but we're hardly talking Argentina 3.0.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
and add in an explicit mandate to run an industrial policy with a simple focus on (i) infrastructure, ie public transport, electricity grid and (ii) energy transformation, ie housing insulation and renewable energy. In the long run, we're all dead. John Maynard Keynes
Tekes mostly funds technology innovation, but other state funded organizations specialize in other areas - including eg forestry. These account for the 3% + of Finnish GDP that taxpayers provide each year. The taxpayers' investment comes back in skilled jobs, revitalizing start-ups, and a largely impartial infrastructuring for the future of society. You can't be me, I'm taken
Of course, some investment decisions are national in scope, but they require a Swiss style bottom up approach to decision making, I think.
More participative than representative decision making, I think. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
It is so that the governors of these institutions are academic/political appointments ie representatives. But they are largely there to ensure oversight management of the funding according to government strategy, rather than to be involved in investment funding decisions. We should also remember that a finely balanced consensus coalition (3 main parties at the moment) ensures that long term strategic changes get quite a public airing.
The ascending buzz phrase in Finland is 'Living Labs' - a term for research projects that bring together government, business and academia with the vital 4th component = end users.
In my experience (and I work equally on communications with start-ups and established businesses) the funding is a continuing success story. I am just working with a newly established gaming company eg, that has had Tekes funding to develop a massively multiplayer strategy game. So the scope of investment is wide.
Another example for leisure industries You can't be me, I'm taken
Part of the problem is that home loans were given to people without income verification. It is not just the banks that were engaging in highly dubious activities. It was everyone connected with housing sales - including the purchaser with the no verification (liar) income statements.
In this sense, to bail out home owners one must as you state - buy their homes. There is no guarantee that even this is enough. A home owner must maintain insurance and pay property taxes. Depending on how marginal the participants in this scam were - it is possible a percentage of the homes will be foreclosed no matter what. What that percentage is is unknown to me.
"Reducing rents and property prices" is an interesting phrase. The two are not mutually independent. Rents reflect the price to purchase - it is the bottom line competition to rental. If it becomes cheap enough, one buys instead of rents. Of course a shortage of rental units or a surpless of rental units will adjust the price up or down - but the bottom line is the property prices.
To some extent it sounds like rents may already be falling:
"A comparison of houses-for-rent classified ads in the Aug. 14, 2008 issue of The Mountain News with similar ads one year earlier shows 89 houses on the rental market this year and only 65 the year before, an increase of 26 percent." "`A lot of houses became rentals when their owners realized they weren't selling,' said Sue-Ellen Knapp of Re/Max Lake Arrowhead Realty. And because of the flood of houses for rent, renters can get more for their money." "`What used to go for $1,500 now goes for about $1,200,' Knapp said. Knapp said...that $1,200 a month might translate into a three-bedroom, two-bath home in Lake Arrowhead, while $1,500 could rent a similar home with a garage. The latter property, she said, would have rented for $1,900 before the economy's downturn."
"`A lot of houses became rentals when their owners realized they weren't selling,' said Sue-Ellen Knapp of Re/Max Lake Arrowhead Realty. And because of the flood of houses for rent, renters can get more for their money."
"`What used to go for $1,500 now goes for about $1,200,' Knapp said. Knapp said...that $1,200 a month might translate into a three-bedroom, two-bath home in Lake Arrowhead, while $1,500 could rent a similar home with a garage. The latter property, she said, would have rented for $1,900 before the economy's downturn."
At least in some areas an entirely different problem may be happening - rents may be too low. If they go below a certain point it becomes impossible to maintain a property. At that point it becomes a slum.
This moves into another problem with purchasing homes for people. What about the landlords who purchased 2 - 3 - 6 homes or whatever. Should we buy them all for the landlord?
I don't see any good solutions to this mess. Too much corruption by too many people.
Well if someone is going to be bailed out - agreed, the small guy should be bailed out. A lot were innocent. Those that were not - well better them than the multinationals.
aspiring to genteel poverty
A home owner must maintain insurance and pay property taxes. Depending on how marginal the participants in this scam were - it is possible a percentage of the homes will be foreclosed no matter what. What that percentage is is unknown to me.
You can't save everyone, but you could - possibly - save the economy as a whole.
It would be the difference between controlled demolition and an uncontrolled implosion.
Part of the problem is - literally - the lack of control, which means that no one knows what the limits of the disaster are. The bailout plan is a finger-in-the-dyke attempt to plug some of the holes, and it's not bad as far as it goes - which possibly won't be very far.
It's the system of uncontrolled detached speculation which is the problem. The current proto-meltdown is an effect, not a primary cause.
Replacing explicit control would start to restore confidence by setting some firm boundaries.
So if there's going to be a political change, now is the time for it.
What we're achieving here in our discussions is a foundation which can be used by those necessary visionaries, that undergirds the courage needed to tell the truth and propose a way out. This situation demands the equivalent to real entrepreneurship. Many can write about or support innovation, but true entrepreneurship is very rare. It demands the ability to stand up and say no, willing to walk away from a deal that does not really reflect what you seek... despite the deal being partly worthwhile.
So it is now. The system is so broken, only those with the courage to actually say it can move us forward. I too, like Grandpa, believe the global economic fundamentals are sound, only just not on this planet.
A National Investment Bank (internationally supported) has to be but a main gear in the drive train building a sustainable infrastructure. Simple, except the dinosaur interests like the coal lobby are flailing with all their power to survive by crushing us. An international Apollo program of sustainability, which begins with building insulation and the immediate re-channeling of industrial infrastructure towards wind and solar on a massive scale, is indeed our best hope.
But then there's GE's Wall STreet darling, Jeffrey Immelt yesterday, calling on Congress to ratify the nuclear deal with India, and calling nuclear power " the safest, non-polluting energy generation technology." I don't hear him pontificating about GE's wind turbines (decent but not particularly the heights of the industry), as they only make up some 3% of GE's gross.
But then i've been saying pretty much the same damn thing for decades now. Sustainability is only tens of millions of purposeful jobs globally in an aggressive program to fix this civilization. And windsmiths love their work, because it's satisfying working hard towards a dream. "Hey man, i did 3 turbines yesterday, and climbed 5 times!"
/rant "Life shrinks or expands in proportion to one's courage." - Anaïs Nin
another thing, i have to report i'm certifiably insane. Despite three decades of high-level fighting against the combustion of fossil fuels, i'm going to spend part of this gorgeous weekend in Germany watching the glitz and glamour circus of the fastest Benzin-burning vehicles in the world, now running under the world's biggest and brightest lighting system, as the Ecclestone ecstasy moves to that bastion of future capitalism, Singapore. (OK, i dream of sponsoring Formula 1 cars running on renewably-generated hydrogen.) "Life shrinks or expands in proportion to one's courage." - Anaïs Nin
I'm thinking of doing one on the single malts of Islay.... Vote McCain for war without gain
Treating the disease is impossible without different basic political assumptions.
Yup.
For the Occupier, the "affordability" of reasonable index-linked house rentals means it's more likely that they can pay.
ie affordability = certainty.
For the Small Guy Investor, such property-based Units of index-linked rentals would provide a nice solid home for at least part of his pension portfolio.....
For the Occupier, it is a new "Rent to Buy" option where he can gradually acquire Units of rental values of land held by a "Custodian" (exactly as blue chip stocks are technically held by Custodians like State Street now) until the nominal income on his Units offsets the nominal rental due in respect of his occupation.
ie he is "Paying it Forward".
And if times are hard, then Occupiers can pay rentals in saved Units, not $.... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
which is not to say that a public bank is not a bad idea..
But looking at Spain... a good boring highly cntrolled banking system is pretty efficient.
A pleasure I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude
Can't be done in a country with a current account deficit. You discourage capital flight, you discourage capital inflow. Domestic rates shoot up, and the economic crash is even worse.
As far as jailing the speculators - if you can find a way to do it, great. But I suspect most of the big boys and girls didn't violate any criminal statutes, at least not beyond a reasonable doubt. They've got a lot of very competent and very well paid lawyers to make sure of that.
On the national investment bank - NOOOOO!
Eventually the Republicans will come back to power. If you think the current administration was bad in terms of corruption, patronage, and cronyism, just imagine what they could do in that situation.
The crisis isn't simply moral. The system designed to foster immoral behaviour. If you choose not to play the pyramid game you're fired or your firm gets bought out as its stock price tanks. From the perspective of any individual Wall Streeter, you can either find another career, or you go along with the system. And many of them don't have particularly good alternate options. A combination Tobin tax with a new top marginal rate for very high incomes would go a long way to solving the problem. Add in a proper regulatory framework and you'd be fine. At least until memories have faded enough to allow everything to be dismantled again. But that's fine. I'd be perfectly happy if we could fix things for a generation or two.
In a system with a policy range of only a year ahead or so - or up to the next election, a national investment bank should be one of the ways to think long-term about the future. Education is another.
A national investment bank should not be politically directed, though oversight is needed. All the functions and processes of the bank should be transparent. The bank is owned 100% by the people. The policy and project leadership should contain academics from different disciplines, business figures, finance professionals, as well as respected citizens in the arts, for instance. They would not be political appointments, though I don't know how that could work. You can't be me, I'm taken
That's a difficulty.
It is easier in Finland that has similar existing institutions. The top person is usually a political appointee who is no longer active in politics - for instance a former PM. (being unicameral, there is no place to shuffle off the ex-PMs to.
Tekes (Finnish Funding Agency for Technology and Innovation), for instance, has an oversight board made up more or less as I described earlier. Then there is strategic management, research management etc. It is cumbersome in some ways, but ensures that ideologies have less influence. Salaries are academic standard for the levels. Some business members at higher level are seconded by their companies.
But it is easier in Finland to get the best people because a) the differential in upper and lowers salaries is much narrower than in the US and b) a job with such an institution gives a valuable overview.
There is a certain amount of revolving door going on, but it is the sort of move that goes from macro to micro - ie a researcher or enabler for some new technology might leave the funding institution to join a project as a start-up, in order to guide it. As far as I know, this is actually encouraged. It's called seeding ideas and know-how. You can't be me, I'm taken
(being unicameral, there is no place to shuffle off the ex-PMs to)
Bruxelles? ;-P
And let's make sure that it is not allowed to have a trading P&L on its own funds. Better, no trading P&L at all. Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
Long term investment also needs to be closely related to education policies at all levels. Not to train people in specific jobs that might not be there when they graduate - but in providing opportunities in all the disciplines. You can't be me, I'm taken
The strategy needs a revamp, but it has been extremely successful in the past - arguably the greatest single factor in the Celtic Tiger success. Vote McCain for war without gain
