Monday, October 6, 2008

Bail-out?

When sane and rational people try to bail out a sinking boat, they bail the water out.  When our fine government economists get in on the act, they bail more water into the boat.
 
Here's what appears to be happening.  Banks loan money to homeowners to buy houses and the land the houses are sitting on, and to businesses to buy business equipment and the land to locate it on.
 
When the forces of land speculation raise the prices of land, more of the money loaned goes to buy the land instead of the houses and business equipment.  It becomes more expensive to become a homeowner or home renter, and more expensive for a business to start up, expand, or relocate.
 
So land speculation becomes a sort of Ponzi scheme which can only go so far.  There comes a point at which home ownership becomes impossible for most people, and at which businesses can no longer be profitable, and whoever has bought a piece of land at the latest price, expecting to make a profit when the price goes even higher, is left holding the bag.  If the landowner defaults on the payments, the bank is left holding the bag.
 
Now, business stock prices are based, in part, on the business's total assets, including land.  If land prices get to the point where further rise is impossible, stock prices tumble, leaving the current investors holding the bag.
 
So, along comes Big Daddy Government with seven hundred billion dollars to buoy up the banks so they can stay in business to loan even more money and enable land speculation pressures to jack the price of land up even higher, thus imposing even greater burdens on homeowners, home renters, and businesses.
 
Nobody seems to be noticing that the only people profiting are the financial institutions loaning money to land speculators, and to those few land speculators lucky enough to sell before the Ponzi scheme crashes.
 
You'd think we ought to bail water out of the sinking boat by taxing the location component of land values, not pouring more water in by funding increased land speculation.  Such a tax, gradually imposed, could eventually replace portions of our current taxes on income, sales, imports, and property imporovements.
 
I'm not sure any of our current leading presidential candidates ever heard of such a thing.  Well, maybe Dennis Kucinich and Ralph Nader, but they seem to be out of the running at the moment.

2 comments:

Poolie said...

Well put, my friend.

IIDLYYCKMA said...

I was so damn mad at this frick frackin bail out. The government with that bail out money could have GIVEN each American who pays taxes over 1 million dollars a piece, to have us PAY OFF OUR OWN HOUSES!!! and still had money to help the banks. But Nooooooooooooooooooooooooooo our stupid government gave it to the damn banks, to do what with?? Line their pockets even more?

I am so damn disgusted with the US right now. So digusted. I am mad at both parties, I'd like to spank them both. I am not going to breathe a sigh of relief until dumbass monkey brains bush is out of office.

My bank WAMU failed, and those jackholes REWARDED the CEO of my bank with 17 million dollars for 17 days worth of work, as he had a contract in the event he was fired.

For god's sakes.

ARGH! Can you tell I am a little hot under the collar.

So, in the meantime, I am canning, everything I can and storing food away because hard times are here and it's just going to get worse.

I have to admit I don't have a whole lotta face in Obama, or the Dem party, it's all words, no one walks their talk. And the stupid Republicans. Oh please.

Thanks for your post, well said, I just needed to vent.