Wednesday, August 4, 2010

Sandcastle Sales Rising

"It isn't only an Englishman's house that is his castle." So concludes a jaded and ideological editorial in today's Herald about the housing in market in Scotland:

Rising property sales and prices are good news for homeowners

"Lies, damned lies and statistics" is how the editorial tells us that the proles treat economic reports but assures us that this one by the Registers of Scotland (RoS) is 'exact' because of its comprehensive range. That maybe so but what of The Herald's take on it?

Are house prices rising? The comparison is with the first quarter last year which was mingin'. Is this technical or fundamental? This question means is it a short term rise based on some particular reason or part of an upward trend in the market? Is all that pre-election 'stimulus' money working its way through the system making people feel artifiially better off for a while? Now that it is ending will prices trend further downwards and 'deleverage' (unravel years of artificially high prices, stimulated by too much borrowed money being in the system) further as it should? Does the editorial consider the idea that 'austerity' by the government is going to see a mountain of public sector jobs go and a wages slashed? Hundreds of thousands will have less or no salary and so will not be able to pay their mortgages. When interest rates go up you can multiply the 'austerity' effects by the interest rates. Many will walk away from their mortgages and more will be driven out the market driving prices much further South.

It is the central premise of the headline that annoys me the most though. Just how is rising prices and sales good for homeowners? Is this not part of the indoctrination that got us into economic collapse in the first place? Thatcher's 'home-owning democracy' meant you could pretend to be wealthy and the dirty little secret was safely behind closed doors. Rising house prices created the Thatcher illusion of wealth. People's desire to be better than their neighbour was heightened and then exploited. Remember the ad where the worldly-looking guy bought his house and named it 'DunRenton'? Crass but effective.

A home is a home, not an investment.

Only bankers prosper with higher house prices. Mortgages and fees go through the roof. With all that debt guaranteeing them income over 25 to 40 years they can gamble on the stock-market derivatives casino till their gambler/speculator's hearts are content using mortgage payments as security. They were allowed to get out of control and fraud became and is still endemic in the system. Joe Public got to then bail them out and now people have to lose their jobs so that the government can pay back the money they borrowed to bail the banks out. And where did the government borrow the money from? The banks. Remember all that 'quantative easing' and almost 0% interest rates meaning free money to the banks? Yes, they got money for nothing from the Bank of England, lent it to the government and now we all have to pay it back plus interest - and the rates will soon go up.

That's just for starters. To get house prices rising in the first place the government destroys the real economy.

Fueling house prices speculation in our 'home-owning democracy' means the government taxes labour and industry instead of property. That means manufacturing jobs go where labour is cheaper. The result? You make nothing and sell nothing into the international market. You get low-paid service sector jobs but don't worry you can always refinance your mortgage to pay for your kids' education, right? Not until the speculation bubble bursts. To keep the veneer of prosperity going the governments, short on tax and earnings because good jobs have gone and we sell nothing abroad, resort to borrowing more money from abroad and allowing the increasingly powerful banks more room to defraud international customers with fraudulant investments. That works until it doesn't.

You see, when house prices go up jobs disappear and salaries go down. Now you have lower salaries and the value of your house has gone down. What else can you do to get your kids through uni now? You have to save, except saving is not rewarded with low interest rates so you are forced into buying shares which the banks just love.

High house prices are bad for the economy - they're just good for banks. So will the muppets who write editorials about how rising house prices (a dubious claim in itself) are good news for homeowners tell me how we got into this economic crisis? And why 'home-owning democracies' are sliding while manufacturing economies are growing? When you say 'sub-prime' or 'mortgage-backed securities' to The Herald 'business team' what goes through their collective head? Fresh air? Or maybe property advertising revenues?

It's economic illiteracy. It's a con (confidence) trick by bankers. Since our 'home-owning democracy' was born Britain has sunk in terms of economic power. That was hidden for a while because we borrowed: government, business and consumer plus taxes came in from those fraudulant City investments and all this made us look wealthy but in reality we were going down the plug-hole. Only North Sea oil is keeping UK PLC on life-support. We took some spoils of war and that gave us a short-term economic hit but those wars, though providing liquidity from opium sales out of Afghanstan or oil sales out of Iraq for the banks, are infact bankrupting the aggressor nations.

It's counter-intuitive for people to demand lower house prices. However, if you look at economies with high rental sectors you find higher quality jobs and less debt. That's not the kind of analysis we can expect from Herald editorials though, is it?

No, they just can't think outside the box. The theology of debt-driven, consumer economics has closed down all sensible debate. Even as it has brought the UK to bankruptcy the politcal and media class still think that there's going to be a 'recovery'. The City will be our champions once again, house prices will climb forever after a temporary blip and the struggle between Labour and Tory will be about who looks after our 'home-owning democracy' the best. Rule Brittania! Reality is not for dawning. Not till we're bankrupt and every last piece of state infrastructure is sold off, at fire-sale prices, to the very bankers who brought us to the edge in the first place. Was it a 'crisis' or a 'controlled demolition'? Ask the Argentinians what happened to them and who they blame. Was that the test-bed?

No people, we should not accept 'austerity'. In the end we need interest rates to go up. When people save capital is formed. Then you can have investment in manufacturing and start to export products again - that will balance the budget. Austerity and low interest rates will simply take us into debt-peonage. Many Britons are already debt-slaves and many more are to follow. Meanwhile the super-rich become like nobles of the middle-ages. Our feudal masters and the 'citizens' nothing but their capital.

In short, when you see headlines about how rising house prices are good for homeowners just ask yourself how many of our media and political class saw economic collapse coming, how many told you 'stimulus' would work and how many told you 'recovery' and 'green shoots' were taking hold. They know nothing. They simply spread propaganda and unwittingly at that most of the time.

Are you going to believe them then when they tell you 'austerity' will work? The time for deference is over. It is time to fight for jobs and services but most of all it is time to fight for democracy itself.

An Englishman's home is his sandcastle in the sky.


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