"The City" - 'socially useless' and needs be 'taxed more'

In a recent post I pointed out the need to tax wealth manipulation far more (e.g. many investment banking transactions), and ideally in a similar way to 'gambling' ... and it's interesting to now hear Lord Turner, chairman of the Financial Services Authority (i.e. the FSA - the UK's financial watchdog), say he also backs a new tax on banks (e.g. speculative transactions) ... as a means to prevent excess bonus payments in the industry. It was also even more profound to hear Lord Turner say that much of the activities in the City of London are "socially useless"!

However Lord Turner's comments do not set out a new policy, because as a government spokesman has been quick to point out, "tax policy" is a matter for the Chancellor! Lord Turner's comments do however put far more pressure on the Chancellor, Gordon Brown, and the Government, to show their true colours now ... and to show us whether all their 'talk' to date of fixing the problems are 'real', or all 'rhetoric' and 'spin' ...

To date it has been mostly rhetoric and spin, as they have handed bankers an open cheque (i.e. taxpayers' money on a plate), and given they created much of the UK banking crisis themselves (e.g. by allowing the re-integration of investment banking with commercial banking here in the UK) ... I think it's unlikely they'll admit their mistakes or fundamentally change tax policy here anytime soon, despite the fact that it's desperately needed ... they'll probably simply rely on fear and confusion created by others (e.g. groups like the CBI, the Voice of Banks, for instance) who will predictably speak out about the 'damaging effects' of such a move.

What Lord Turner has successfully done is to raise the 'stakes' and to highlight where 'responsibility' actually lies ...

Referred to on Stephanomics recent blog (on QE and banking). Take a look at Paul Mason's blog too - he's Newsnight's economics editor, and unlike Stephanie, he took time to blog about this specific subject himself.

The 'illusion of democracy'

Here's another important article* highlighting the 'misuse of power', the 'illusion of democracy' and the erosion of 'free speech'. How can this be right in the 21st century? ... well the simple answer is that it isn't right, and it has no place in a 21st century democracy ... and people need to start to make a stand and put up with this no longer ... our basic 'civil liberties' are rapidly being eroded by those who wish to maintain power, and 'profit from' power (i.e. Poweromics) ... and we need to challenge any strategy designed to engender fear into honest, hard-working people who wish to peacefully protest about the all 'wrongs' they see around them ... and who wish to help to put things right ... because if we really want to improve our nation, such people need to be supported, not 'gagged'!

* Take a look at my previous blog here too.

Cracking down on "Boomerang bosses"

An interesting article was published today pointing to an investigation into "boomerang bosses" ... and council chiefs who leave their councils with a big pay-off only to get another highly-paid council job.

Communities Secretary John Denham has said so-called "boomerang bosses" are undermining public trust. He is not wrong ... but there is a big difference between an investigation and effective action to 'crackdown' on such practices ... so whilst the title of the report again appears to contain more 'spin' than substance at the moment, let's hope an effective crackdown actually takes place ...

... and then moves on to look at exactly the same practices in the civil service, central Government and the private sector too ... where these practices thrive too. For instance how has Lord Mandelson once again joined the Government (with a mightily enhanced role), when he's unelected and has had to resign twice in the past for irregularities and misdemeanors already ...

There's a huge amount to do to restore public trust ... but are they serious in doing it? ... well it sounds like John Denham might be, but Lord Mandelson certainly won't ... and it's interesting that it's again being promoted by the Communities Secretary and being applied to local Government, not central Government. It's also interesting to note that John Denham is also promoting the idea of introducing more effective people consultation / democracy into local government / services at the same time (again to try to regain public trust) ... but once again it's unfortunately not being promoted for central Government / services ... which is where people actually have the least trust (and is also where most of our taxes are wasted).

So is this more spin than substance? ... let's hope not, and let's wish John Denham every success in achieving both of these goals, and the rapid expansion of them too!

'Traditional Economics' - Here comes the Spin

Spinning 'recovery' is well on it's way ... and as my previous blog pointed out, it's likely to 'work' for a while ... but not for very long*. Comments that 'house prices' are 'stabilising' are abound, and the Institute of Chartered Accountants is the latest 'group' emphasizing the upturn in confidence after they surveyed 1000 accountants around the country ...

The fact that it is in the interests of this group to make such statements should always be taken into account, but I have decided to refer to this article for a very different reason ... and mention it because it refers to the significant upturn in confidence in the 'banking', 'finance' and 'insurance' sectors, and "in particular the remarkable 'upturn' in the banking sector given the turmoil of the last two years".

To me (and many others) this will come as little surprise, as bankers are the only group the Government have helped (at the expense of all others), by bailing them out and presenting them an 'open cheque book' - offering them all of OUR money, which hard-working people will have to payback for generations to come through increased taxes (and less services) ... paying (and continuing to pay) for their failures, bonuses and greed. The Government have also done nothing to reverse the decisions that caused the banking crisis in the first place, or to stop it from happening again.

The Government have once again demonstrated the 'values system' they support and 'economic foundations' (or more precisely the lack of robust 'economic foundations') they have chosen to lay ... based on Poweromics** and the support of 'wealth manipulation' over 'wealth creation' ... and our nation will continue to the pay the price until this changes. My previous blog highlighted some of indicators capable of charting the real situation, but the Government will not surprisingly stick to referring to house prices and quoting simple GDP figures, even though more and more commentators are pointing out they are the wrong measures and completely floored.

They may have delayed the future 'battle' slightly, but not for very long, as the illusion of 'wealth' and 'recovery' will not last for very long, and things will quietly (and rapidly) get much worse (e.g. unemployment, debt, trade deficits, stress) ... especially as the nation believes it's own 'spin' and stops addressing the fundamental problems it actually faces.

The internet/communications technology will eventually change everything (including the 'balance of power', 'politics', and 'economics'). All the 'illusions' will quickly evaporate and the 'bubble' will finally burst. All of these are entirely predictable ... and history (and all current evidence) are telling us that we are not very far away from this now ...

* The Government are hoping it will up to the next general election (which is getting close) and perhaps a little longer.

** Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed.

Leanomics - looking for signs of recovery ...

There is currently a great deal of searching (and spin) associated with the 'green shoots of recovery', but what should we really be looking for ...? House prices increasing again ...? Stock Markets rising again ...? Well this post seeks to answer this question, by using one simple Leanomics test, known as the 'BUTS' test.

The BUTS 'economic' test looks at a number of factors ... and combines individual well-being & community indicators with financial indicators too. For instance it looks at:

B - Borrowing

U - Untapped Talent

T - Trade deficit

S - Stress

Whilst Government borrowing continues to rocket, and the Bank of England prints more money, to 'buy' more UK Government debt, it is not hard to see how bad borrowing is, and how it's now likely to be with us for decades to come ... and the trade deficit, and budget deficits, are also the worst they have ever been too ...

Stress is also growing rapidly, and even before the current crisis started, it was already (using the most simple and conservative of measures) standing at 1 in 4.

So what about the last one, 'untapped talent' ... well despite official unemployment figures being manipulated downwards for the last decade (e.g. by pushing numerous people to claim 'invalidity benefit' instead), the figures are continuing to show unemployment rising rapidly - reaching 2,400,000 people already and it's set to go well beyond 3,000,000 next year. Yet such figures are just tip of the iceberg, as the real level of 'untapped talent' it is actually far greater than this (and well over 50%).

There is growing concern about this, not just from a financial perspective, but from an individual point of view too, as more people lose self-confidence, belief and self-worth. There is also concern about all the social implications too, as stress increases and motivation reduces ... and as people's natural desire and ability to add value (and make a difference) to other people's lives reduces, reducing the overall well-being of the community, as well as the nation's economy, too. There is also the risk of growing frustration & anger, particularly from younger generations, as youth unemployment rates are much higher, they have been saddled with debt (e.g. due to tuition fees) and given little prospect of a job, house prices are still expense to rent/buy and they are also the ones who'll have to pay most of the Government current borrowing back (through future tax rises).

With all the government spin, the BUTS test is the real one to look at for signs of recovery, i.e. not house prices appearing to stabilise or stock market prices rising again (see my previous post to see more explanations for this), and because the Government have changed very little in terms of the 'leadership', 'management practices' & 'policies' they apply ... the actual unemployment, debts, deficits and stress levels all tell us that the real situation is continuing to get worse ...

But the youth are also more savvy, and are far more effective at using 21st century communication technology too ... so they have the power to change everything, and it will only be a matter of time before they do ... which is what the current 'politicians' are actually really worried about ... i.e. as it will change the balance of 'power', create a new form of 'politics' and a new 'economics' too ...

The death of Poweromics - A simple 'Coup de Text'?

The internet, cellphones and text messaging are changing balance of 'power' and the way political mobilizations are conducted around the world. From Manila to Riyadh and Kathmandu protests once publicized on coffeehouse bulletin boards are now organized entirely through text-messaging networks that can reach vast numbers of people in a matter of minutes.

The technology is also changing the organization and dynamics of protests, allowing leaders to control, virtually minute-by-minute, the movements of demonstrators, like 'military generals' in the field. Using texts that communicate orders instantly, organizers can instantaneously call for rallies against 'wrongs' and steer the actions of law-abiding protesters.

The Philippines, widely called the text-messaging center of the world, has led the way. When President Joseph Estrada was forced from office in 2001, he bitterly complained that the popular uprising against him was a "coup de text." Every major Philippine political party and nonprofit group has a database of its supporters' cellphone numbers and many now use computers to automatically generate mass text mailings to those phones with news about issues or rallies or upcoming votes.

Politicians in 'authority' clearly understand this (e.g. Gordon Brown mentioned it in a speech earlier this year) and in their fight to maintain 'power' (so they can continue to 'profit' from 'power') they will actively trying to stop it! For instance in 2006 Nepal's King Gyanendra ordered authorities to cut cellphone services after protesters against his absolute rule used text messages to help assemble street protests by tens of thousands of democracy advocates. This type of strategy will also be a very clear (albeit 'hidden') part of any G8/20 plan for whenever 'world leaders' meet (e.g. at the last G20 meeting in London for instance).

As mentioned in previous posts, communication technology (e.g. internet, mobile technology) is enabling a new era of democracy - which is a real problem for those currently in 'authority' and 'power' who don't want 'real democracy' to occur. IMHO one of the biggest scams/cons of all time is suggesting that the UK/US are a 'beacon' of democracy - when this couldn't be further from the truth. For instance take a look at my previous post about '21st century democracy' here).

Gordon Brown not only understands the change communications is about to make, he talks about it, and about a new world order that will result too (e.g. for tackling climate change, oppression, poverty, the financial crisis), based on a new set of values (responsibility, fairness) ... ! So is this particular 'leader' actually starting to get the message and looking to introduce moral values & ethics into politics, to really 'right the wrongs' and to deal with 'injustice' too ...?

Unfortunately all the real evidence from the UK suggests not ... in fact it suggests quite the opposite*. IMHO this 'showmanship' talk says far more about what he would ideally like to be remembered for (nb instead of completely destroying the UK's economy!) and associated with (e.g. in a similar way to Al Gore's - take a look at the following post too). Worse still, it arguably highlights the hypocrisy of a person who has actually been i) completely neglecting the needs of all the people in the UK he was 'responsible' for 'representing', ii) continuing to 'manipulate' democracy to make sure we don't get proper democracy, and iii) quietly supporting and introducing a myriad of new laws (under the banner of 'terrorism') to bring forward a 'police state', to 'reduce civil liberties' (particularly related to the use of internet, email and communications technology) and to restrict people's basic democracy (i.e. 'freedom of speech' and the 'right to protest').

In addition he has failed to address one of the arguably most widespread and 'fundamental' of 'injustices' - the application of Poweromics**. For instance rather than demonstrating values such as 'trust, honor, responsibility & respect', all we have seen is deceit, lies, broken promises, cover-ups, corruption and spin ...

... in fact in virtually every decision & action taken he has not only completely failed to address Poweromics - he's actually made it much worse (e.g. command & control, unelected ministers, centralised targets, party whips, quangos, spin doctors, growth in bureaucracy, growth in inspection, reduction in civil liberties, reduction in democracy, support for banking, lack of support for enterprise, financial crisis, bailout of banks, broken EU referendum promises, MP's pay/expenses fiasco, government/consumer debt, unemployment, stealth taxes, destruction of pensions, destruction of our nation's future, destruction of our children's future ... etc etc).

In fact whilst openly promoting the benefits of a new era based on social values ('powered' by 21st century communications) to everyone else around the world, in the UK he has been quietly doing a huge amount to 'stifle' it ... as well as to prevent a 'new era' of '21st century democracy' from being born ... by restricting 'civil liberties' and reducing 'freedom of speech' ... (mostly under the 'banner' of tackling 'terrorism', when in fact most of it has little/nothing to do with 'terrorism' at all, but has been introduced to restrict ordinary 'law-abiding' people's ability to be heard and to have their say, in a peaceful/collective way) ... to make sure Poweromics** lives on ...!

And are such 'strategies' likely to work for any length of time ... not really ... as history says change will happen sooner rather than later, and it will do so in many different ways ... for instance, if communications (like cellphones) are cut for any length of time, businesses cannot operate, nations stop working effectively (e.g. remember all the chaos at UK petrol stations when just a few people decided to protest - see below), and any confidence in that nation's economy/democracy will reduce further ... which most 'leaders' and nations cannot 'afford' to do (and certainly not in the UK) ... so their 'authority' and 'power' is much more fragile than they would like people to think ... and as the Phillipines past President Joseph Estrada found out to his cost.

When more of the nation, and particularly the 'work-force of the nation', decide to stop what they are doing (i.e. stop adding 'value'!) and collectively head to Westminster (and/or wherever 'leaders' reside) to protest at what's going on (e.g. poweromics, restriction of democracy, civil liberties, communication links being cut ...) change will start to happen, as they cannot lawfully, or practicably, stop peaceful protests, and if they started to detain lots of people (and perhaps millions of people), it would only make the situation much worse! The irony is many countries are already looking at the UK with pity, and ordinary hard-working people need to realise this and start to do something about it ... US citizens will, French citizens will, and eventually UK citizens will ...

... as Edmund Burke said, 'For evil to flourish, all it need is for good men to do nothing' ...

and the 'battle of the future' is a 'battle of values', a 'battle' that 'transcends nations' ... it was predicted many years ago but it's just beginning now. The outcome of the 'battle' will benefit society and communities all around the world (as long as we don't allow 'leaders' to create 'battles between nations' instead), and it will stop those who use (and misuse) 'power' in order to 'profit from it' (and at the 'expense of all others') ... as well as 'helping' all those in genuine need/difficulty ... whilst also 'rewarding' those who add 'real value' to others, their communities, their economies/nations and to the environment in which we all live ...

* As Prime Minister (PM) of the UK he has been more than happy taking massive amounts of others people's money (including our future generation's money) and spending all of it, systematically wasting between 40-80% of it ... and without ever having been elected to the position of PM by the people too.

** Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed.

Printing Money, Inflation, and Spin

With all the 'headlines' & 'spin' associated with 'Quantitative easing' ... do we really understand what it means, and what's really going on ... ?

This post is designed to do just that ... to get behind the froth, the big words, and all the hype/spin to understand what's really going on. ...

Let's start with Quantitative Easing (QE) - a big word used to bamboozle people and to make something sound very complicated when it actually isn't (remember previous ones like this too) - as what it really means is "Printing Money" ! ... well we can start to understand what this might actually mean now, and what it might do ...

So let's move on then ... if we print more money (£notes) to represent the same 'assets', then money (£notes) is effectively 'devalued' and the same asset is therefore now worth 'more money' (£notes) - this is 'true inflation' - or 'monetary inflation' - i.e. the amount 'money' has been 'inflated' without changing any assets at all ...

Hence it should come as no surprise that asset prices (including stocks) have 'risen' as a result of this (QE) - money has been devalued, but the 'value of the assets' are still the same - so there's no point getting carried away about the recent stock market rise (or in the fact that house price falls may have 'stabilised') ...

So why all the 'spin' about the stock market rally and using this as 'evidence' of a recovery? ... well that's part of the overall strategy ... to make 'people', and 'foreign / currency markets', believe that our economy is recovering, when in reality it's not recovering at all (as in reality it's still getting worse - take a look at unemployment continuing to rise for instance)!

Let's take the foreign/currency markets first. At the moment, as far as the currency markets are concerned at least, the spin/scam appears to be working a little, as the despite devaluing our currency, the exchange rates for £notes has risen recently in the belief there are signs that the UK economy is starting to recover! Take a look at the simplified model* below, from 'printing money', through to the 'illusion of recovery', combined with the 'spin' associated with 'Quantitative Easing' (QE), and it's temporary impact on 'currency markets'.

The temporary increase in exchange rates will also temporarily reduces import prices, but the problem with all of this is simple ... without changing what's actually happening on the ground (which our 'leaders' are not!) the spin/scam (just like any other pyramid scheme) won't last ... the 'illusion' and any 'assumptions' will quickly disappear ... and then there's likely to be a massive exit from (and huge reduction in value of) the pound, and hence a massive rise in import costs and 'price inflation' too.

Let's now look at people - starting with the vast majority of people. The spin/scam is designed to bring back 'confidence' again ... and to kick-start the majority of people to 'buy' again. For instance QE (or 'printing money') means the 'value of houses' can continue to reduce, but without 'house prices' appearing to go down (i.e. the value has actually dropped, but it's still 'worth' the same amount of £notes, as the currency has been devalued) - great eh ... and another aspect of the scam to bring back a feeling of confidence again, so people are more likely to spend as well as take on more debt!

Again, this scam is not hard to spot and is quite simple in its construction - the problem is it doesn't change anything on the ground in any sustainable way - and as any pyramid scheme/scam it will also fail and it's likely to enhance the decline in housing speculation further down the line (see my previous post) too ... as it combines with interest rates starting to track rapidly upwards again (to deal with all the growing 'inflationary pressures', as highlighted earlier), and as the debts taken on by Government have to be paid back through higher taxes. Most UK people are currently set to become a lot worse off over the next decade, in terms of the value of their pensions, the money they actually have to spend, and the value of some of the 'assets' (in particular - their house) they currently 'own'. Wage inflation will also attempt to be restrained, by keeping fear and unemployment levels relatively high [nb the problem is the UK Government cannot afford to do this, without cutting Government support or raising taxes even further too ... which will create further problems / unrest].

This outlook is not the same for all people however. For instance it's not the case for current 'leaders' and 'bankers', because as the model above also shows, they will 'profit' greatly once again - from the apparent 'rise' in stock prices (once again without doing anything at all), from reducing all of our pensions, and from the 'interest' people have to pay for any debts they have, or take on in the future. Whilst wage inflation will be held back for the vast majority, current 'leaders' will be 'rewarded' for their efforts in ensuring this happens too.

The application of Poweromics** will become increasing clear, and Ignoromics*** will reduce as more people lose their jobs, become progressively worse off, far more aware of what's going on and step forward to make their 'voice heard' ... a real 'battle of values' will then begin (powered by the internet) ... and a new 'values system', and a 'new economics'****, is likely to emerge ... though those currently in 'power' will fight all they can to avoid this from happening and to maintain 'power' ... so they can continue to 'profit from power' ... [nb many of the laws passed in the wake of 'terrorism', weren't really about dealing with 'terrorism'!]

Hard-working people around the world will soon face a stark choice about the future, and the success & well-being of their community/nation will depend on the choice they make, the values they uphold, and the 'real value' they create ...

We all face challenging times ahead, as history tells us 'change will happen' ... we just don't know exactly how or when ... but given the advent of the internet, 'change' is very likely to occur in many different ways ... and foreign investors / currency markets are unlikely to buy the 'illusion of recovery' for very long too ...

* Whilst more complex models can be used, IMHO the simple model above tells us most of the story, whilst the rest simply adds finer (and arguably unnecessary) levels of detail.

** Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed.

*** Ignoromics = People are either effectively ignorant of the situation (e.g. the overall environment) or not prepared to take responsibility to make sure it changes for the better.

**** Leanomics = People taking responsibility for adding value and continuously improving the situation for others (e.g. customers, communities, overall environment), based upon fundamental values such as trust, honor, responsibility and respect.

Referred to on Stephanie Flanders blog, "QE more to do" (Post 72)

'Land' of the 'Free' ... but who's 'paying' for it ?

I've often referred to the folly of wishing for (and relying upon) house prices to rise again, as for most people this simply equates to 'paper wealth', not 'real wealth' (as everyone still needs a roof over their head), and it creates a huge (and totally unnecessary) financial burden on our children, and our children's children (e.g. because every month a huge proportion of their hard earned money has to go straight to the banks in interest).

Whilst this clearly starves people of their own money, it also constrains their standard of living, their freedom and choices, as well as their natural creativity & ability to innovate too - which could otherwise have been put to good use in creating 'real value' for others ... for their community, as well as creating products & services that are tradable all around the world (which creates more 'value' and 'prosperity' for a nation).

At present most people do not realise what's going on and they simply join the 'treadmill of life', looking to buy a house, taking on huge debt and having to desperately look for ways to pay it back (e.g. through any 'money for nothing' scheme they can see themselves, such as more property speculation, using buy-to-let-schemes, for instance). The problem with this (besides all the ethical ones) is that 'wealth manipulation' does not add 'any real value' (or wealth) to an economy / nation, or increase a nation's overall well-being & happiness ... and it doesn't reduce a nation's trade deficit or level of borrowing either (in fact it makes all of them worse) ... and just like any 'pyramid scheme', it's now starting to collapse, big time, and it has the ability to take the 'whole nation' with it ...

So how have we got to this? Well, there are many steps that have taken place, but arguably one step in the wrong direction took place in the UK during the late 80's/90's (under Margaret Thatcher) as she tried to introduce the Poll Tax. Do you remember all the demonstrations that took place as a result, the fact that it led to Margaret Thatcher eventually losing her job, and that it was updated/changed to a Property Tax instead (that's still levied today)? It turns out that the changes Margaret Thatcher made were still highly significant - as a land tax (or Land Value Tax) would have worked entirely differently in 'economic terms' to a property tax - as one taxes land ownership, whilst the other taxes people based on the value of a property (and not the land itself) ... which we need to understand further ...

Land Value Tax is well known and arguably one of the simplest, fairest and best methods of taxation, as it taxes all land ownership based on it's potential value, based on it's natural position/resources and the community/amenities placed around it (e.g. people, jobs, transport, services) ... which are placed their by us - the Community (hence the original, and true definition, of a 'Community Charge'). It deliberately separates the 'value of the land', from the value of a 'property' (i.e. the basic bricks/mortar) on that land so it can tax land, and not the building - which is effectively the opposite of what we have now! By taxing land ownership (not the individual tenants or property) it also drives landowners to seek better 'economic' use of any land they own (instead of simply hoarding it and watching the value of their land grow without doing any work at all) ... and it has numerous more positive aspects too ... for instance when implemented properly the land tax itself cannot simply be passed on to those who live there, or who 'use' the land, because of the overall environment and the natural 'economics' that's created, as it simply taxes land based on it's 'economic value', and if landowners seek to pass on this tax, then people & enterprises are able to adapt and move to where the 'economic' conditions are more favourable (and the landowner has to pay the tax whether they are using it to it's full potential or not !) ...

A Property Tax (i.e. based on the size/value of a property) naturally moves the focus of attention away from adding value and switches it to 'asset speculation' instead. It also arguably avoids one of simplest forms of taxation (e.g. it cannot be avoided, it stops asset speculation/hoarding, and it arguably provides one of the most 'natural', 'ethical' and 'fairest' forms of 'economics' known to mankind). The avoidance of land tax, coupled with the fact that 'land' is one of the very few things left that is still not subject to 'inheritance tax', has made wealthy land owners pay far less for 'owning land', to 'hoard land', and to pass on land/wealth to future generations (without the risk of inheritance tax) ... so they can also continue to make money from it without doing anything at all (yet another example of 'wealth manipulation' instead of 'wealth creation').

One could argue that a Conservative Government would naturally want to do this as the party is well known to be 'sponsored' by the very rich, who are clearly the small minority benefiting greatly from such steps. However, when Blair/Brown took over they did very little about it, in fact they complicitly supported house price inflation, as coupled with banking (nb mainly 'asset speculation' and 'wealth manipulation' again), became their way of 'building' economic 'growth' without apparently having to work hard or creating lots of real value (and by two 'leaders' who preached to us prudence and who were supposedly brought up in the 'ways of the church')! One clear (and arguably callous) example of this was when they deliberately changed the Bank of England inflation target to one which specifically excluded house prices ... to allow house prices to continue to rise unchecked (i.e. as interest rates would no longer have to rise). Hence the 'illusion of wealth' was extended a lot longer, which will make the fall much deeper and greater now.

Real wealth is created by building new homes, not the price of existing homes going up. The bricks and mortar in themselves should arguably normally depreciate as they get older too, though the land value may grow (which is another good reason for separating the two). Yet the current system continues to incentivise landowners to hoard land and benefit from its continual growth in value (at very little cost - nb the low ceiling deliberately put in place with the property tax) and often without using it. Insufficient supply of housing, due a mixture of hoarding, demographic changes and increasing marital breakdowns (nb which are often related to money and stress!), means basic 'economics' (i.e. supply and demand) will make prices of property more than they could/should be, but arguably the main reason for all of this was to raise tax but i) to avoid a 'Land Value Tax' (so as to mostly ignore the real 'economic value' of land), and ii) to favor 'wealth manipulation' over 'wealth creation' ... and until both of these are reversed, things will only get worse ...

Value creation will continue to decline and unemployment will grow, borrowing and trade deficits will continue to get worse too ... all that will continue is wealth being transferred to the landowners, the bankers, and the already rich, whilst everybody else pays for it in their taxes, mortgage interest and their worsening quality of life (and for generations to come) ... so who's 'paying for it' - well it's pretty clear that good and otherwise hard-working people & communities are ... in terms of their well-being & happiness, the 'spare' money they have to spend, and in the 'freedom' they have and the 'choices' they are able to make ...

Solutions do exist, but those currently in 'power' will try to 'fight' any such change. In many ways we face a battle that 'transcends nations', and circumstances will continue to get worse until more people start to take proper notice, realise what's actually going on, and decide that this must change ... in the future we need to reward 'wealth creation' not 'wealth manipulation', and we need to move away from the toxic mix of Poweromics & Ignoromics we currently have today ... to a much wider, much fairer, and far more holistic form of 'economics' ... which I call 'Leanomics' ...

Land Value Tax should arguably be introduced early on (nb places like Hong Kong, Denmark, Singapore, Taiwan and Australia already have it and it works very well), so that it can replace, or at least dramatically reduce, other arguably less fair forms of tax* ... such as taxes on jobs/employment [Income Tax, National Insurance Contributions], taxes levied on enterprise [Corporation Tax] and taxes paid for providing goods/services (i.e. real value!) to others [Value Added Tax] and all the other 'stealth taxes' [e.g. road tax, congestion charging**] for instance too ...

As can be seen here, Leanomics is based on an entirely different 'values system', and one that focuses on (and rewards) ...

"People taking responsibility for adding value and continuously improving the situation for others (e.g. customers, communities, overall environment), based upon fundamental values such as trust, honor, responsibility and respect"

... a system very different to one the UK has right now, but ones that other nations (particularly smaller nations and those in the far east) understand only too well ...

* It is also worth noting that these are all set to rise dramatically in the future (VAT increases etc have already been announced), not reduce, to pay for all the current failure!

** If you're perhaps wondering where 'carbon taxes' fit in, and why I've included road tax and congestion charging as 'stealth taxes' here too, you may also want to read this.

The Writing's on the Wall ...

I was interested to read an observation made by a fellow blogger (writingsonthewall) on Robert Peston's blog (post 60), referring to where the current slight up-turn in house prices comes from ... and what we are yet to face (e.g. 'capitulation' & 'despair') - it chimed with a number of people reading the blog and with much of what I've been saying here too ... so I thought I'd summarise his comments here too ... and link it to my previous post ...

"... you can listen to all the optimism - or you can prepare for the worst and be pleasantly surprised if the worst does not happen. This graph (included below) beautifully explains where the mini-boom comes from. It's for the housing market but it applies to all asset bubbles (and we are currently moving towards 'return to normal') ..."

As pointed on in my last post, wealth manipulation 'transfers' wealth (e.g. share dealing, loans, mortgages, debts) ... whereas wealth creation is achieved by 'providing value' which 'creates wealth' (e.g. products, services, shelter ...).

House prices are starting to stabilise/go up again slightly (e.g. in the UK), partly as we've been building too few houses for so many years (nb a lot of projects have virtually stopped now too = i.e. we've stopped creating any more value - i.e. real value/wealth!) ... and partly due to the low interest rates at the moment (NB the gap between the rate at which banks now lend money compared with the Bank of England rate itself).

However asset (house) price inflation is arguably not what most hard-working families should be looking for ... as it simply means our children, and our children's children become forced into taking on more debt (and effective poverty/stress), for more of their lives (just to pay for a roof over their head) - so that the bankers/landowners can benefit from this more.

A reality check is due (as highlighted in the graph) and this hasn't happened yet ... but it will and the whole 'illusion of wealth' will go with it, alongside the current 'political' and 'economic' system ...

This will be further exacerbated when people realise that the politicians have effectively colluded with the bankers to take the future health, wealth and prosperity away from our children, and children's children (paid off in future debts/taxes), due to the colossal bailouts of the banks (who have made billions, have personally pocketed millions, and who are now doing exactly the same thing again - and all at our expense, and not from 'creating wealth', but by 'manipulating wealth!).

History says change will happen, and with the advent of the internet now, it's likely to occur in many different ways ...