Editorial - Why Are We In Such A Mess?

"The News In Shorts" is usually reactive in its reporting but smugness, even in the face of such obvious political incompetence, needs to explain itself. What then is our analysis of the present mess? The economic crash was precipitated by a crisis in the property market. For thirty years the finance industry pursued a policy of inflating property prices across the world, pushing prices to such a level that those not already on the property ladder had no chance to even start climbing. Their answer was to deregulate the property market by lowering deposits, increasing the income multiplier and, more dangerously, increasingly ignoring customer's ability to service the debt. Property values soared, feeding the banks with increasingly large mortgages and, in tandem with estate agents, increasingly large fees. In essence they had created the world's largest Ponzi scheme and governments turned a blind eye. As the market priced new buyers out, it became increasingly dependent on existing owners remortgaging their properties to release what amounted to unearned income in order to finance lifestyles they wouldn't normally be able to sustain. Then suddenly, but not unexpectedly by those with half a brain, the market began to collapse for want of new buyers entering from below. A market is not a market if there are no new customers. Banks then began to trade in subprime mortgages - playing pass the parcel and hoping that they wouldn't be the one's holding the package when the music stopped. When the music did stop they found that they had all been telling lies, hiding subprime loans in seemingly attractive packages, and that they all owned more bad debt than they could handle. Suddenly the banks were in danger of failing and they turned to the lender of last resort - the taxpayers of those nations that they themselves refused to pay tax to. Governments panicked and did as the banks asked, fearful that the entire financial system would collapse. Having learned their lesson - that being in danger of failing meant access to yet more money - the banks carried on as if nothing had happened and kept paying thmselves obscene bonuses for failure. And governments kept throwing money at them out of sheer terror. Now we inhabit a world of increasing numbers of homeless people in a landscape filled with empty houses as governments fall over themselves to maintain property values for fear that they will be turned out of power if they don't. What then is the answer to all this? Property needs to be revalued downwards to realistic levels where new buyers can afford to buy them. And banks need to be told that they will have to meet the shortfall, even if that means they go bust. After all, that is what happens to other businesses when they fail - isn't it? They can then be replaced by a nationalised bank that can provide mortgages at realistic levels for houses at realistic prices, stimulating the economy and cutting out the cancer that western capitalism is suffering from at the moment. Make sense to you?