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Credit Crunch Reform

 
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Haydon Bradshaw



Joined: 11 Jul 2007
Posts: 10
Location: Bath Somerset England

PostPosted: Mon Dec 08, 2008 5:44 pm    Post subject: Credit Crunch Reform Reply with quote

There have been calls for renewed regulation of the failed, discredited credit system.
But not for reform, yet! After the 1929 panic it took about seven years of depression before matters of reform seemed to surface.

After the recent panics and bailings out,
"banks remain weighed down by the same toxic assets that sparked the whole mess" Economist.
Financial First Aid to deal directly with toxic assets, early on, would shorten the grief.
Although still not reform, consider taking these steps:

1. Value the house threatened with foreclosure, and its rebuilding cost.
2. Write off the land value share of the mortgage, its title going to the Bank of England, who issues credit to the lender for the amount. Previous repayments are credited to the borrower's title in the building.
3. Rewrite the mortgage, so the borrower holds the building only.
4. The borrower stays in his home, with secure land tenure for as long as he pays annual land rent to the Bank of England.
5. This revenue can be used to relieve tax on the 30% lowest earnings.

The markets for such bank assets, and for credit could begin to recover.
Land prices will continue to drop further, but real tax cuts to reduce marginal employment costs and marginal enterprise will fire the economy.

The US are ahead of us in this cycle,
but it is said that about a third of houses on the US market are foreclosures owned by banks.
Panic driven 'bail out' money is sprayed around Wall Street,
but nothing is being done for Main Street - and the prime cause of the problem.
For striking money reform oratory see the youtube under Money Reform below.

The land element in a house price has been puffed to more than 50%,
but let us take it at 50% to set out a simple example.
Take a 20 year repayment mortgage of £200,000.
The annual cost to the borrower @5% is £17,436.

House element. £100,000 mortgage cost pa £8,218
Land element. Rent to Bank of England @ 20 years purchase £5,000
So total mortgage and land rent charges are £13,218
Reductions in borrower's annual outlay 24%
Reduction in borrowers total capital outlay:£184,000

With surgical precision this removes the root of the credit / bank reserve meltdown, yet retains long term public assets. It relieves the poor, the house market, bank reserves and credit squeeze; and public revenue. It cancels out debt, reduces interest payments, and recovers a little public credit money seigorage, (which with full reform, would evidently supply 15% of current revenue levels before starting inflation).

When ballooned house prices drop 30% - 40%, proper reforms may start more easily.

TAX REFORM
www.schooleconomicscience.org
www.henrygeorgefoundation.org
Progress and Poverty by Henry George
youtube: Fred Harrison; Renegade Economist

MONEY REFORM
www.prosperity.com
Creating New Money Huber & James Robertson - download.
www.youtube.com/watch?v=Feyu2Db2Q

CURRENCY REFORM
Storage and Stability. by Benjamin Graham. 1937
World Commodities and World Currencies. ditto. 1944

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It is not possible to both understand and disagree. P.D.Ouspenski.
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