Mr. Redwood, according to the report in the Metro, Gordon Brown has invoked anti terrorism laws against the assets held by Iceland and Icelandic Nationals in the United Kingdom.

Do you think this is appropriate use of leglislation in this case?

I don’t think so, but it does in my opinion illustrate how easy it is to abuse this type of sweeping leglislation once it is on the statute books, regardless of the assurances given during the passage through Parliament.

As long as the British people have a culture of owning their own property the ups and downs will happen. If a government creates a fiscal policy to deter asset price inflation, and it proves unpopular, the other party will simply promise to abolish it upon election.

Why don’t we just accept that boom and bust is a reality, even if it wasn’t property it could be another asset class. People borrowed to buy shares in the roaring twenties and during the dotcom boom. If we all went crazy for some other kind of asset I’m sure someone would find a way of creating the loans to pump the bubble up.

If you ask me, the sooner property falls 30 – 40% from peak the sooner the big wall of money out there will dip their toe in the water of recovery.

That’s been the flaw in your argument. No private capital entity, or for that matter, sovereign entity, has been interested in investing in a UK bank.

There is no alternative, as I think even Osborne acknowledges.

Still taxpayers wake up tomorrow owning the banks. Socialism triumphs. The road to serfdom beckons.

What do you think re interest rates. Should they be increased or decreased ?

Grateful for your thoughts.

Mark Wadsworth’s suggestion of debt for equity swaps looks perfectly feasible but there appears to be little appetite in the City for anything beyond temporary part-nationalisation.But why temporary and why part?The only inference to be drawn from the temporary nature of the arrangement is so that the banks can be tided over and when they start making money again can be bought back so that the private sector can step in when big trouble-free money is to be made.The part nationalisation notion just affords a free ride during the trip back to profitability with the shares gaining in value along the way.

Properly conducted national ownership of the production of credit is not only a useful stop-gap but a juster system whereby the nation resumes control of the common stock of money in much the same way as the Single Tax on land returns the profits of land (or economic rent) to the community.(The great land reformer Silvio Gesell also taxed the circulation of his money at set intervals.) Interest rates in a fully nationalised scheme could act as such a tax(minus the payment to savers)which could replace other taxes on the workers (already less burdened under LVT).Also Gesell’s money circulated at a ferocious speed as people passed the notes on before the tax became due so unfreezing the system.

At the moment LVT might serve to unfreeze the system somewhat because the banks could be freed to lend money on houses without fear that they would be getting into another bubble, which might develop from the value of the land underneath expanding before catastrophically contracting. The much sought-after floor in the housing market slide should be not some ratio of house prices to earnings(by definition inflationary) but as near as possible the cost of the bricks , mortar,labour + a profit.

Reply: This is not a Conservative website. This happen to be my website, and I am a Conservative. I did not make critical comments about the miners, and do not intend to attack the many people who worked for banks doing a good job. I have already criticised the Directors and regulators.

Exactly!

The private sector solution is called “debt for equity swaps”.

Like Neil Craig, I am horrified that Cameron & Osborne are going along with this whole idea that the government should be spending one penny of taxpayers’ finest on propping up banks.

That’s that fixed for now. And if you want to avoid property price/credit bubbles in future, sensible regulation is half the battle and replacing Council Tax, Business Rates, Stamp Duty Land Tax and Inheritance Tax with Land Value Tax will prevent them once and for all.

Roll up roll up !

Get your economic fallout shelters here !

I’m taking orders now so if you’d like to send me £100 please I’ll send you a drawing of how to build one of your very own.

Choose any colour you fancy as long as you have the paint.

-its just that Brown simply can’t make up his mind and really believes he can “leak” his way out of it.

Except that the leak this morning reduced the mkt cap of RBOS from £20bn to £14bn.
Probertly reducing the proceeds of a Govt 1-for-1 rights issue, to too small an amount to provide enough capital to provide a bottom for the RBOS.

I genuinely believe that Cameron’s “all party consensus” should be abandoned in the face of this extreme government incompetence, we are very close to a proper Bank Run, one that takes civilisations down with it.

Who is going to be our Leo Amery?
Who will say this to him in the Commons?
“You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!”

Go on John!
Do um!

Its a pity that you are not reported more widely. ah but you are a Tory and only the left are allowed time on the BBC.

I notice just like the ERM we will get no help from France or Germany as its every man for himself as before.

Mr Cameron does seem rather fond of all this ‘Socialism’ stuff doesn’t he: are you in the right party.?

There is no technological reason for recession – the oil price rise which started it is over, with prices now under $90 (remember that the $ has almost halved in value sincce Bush was elected so this is about te equivalent of $50 in yesterfay’sprices) & “peak oil” which was going to destroy our ecoomya couple of monnths ago is no longer problem.

If we put 1/4 as much into supporting nuclear power, X-Prizes, GM, cutting Corporation Tax, fixing our crumbling infrastructure & cutting regulations as we are into propping up banks we would be in an enormous boom now.

http://www.lewrockwell.com/rozeff/rozeff92.html

As I suggested in Andrew Lilico blog in Conservativehome…

‘The problem isn’t deposit insurance, the credit crunch is about Banks struggling to get funds from the inter-bank market, which has become banks not wanting to take other banks as counter parties on their books.
The solution to the unwillingness of banks to take other banks as counter parties is the same as has been done in the futures markets, i.e the counter party to a trade in a futures exchange isn’t the person you have struck a deal with but the clearing house that guarantees the trade.
In the case of the inter-bank market, it seems to me that the Bank of England should make its self as the ‘clearing house’ for money market transactions, and so in acting as the counter party to money market deals it should restore confidence in the money market and get it to free up. If this action was replicated by all main central banks international capital flows would be restored.’

We can be fairly sure now that our Lords and Masters do not have an adequate mechanism for calculating systemic global risk. There are clearly two different but parallel banking systems. In one are the commercial/retail deposit taking banks. In the other are the investment banks who are basically not regulated and work more like Corals or Ladbrokes betting offices, but not as well capitalised.

It would have been nice to keep the two separate with a clear set of “rules of engagement” between the two. The US has buggered that idea by converting Morgan Stanley and Goldman Sachs into deposit taking banks.

Deep derivative products like credit default swaps have a role to play; but, they can expand at the speed of light into the worlds longest daisy chain attached to some little bond somewhere at the back of a bank vault. Fortunately, a lot of them eventually cancel each-other out.

The day of the pure investment banks may be over. There will be a lot less banks when all this is over; money will be dearer for a while; growth will be slower.

Meanwhile, I am thinking of making a bid for Iceland, and I don’t mean the shop. (Is there any good skiing there?)