This section is applied Christianity. It is the result of applying some of God's principles to the banking system and its regulation or lack thereof. It is also a further example of the wonderful principle proven by the journalist Clive James (on his Saturday Night Clive show) that for every problem mankind has, there are academics or business people who know the solution and then there are politicians who are too incompetent or self interested or corrupt to implement that solution. Clive showed that democracy does not work. It puts people in charge of areas of mankind's activity which they are not qualified to manage. President Bush for example.
The UK banking system over the last 25 years has become more and more property focussed. They have been given the power to throw women and children out of their homes and they have abused that power to invest massively in residential property and have neglected to invest in the economy in which that property is based. The fundamental flaw in western banking strategy over the last generation has been the misconception that residential property is secure, that it in itself is a security. It was believed to be secure because people really do not want their children to be thrown out of their homes. But in truth it is only as secure as the economy in which it is located. So if banks fail to lend effectively to businesses in the economies where their 'mortage securities' are located, they actually have no security.
To set the scene from a biblical standpont please consider the following scripture...
6 No one should seize a hand mill or its upper grindstone as a
pledge, because it is a soul that he is seizing as a pledge.
7 In case a man is found kidnapping a soul of his brothers of the
sons of Israel, and he has dealt tyrannically with him and sold him, that kidnapper must also die. And you must clear away what is bad
from your midst...
10 In case you lend your fellowman a loan of any
sort, you must not enter into his house to take from him what he has pledged.
11 You should stand on the outside, and the man to whom you are
making a loan should bring the pledge outside to you.
12 And if the man is in trouble, you must not go to bed with his
pledge.
13 You should by all means return the pledge to him as soon as the
sun sets, and he must go to bed in his garment, and he must bless you; and it will mean righteousness for you before Jehovah your
God (Deuteronomy 24).
So of course you should not actually take his whole house as a pledge!! Neither could you take a soul as a pledge. And if you took anything essential such as an only garment or an only mattress, then since it was pledged, the debtor should certainly give it to you. But since you love your brother, you should certainly return it to him before the sun set. This was very proper behaviour. The law did not say that the debtor could just not bother to give the pedge back and just presume upon the kindness of the lender. No he must give what he pledged so long as it was not a soul or his means of living (such as his house and land or the tools of his trade). But if the pledge was necessary for the basic existence of the debtor then the lender should return it before the sun set.
Anyone could choose to sell his house or his children or his wife or himself into slavery in Israel. But no one could be forced into that position by any creditor or any judge or any bailiff. Slavery was a family run social services network back then. And on every 7th year, all Hebrew slaves were to be set free unless for some reason they did not want to be set free in which case they became lifetime slaves.
So the whole western banking system has become based upon usury. It is centred on the extortion that banks have the power to throw defaulter's families onto the street. Whereas the law of Moses provided that even a debtor's overcoat should be returned the day it was seized by the lender. Now Sir Issac Newton discovered that action and reaction are equal and opposite in his Newtonian Dynamics. That is how the physical universe is created. We have all experienced this law with every physical collision in our lives. But the physical is a tutor to the spiritual. And as regards human interactions Newtons 3rd law becomes...
7 Do not be misled: God is not one to be mocked. For whatever a man is sowing, this he will also reap (Galatians 6)
The reaping and the sowing may be separated in time but the one will lead to the other in the end. So bankers who live off this usury will one day be thrown out of their homes and offices.
So really Deuteronomy24 and Galatians6 are the biblical principles behind the fix that we now propose. Although the writer also has extensive experience in both the property market and the derivatives markets which he uses to define the specific form of the fix.
The answer is simple. When property values start to fall, banks start repossessing at an accelerating rate. Northern Rock, the government owned bank in the UK, is now responsible for 25% of all UK repossessions. How sick that the public should be forced support a bank with that kind of morality! These repossessions have to be sold very cheaply at distressed sale values, which brings the property market down more. This begins a negative feedback loop in property prices, a viscious circle, where the lower the price goes the more repossessions occur and the more repossessions occur the lower the price goes. In fact banks repossess so aggressively that they produce a backlog of unsold repossessions. It is this backlog the extends the property crash for several years rather than the thing being over within a few months or quarters as it is with other commodity crashes.
The way to stop property crashes continuing is to effectively stop repossessions. Now one could just propose a moritorium on repossessions - Hillary Clinton proposed this in February 2008. She comes from a family that knows how to run an economy and pay off national debt. But that would scare the banks into total selfish mode so perhaps a better idea is to let them repossess but not let them remarket the repossessions until the market has recovered. We could then use the backlog of repossessions to moderate the upmarket and prevent the next property bubble. In the meatime the government would pay the interest on the repossession so that the bank loses no money, and the mortgagor would stay in the property with his family paying whatever he could to the goverment, as determined by a judge if necessary. This would be a kind of government housing association. This would stop the property market declining or at least slow it substantially.
Now the banks are all in big trouble because they have purchased leveraged mortgage backed securities and have not imagined that these things could go down in value. The US property market is a $10 trillion market. Derivative leveraging can be anywhere from 10x to 50x. The main game has been the selling to each other of the next 25 years of mortgage interest payments. The trouble now is that in a lot of cases these payments will never exist. So do the maths and you see the magnitude of the problem. Worries about being able to meet the margin calls for these derivatives in a falling property market have led to the bank liquidity crisis.
When Paulson deliberately choose to permit Lehman brothers to fail, at that point, all banks thought - wait a minute, which bank can we trust? Which bank will Paulson abandon next? Hence they stopped lending to each other and the credit freeze began. In fact we should call this disaster the Paulson-Bernanke Depression since Paulson triggered it and Bernanke is throwing money at it in a way that we shall now prove cannot fix it.
Bernanke, Paulson, and Brown have proposed giving huge amounts of money to banks to solve their liquidity problems. This seems from a superficial evaluation to be a good idea but it is fundamentally flawed for the following reason.
The credit crunch is not the primary tumour here. The primary tumour is falling house prices and the leveraged effect that has on the future viability of banks. If we fix the secondary tumour of banking liquidity but fail to address the primary tumour of housing price collapse, the patient will still die. So we can be certain that injecting billions into banks but permitting the housing market to continue falling will not work.
On Sunday October15th, 2008, at the economic club of New York, a Harvard Economics professor asked Bernanke the following loaded question: Do you think that it is possible to avoid a depression and fix the credit crunch without enacting a policy which stops house prices falling?
Bernanke gave the classic power hungry status seeking bureaucratic response: Ha ha ha, yes I am aware of your theories and respentations professor - ha ha ha ha. But I am more than satisfied that the measures which I, Ben Bernanke, the Fed Chairman, Yes the Chair-man of the Federal-Reserve, Ben Berrrrrrrnanke, have taken in setting up committees and spending billions and then setting up bigger more international committeees and spending trillions and then planning in the future to set up even bigger more galatic committees inviting all the aliens from the delta quadrant and spending quadrillions will be sufficient to deal with this matter. And in any event the last time I looked at the door of the Fed Chairman's office the sign said: Bernanke, that is Ber-Nan-Ke - OK? So who is the the fed chairman professor? What is his name professor? (This is obviously a charicature of his response but has the substance of it).
It was the classic Clive James situation where the academic had the solution. A solution which had also been proposed by the Clintons and even attempted by McCain. But the bureaucrat was more interested in his own status than he was in solving the problem - which could not be more ciritical to mankind's prosperity or security.
Now it is relatively cheap for governments to pay the interest on all the repossessions in their respective economies. 100,000 repossessions in the UK would cost around £150 million per month and 500,000 repossessions in the US would cost around $750 million per month. These figures are tiny compared to the trillions now being wasted. The governments are trying to solve the problem in the secondary leveraged space, at the banking level, when they should be solving it in the primary non leveraged space, at the housing market level.
The solution is this simple. STOP HOUSE PRICES FALLING. That is it. If you stop the rot, then banks know they have no further exposure and all the worry disappears. Now if taking all the repossessions off the market does slow down the price crash but does not stop it, then the government should remove from the market and pay the interest on the mortages of all houses and flats that have been on the market for more than 6 months and put them in the housing association until the market recovers. And if that does not cause prices to start rising then they should do the same thing with houses and flats that have been on the market for 5 months etc etc. Until the market recovers which it will do when demand exceeds supply like any other market.
They must also ensure that there is a reasonable supply of residential mortgages at sensible income multiples whilst this goes on. They must understand that banks will not provide said supply because they are institutionally selfish and are incapable of acting in the common interest. So the government will have to fund a new bank with no bad debt to do this job in the short term. Let the banks watch their mortgage market disappear to this new bank in front of their eyes. That is the best way to kick their butts into lending again.
Banks must understand that if they repossess in a property recession they will not be permitted to market their 'security' until the recession is over and neither will they be permitted to throw familes out of homes in their usury. It is OK to repossess a second home or an investment property, but not a family home. That will moderate their absurd lending practices in the future. Ideally in the future no lender should have the power to evict families from their homes. This will force banks to lend on businesses rather than pushing house prices up to the level where a nice detached family home in London is 20x a doctor's salary in 2008 whereas it was 1x a doctor's salary in 1968. That really shows how banks have destroyed the moral values of our society. They are guilty of financial genocide in the hundreds of billions and the only sentence so far passed upon them is that they say sorry before a committee in Westminster for a couple of hours and get a somewhat smaller annual bonus. Whereas if a bank robber steals £10,000 from a bank he gets 5 years in jail.
But we cannot blame only the banks. For they are the sheep and the government, the FSA, the treasury and the Bank of England, are the shepherd. This world, and its media, normally blame the sheep when they go astray and suck up to the shepherd. But the true villains of this piece are the governments and their regulators over these last 25 years and especially the over the last 10 years. They have permitted encouraged and profitted from bank usury. All their mortgage market regulation has been a pointless charade. Banks may go bust, but governments and regulators are the ones who have really failed us.
More recently Gordon Brown has lead the way in betting a whole nation's economy on this rescue plan for banks which ignores the primary tumour of house prices. Is this not the height of irresponsibility? If house prices continue to fall then not only will banks go bust but whole countries which underwrite those banks will be following Iceland, the Northern Rock (literally) of national economies, under water.
In the UK a couple had 3 children and one of them was found to have hairline fractures in his leg. Social services claimed that these could only have arised from parental abuse and confiscated all 3 children and had them adopted by 3 other families whilst the court case into the abuse was delayed.
By the time the case was heard all 3 children were irreversibly adopted. The parents were cleared of abuse, it was discovered that the child with the fractures had a genetic condition.
Social services then used the law to say that the adoptions were irreversible and so the children were now lost. The government position is well no system is perfect we do the best we can, we are sorry we failed in this instance.
God's position is that the children are owned by the parents and were kidnapped by the government through their incompetent soical services. What should happen now is that the court should give the parents the power to decide whether to retake their children or to leave them where they are or to operate a joint custody for a period until the children can either decide for themselves or until the children are comfortable enough to be returned to their parents. The adopting parents could then become 'uncle and auntie'. The point is that God gave the children to the parents not to the government. Even today these children are still kidnapped.
4 But if any widow has children or grandchildren, let these learn first to practice godly devotion in their own household and to keep paying a due compensation to their parents and grandparents, for this is acceptable in God's sight (1Timothy 5).
To God wives are owned by husbands and children are owned by wives and husbands. So the social services have acted as a thief. Why were the children not given to relatives during the court case? Why were the parents assumed guilty until proven innocent? Even now the children are owned by the parents not the government.