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...a society made up almost entirely of mendacious megalomaniacal psychopaths, do declare that the causes of the current economic crisis are basically nothing to do with us:

3. During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.

4. Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption.

God it makes me sick. Lying miserable tossers. Understand this well. Maintaining low interest rates, in order to get more people borrowing more to put into a land price bubble which would enable others to borrow to spend our way out of a mini-recession at the beginning of the century was DELIBERATE PUBLIC POLICY. Deliberate public policy the effects of which were to make the poorest and weakest in society attempt to take on unacceptable levels of debt and risk just to prevent themselves from being ripped off even more in the future.

Not only that, but they knew at the time it would lead to problems later (Eddie George said: "My legacy to the MPC, if you like, has been 'sort that out',"). They simply hoped their successors could get us out of those problems. I think we should take their prescriptions for recovery with all the salt in the world's oceans.

Anyone who's read any of my blog will know of the work I do on affordable housing through Oxfordshire Community Land Trust in my spare time. After five years of work, persuasion, lobbying, all for nothing, we have the opportunity, thanks to a very generous elderly lady who has settled all she wants to on her children is willing to swap us her house and its plot in return for about half its value and a smaller home carved out of half her existing cottage so we can at last get a site on which to develop a few affordable houses and prove the concept to the communities of Oxfordshire who would like to be able to do similar.

The trouble is that to be viable we have had to buy about half each of the two neighbouring gardens and are likely to try and get another adjacent one. And so, with the efforts of a very energetic fellow board member's contacts in the Society of Friends we have raised a decent chunk of this. Nevertheless we still have to fund the borrowing on about £170,000 worth of loans starting from the end of May when we are due to complete on the first two slices of adjoining land.

Anyway, it works out that in the worst case we probably need to fund interest payments of around £1000 per month until we either get planning consent and can realistically borrow against the land to develop or till we can raise the remainder as gifts and pay off the loan that way, whichever is the sooner.

So we have a variety of ideas about how to scrape together this sum, one of which is a commitment by me that, if in May I were to find myself in receipt of a small additional income, say from a councillor's allowance, the 90% of that I am not already committed to giving to the party to help me pay for Focus leaflets and campaigning in the ward will go to the charitable associate of OCLT, the Stonesfield Community Trust that is fronting our land purchase, to help pay that interest bill.

So, not only do I now have to win for Headington Hill and Northway, its residents, this and next year's new students, freedom and the Liberal Democrats, but also for OCLT and affordable housing in Oxfordshire!

Mad eh? We'll, we've got to pay for it somehow to prove the whole idea to skeptical councillors, the media and bureaucrats? What better a way if it works out right? I am standing in this election at least partly to promote my ideas for innovative financing of things like affordable housing. I'm sure there's not a household in the ward doesn't feel or understand the effects of the gross deficiency we have in Oxford and Oxfordshire of that.

I see Will Hutton in today's Observer talking about housing "shortages" and the panic that's setting in. He takes extensive coverage from the initial report of Stephen Nickell's National Housing and Planning Advice Unit I covered earlier. Tim Worstall comments here on one aspect of Hutton's suggestions - that the Bank of England needs to target house price inflation.

I would add that there was a piece by Eddie, now Lord, George, Mervyn King's predecessor as Governor of the Bank of England back in March this year which I didn't see getting much comment at the time that "The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession."

This tells you all you need to know about house prices in my opinion. For those of you who still labour under the misconception, common though it is, that house prices are driven primarily by supply and demand, what Eddie is saying here is that house prices are in fact primarily driven by the availability of money. And, whilst preventing a slump is no doubt a laudable aim, do you see how it has been done? Cheap money, secured against land values, is created by the lending banks, and while interests rates remain low this is less of an issue. But it's pay back time and the people who are squeezed are not the great and the good who made the decision to ramp up house prices with cheap money, but the poor sods who found they simply had to borrow more because everyone else could just in order to buy a house.

And in the meantime, the government has borrowed countless billions on things like PFI deals. Can any economist out there explain to me why it would have been any more inflationary than the chosen strategy of ramping up debt money for the government to have created, Keynes style, that PFI money to spend into the economy instead? As it stands, a whole generation more or less of house buyers will face straightened circumstances with their more expensive money as well as us all having to look forward to higher taxes to repay the debt on PFI deals.

But I really want to take Hutton to task on these other two aspects of his "solution". First, he says:

"The simple answer is to build more houses, especially social housing, but that means eroding the green belts and relaxing planning laws - unpopular ideas. "

Only up to a point. It is a commonplace scare tactic to say that building more housing will eat up some of the most precious parts of our green and pleasant land. Again, setting those who have (in this case a nice view) against those who don't have even a window from which to look out on a view. However, at current planning guidance densities of 40 dwellings per hectare (and I don't claim that this is appropriate in all places), even if every new house in the government's claimed requirement of 2,000,000 over the next two decades were built on previously undeveloped land it would require less than half of one per cent of the land currently classified as agricultural, grazing or woodland (and even this does not factor in land in upland non-agricultural uses such as moorland or undeveloped urban land - the "green lungs" and equivalent that Oxford is so proud of). You can get the spreadsheet from DEFRA if you want the figures for yourself.

However, according to the Department for Communities and Local Government, there is also enough land, at these densities, for 2,500,000 new homes on previously developed land now languishing at below its optimum use. And this does not take into account land currently developed as housing, largely from the inter-war years, that seriously underuses whole swathes of suburban land. So if Stephen Nickell has any job to do, it is to find a way to get this sort of quentity of already urbanised land into more productive housing uses. A point which Hutton begins to look at in the following paragraph:

"There are tougher measures, too. If housing faced higher taxes, either through inheritance tax, a wealth tax, lifting stamp duty, or limiting tax-free capital gains on housing, then house-price inflation would slow. And if Britain repealed its far too generous concession that non-residents and non-domiciled individuals can buy and hoard houses without paying tax, that would dent overseas demand. All have been ruled out because of a recoil at higher taxes."

And yes, you know what I'm going to say here don't you. Why faff around with these various taxes, all of which, you will notice, penalise investment in the capital value of dwellings rather than encouraging parsimonious use of land. They only attempt to cure one part of the problem - by knocking something off the overall price of existing housing. Not the whole problem by encouraging the bringing into more productive use of underused urban land assets.

Introducing a signficant Land Value Tax - one that would replace IHT, CGT, National Non-Domestic Rates and Council Tax at least - will bring down the capital value of land, but make it uneconomical to hold any land out of use or below its optimal use, or you'd be paying the rest of the community (in this case represented by the tax collecting government) for the privilege. It will of course mean that people have to borrow less to pay for their home. And this in turn will focus the monetary authorities on how to create a stable and equitable money supply to pursue their macro-economic aims without exploiting the poor sods at the bottom of the pile. They will need to find ways of getting new money into the economy when it's needed without forcing us all to take on more debt. And we will end up with an altogether fairer and less costly money supply if they do it right.

Technorati Tags: monetary reform, affordable housing, debt, Eddie George, Will Hutton, land value tax

I recently discovered a Conservative version of the Lib Dem Blogs aggregator and so my eyes have been opened to a whole new genre of political blogging! Today I spotted a chap called Mike Rouse writing about "spectrum auctions" as it was called:

I am hoping, nay praying, that Gordon Brown is out of office when the analogue TV signal is switched off. You see, that old airspace is very valuable to mobile phone operators and the likes of Google. They would be able to use it to send fast data to mobile devices and other cool things like that. The last time this government oversaw the sale of airspace to mobile networks it managed to amass itself millions of pounds, in fact it actually got too much money for it, leaving the people that bought the space with not much money to do anything else with it. Going by the track record of this government in screwing things up I wouldn’t put it past them to screw up this potentially lucrative deal when it comes around. We have to be careful to balance the government’s desire to fill its coffers and the need for a competitive marketplace that will benefit the economy in the long run. [From Not Bad for Essentially Privatising Thin Air | Mike Rouse]

Er, no Mike, the sale of 3G spectrum was an auction. That means the bidders decide how much they feel it's worth to them. Yes, they may well have made catastrophic miscalculations, but, as they say, you live and learn. These "locations" on the electromagnetic spectrum - so called "Electromagnetic Frequencies" or EMF - are, in economic terms, "land" - finite bits of nature that everyone wanting to operate in a particular technology has to share. So they should be auctioned, or leased, for whatever the market can bear and the proceeds used for public revenue (which was £22 billion in the UK). It is a form of Land Value Tax. It encourages ingenuity in ensuring the optimal use of a precious and finite natural resource (though I accept the point, that the operators chose to pay so much they could no longer raise the money to exploit it properly - but that wasn't the government's fault).

One thing I wish the government, or Ofcom, would do, is to make local bandwidth genuinely local, however. The current wireless spectrum for example is only useful over distances of a few hundred meters at most with present technology. It should be a source of revenue for local authorities rather than central government.