Creative Commons License photo credit: amirjina

Can someone please write in their diary June 2024? Because that’s when we are going to start warning about the next big bailout for bankers. If we do not learn from the horrors of this downturn and collect the economic rent that accrues to land, then the next 18 year cycle will be chugging along by 2024 and another asset boom-bust will be underway.

It is almost beyond belief that the $870 billion bailout equates to the entire spending of the US Department of Defence, Education, Health and Human Services. With rumours surrounding Goldman Sachs as the next to go bust, one wonders if the revolving door between Goldman and Treasury, where US Treasury Secretary Paulson worked until 2006, will see another bailout for insiders.

Of greatest concern with the $870bn bailout is whether the thousands of mortgages acquired by the government will be drip fed to the market. This will put the government in direct opposition to the community. A market system would see these banks fail and the price of land fall back to levels that can be realistically earnt off the site via the average wage in the area.

With a new Fed agency given the powers to sell off the land, they will restrict land sales onto the market in order to re-coup their investment. With the US dollar expected to fall when the dust settles on this latest intervention, the government will be caught in one ugly bind!

If they drip feed, they will slow the economy’s recovery. Why? Less people will be able to afford the above average prices for somewhere to live or work, restricting the uptake of new business and thus job creation. If the agency sells off too quick, this will push the US even further into debt.

What will Chinese investor’s be telling them to do? With a low US dollar making US assets dirt cheap, will Chinese investors sell US bonds (pushing the dollar even lower) to finance the purchase of American assets? Very interesting times indeed!

In the move towards a service based economy, the focus of innovation has moved away from productive enhancements and towards those that leverage higher profits. Let’s avoid a myriad of tax laws and regulation by cutting out the source of these profits, the speculation in land. Grab a Trial Subscription to our mag or read more here .

Tomorrow – how the US can use this intervention to provide long term stability in the market.