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article imageOp-Ed: Financial nonsense from both sides of the Atlantic

By Alexander Baron     May 2, 2013 in Business
Is there really a mortgage crisis in the UK? There needn't be, all it needs is for people in high places to do the right thing. For once.
The sheer amount of drivel that is spouted by so-called economists and politicians knows no bounds. Take the minimum wage, how about increasing it to boost employment - seriously?
If you haven't heard of Peter Schiff, he is the son of American tax rebel Irwin Schiff; here he is on his radio programme talking to a woman who believes raising the minimum wage would boost the economy. Yes, boost it.
There is no doubt that Catherine Ruetschlin of Demos means well, but this self-styled policy analyst simply does not understand what she is talking about, and Schiff can hardly conceal his mirth. Here is some meaningful analysis of the true effects of the minimum wage. Check out the video linked to the article.
Schiff is spot on not only with his analysis but with his claim that organised labour supports and benefits from the minimum wage. And he does have some good ideas, but he has fallen into the full employment trap. And like Ron Paul, he believes the revival of the gold standard will solve all America's and the world's problems. If only.
Today, on this side of the Atlantic, there is a warning that over two and a half million householders who took out interest-only mortgages will soon be facing serious problems, namely they will not be able to repay the capital when crunch time comes. Martin Wheatley of the Financial Conduct Authority said that perhaps half those affected will end up having to sell their homes. Banks don't want to write off bad debt, he added, but neither do they want to evict people from their homes. It is probably this milk of human kindness which resulted in a mere 8,200 repossessions in the third quarter of last year.
So what can be done to avert this disaster? Well, how about the banks writing off this bad debt anyway? Or less benignly, how about the government rushing through legislation that reduces the debt burden by switching the compound interest on these loans to simple interest? As the banks obtain this money in the first place by creating it out of thin air, they can't really be said to have lost anything.
Finally, how about abolishing common or garden mortgages altogether and converting those already existing into shared enterprises in accord with Islamic banking principles?
That is three suggestions from one source, doubtless there are many other ways of thinking outside the box. One thing is for certain, the banks have already dragged down Europe and much of the rest of the world with their recklessness and greed, there is no reason the people of Britain or anywhere should allow them to take away the roofs over our heads as well.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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