Monday, 16 July 2012

Cameron and Clegg seek to heal rifts

To get this straight: the banks got 10 times more cash than the railways.  The banks get the money immediately, the railways from 2014 to 2018.  This is because the banks are crucial for the economy, while the railways are just a nice-to-have thing.  And the banks are not going to increase their profits through the "lend to fund" scheme, but will gently and altruistically pass on to consumers and businesses all these freshly printed banknotes.  And after all, even if they further boost their profits at taxpayers' expense, and even if their managers collect exceptional rewards, this is good for the economy because new jobs are created and more money will be spent on consumption, and more taxes will be generated so we will all live so much better.  Alternatively, if you spend taxpayers' money on infrastructure is bad, because the government has to be small and bring the deficit down.  Public spending on capital goods is the worst economic strategy, public propping up of the financial industry is the only alternative to get out of the crisis (which by the way has been caused by the European left and immigrants into UK) and the only efficient manner to grow the UK economy.  Brilliant!  I wonder why on Earth aren't all world leaders copying David & Osborne's infallible logic?  Why do they still have doubts over how to get out of the painful debates over sustainable growth?

Now that we made these things clear, let us celebrate this is the largest investment since Queen Victoria's glorious era.  This in itself is a sad admission of the utter neglect in public services, but each government is free to be proud of its own achievements, and find the appropriate benchmarks for that.  I would say that an economy that generates $2.5trn in output and takes more than a century to spend some 0.5% of its total annual economic might on a 4 year "revamping" plan on railways, and makes a big fuss about it, is governed by lunatics.

On housing: do not have any hope.  This government will not give away anything on property.  They will fiercely restrict supply to maintain UK's record of most expensive, smallest, worst quality houses in Europe.  All newly built housing in London must cost more that £10,000 per square meter.  Do not expect any revolutionary change in regulation, and tens of billions of pounds that would transform the prime residential urban landscape over the next 5-10 years, through redevelopments of obsolete, substandard stock, and building thousands of 6-12 storey complexes at £2-3,000 per square meter.  50 square meter 2 bedroom flats of today's London (at more than half a million pounds a pop) will look cheap and spacious in 5-10 years from now.  And yes, people will live in smaller homes, and pay > 60% of their disposable income on housing.  And the mortgage will be conveniently and timely offered at "affordable" rates by banks which get their BoE labelled "carrots" from "passing on" to consumers all these hundreds of billions that the central printing house will have continued to lend to them.  Gone are the days when a private bank was in the business of attracting money to lend them cautiously.  Want to be in the mortgage business?  Just ask George for funds, add your mark-up and lend them to Ms and Mr Jones for 30 years.  If Ms and Mr Jones don't have enough money for a deposit, the taxpayer can help again.  Whatever it takes to keep the hamster on the wheel.

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