In this post, I have linked to a video about the suburban housing problems and its relations with a new risk, the increasing of transportation cost. It’s a very illustrative example, sited in Phoenix but that could be sited anywhere, which doesn’t need further explication. Despite this, I think that the declarations of the Grossos family and the housing businessman are impressive.
Posts tagged ‘housing’
If a few days ago I went on economic and governance issues, associated to the rescue of some Spanish motorway concessions, now I think back on the same kind of issues. It is hard not to do that, because we are real time viewers of the Irish bailout. To this new crisis, it comes to my mind two quite synthetic images of the situation.
On one hand, there is the image of the recently deceased Spanish filmmaker Luis García Berlanga and his film called “Plácido”. I remember one movie scene in which there is an auction, for a beggar as a prize, with a banner who says “A poor at your table”. In this case you know who the beggar is, and how their neighbours, richer than him, have invited him to dinner to wash their consciences and their souls in an attempt to be good Christians and so, of course, to earn Heaven, which is what really matters. This first idea has the stakeholders of the crisis.
On the second image that I imagine, appear the methods in use. In the 80´s, there was a very popular ad on Spanish TV where a helicopter, loaded with tons of butter, came down to public schools and swimming pools to hand out this delicious cream (for free). The butter brand was called Tulipán. In this case, the European helicopter will provide resources to the Irish state.
All these issues are starting to seem as surreal as a Berlanga movie, as we see how the states are willing to help everyone, banks, countries, car manufacturers, infrastructure concessionaries, etc.. Everyone except the individual citizens. Let’s see some data, the amount of Ireland’s rescue is not clear and it seems to be between 50,000 and 100,000 million euros. We can suppose that it’s going to be 80,000 million euros. This money is going to be given to pay the debt left by the Irish housing crisis, which has caused the devaluation of the housing assets.
On the other hand, we have 4,500,000 Irish, implying that the bailout of banks is equivalent to distribute 17,700 € to each of the Irish citizens, this figure is surprising though there are other sources that say that it could be 60,000 € for each Irish person. So, with these numbers, a doubt rises, supposing that it’s necessary to pass the money helicopter, why not distribute it directly to the mortgages owners, rather than on banks in terms of book value of mortgages? Perhaps it is nonsense, but you could give 17,700 € to each Irish person, and you can push them to amortize their mortgages in price, not in time.
This way of doing things would get some positive impacts, like money entering into the banks improving their financial results. There would also be a minor underestimation of mortgage assets because it would help people on not having to sell their homes, which would result in a lower supply of housing, which in turn would keep housing prices and thus there would be a smaller impact on banks accounting.
In addition, this would introduce a greater volume of money supply in the economy. Suppose a mortgage of 150,000 € and 25 years for paying it. Eliminating 17,700 € of principal would make available 75 € to every citizen each month, what could have a great impact to consumption and to taxes. As a requirement, to avoid speculation, I think that housing assistance should lead to a commitment for not selling it in the long run. That period could be the mortgage term; in addition it’s necessary to implement the much announced reform in bank systems.
Obviously, this raises an equity issue, because those who have not purchased a home are not enjoying such support. I think that governments could compensate these people through an equivalent sum of money in education services. This would also help to lead productive factors into new sectors with quality jobs.
Summing up, this whole post is to polemicize a bit, since I think that growth model based on debt seems to be outdated and that the capitalism of the benefits and the communism of the losses are becoming very unpopular.