Nail on head

The cure will be to increase the median wage, and to stop the transfer of the national income to fewer and fewer hands. For that is how the system is set up today. It is not the result of 'free markets' but a sustained transfer of wealth through regulatory and tax policies, and a pernicious corruption of the nation most significantly starting in 1980, although a case has been made for 1913.

- Jesse

Turkeys Reunited

Goldman Sachs are on the brink of a massive new consultancy contract, it is rumoured. An unnamed source within the organisation hints that ITV may be asked to take over Lloyds Bank and Northern Rock.

"ITV's £105 million operating loss is peanuts," said the trader. "We at GS paid out £1 billion more in bonuses than we got in bailout money last year. The guys at ITV don't think big enough. If they don't wise up fast, they could be in danger of making a profit."

This alleged development lends credence to the long-standing speculation that the American and British governments are secretly planning the creation of a "Super-Turkey", merging all remaining manufacturing, banking and finance into a giant loss-making enterprise that will employ increasing numbers of the population until everybody starves.

The power of ignorance

If we were as ignorant of what goes in political circles, as country folk were in the Middle Ages, how could we tell which party was in power? Unless we had been pressed into military service, wouldn't we pretty much go on as usual from day to day? The papers rage about tax but most people haven't a clue how much they pay in income tax and NIC on their salary slips. Is it OK, rational, to be politically apathetic? Isn't personal action to improve one's life 100 times more important than who you vote for every 5 years?

1984

It hasn't happened the way Orwell said it would, they keep saying. Yet:

The Children’s Secretary set out £400million plans to put 20,000 problem families under 24-hour CCTV supervision in their own homes.

They will be monitored to ensure that children attend school, go to bed on time and eat proper meals.

(htp: Mark Steyn)

Soon, I shall wake up and discover it was all a dream.

What's happening to houses?

Mish gives us a few interesting graphs on the US housing market and asks whether it's hit bottom yet. I did leave a comment but it disappeared, so here's the gist:

It looks as if most of the air has come out of the balloon - in the US. Houses doubled in 5 years, and in some cities have now halved again.

As the tide recedes, it uncovers evidence that the market is segmented - look for example at New York compared to the others. The "best" areas are holding up better, and I'll bet the best houses within those areas ditto.

I think this segmentation will continue to be important, because of growing inequalities of wealth. This has been going on over there since 1980, but also historically (as Fischer in "The Great Wave" points out) the rich get comparatively richer in times of crisis.

I also think that the not-the-best-but-better-than-average housing sector will enjoy support for some time, because I suspect that there are not a few people downshifting from the most sought-after areas. These will be aware that they could have got more if they'd sold in 2007 (when I was mooting a caravan to my dearest), but have still done okay and so will not haggle too hard to get that nice little place in the country, especially since many sellers are hanging on stubbornly, waiting for an upturn.

Here in the UK, we have much less land available for residential development, and nothing like the oversupply of housing that exists in the US, so quite possibly our house price bottom will not be so deep. Of course, if our government hadn't encouraged the (legal and illegal) import of masses of poor people who also need a roof over their heads, the picture might have been somewhat different.

In both countries, we still face long-term economic decline; lower real wages as we continue to lose our manufacturing sector, higher energy and food prices and so on. So I expect house prices to continue their decline in real terms over the next generation.

On average, that is. I think we can take the Blair's real estate coup in Connaught Square as not untypical of what will happen in the best end of the market. Speaking of whom, I note that Tony's practising the "sneer of cold command" these days. Pitiable, really.

The dam may break after all

Jesse reports on another big bank about to go down; Karl Denninger speculates that the FDIC is colluding in the cover-up of widespread bank insolvency, so it isn't forced to step in when there's no money left in its kitty - for the only thing after that is load more of the losses onto Uncle Sam, i.e. the taxpayers and all our descendants.

If the pressure continues, maybe we'll end up doing what some have said all along needs to be done: step back and let the losers fail, to flush all the rubbish out of the system. Well, all the rubbish that Uncle Sam hasn't already been forced to eat.

More difficult for us in the UK, though, since we don't have lots of second-tier banks ready to take over the loan books. Maybe Barclays and HSBC will profit enormously? Or how about the Bank of China, now moving into the British market?

A great mood-lifter