Why Not Control Land Prices and Abolish Mortgages?
Control Land Prices
Land is one good that violates the laws of supply and demand. As Will Rogers said, “God is not making any more of it.” Land is always in short supply creating an artificial situation of very high demand which ceaselessly drives up pricing. Because land is not a normal market it must be regulated, controls should be put on land prices, and this benefits homeowners and businesses alike.
We can go even further if we like and reduce land prices to zero, and hold land in common as we do other national resources. Land would then be distributed by first-come-first-serve application, by lottery, by need or some other method or combination. Policies, regulations and penalties can control opportunists who try to take advantage of a situation.
There is no logical reason to give land a price, if we hold it in common. Land should be considered a sacred trust managed by an ethical steward. This stewardship could be passed on -- inherited or given to others.
If the idea of not owning property creates insecurity, we can abandon the idea of common land. With land price controls on private property there will still be a significant gain.
When land prices are half or more of one’s property assessment, this can be a huge boon for citizens and business. Since construction price rise is often associated with the warped supply and demand relationship of land, we must also control it too.
Abolish Mortgages
Why not Abolish Mortgages altogether?
Sound crazy? Not really. If we have determined that land should not have a value or should have a very reduced value, and that construction costs are warped and must be controlled or reduced, then we have essentially ended the conventional mortgage.
Consider that banks and mortgage companies make most of their profit from false pricing of land and construction. This is a transfer of wealth monthly from you to them. The financial firms then bundle your mortgage and sell it as a mortgage-backed security at a discount to get immediate cash. They then use this cash to create more lucrative mortgages. This is the cycle of the mortgage economy. And this cycle transfers wealth at a dizzying speed from ordinary people to corporations and the rich.
If we abolish conventional mortgages and control land prices and only allow reasonable construction loans for the future, we will have made a move to a rational and ethical economy. Should we do it all at once? Probably not, because the shock of no mortgage payments would collapse the financial system immediately. But what we can do is stage the process so that, say, over 10-15 years we reduce payments on mortgages to zero. This gives financial companies the time to reorganize. They will have a window to set themselves up providing loans on a more rational and ethical basis.
Yes, this will cause losses for these institutions and shareholders but we have no choice. This sector is in serious trouble anyway and is essentially defunct and needs serious restructuring. Now is the time to be bold and follow through on the logic of economic history and create something very new. Why fix this problem later when we have suffered so much already because of it, why wait for another collapse in 20 years and go through this again?
There will be big gains for consumers and businesses as their mortgage payments decline, monies will be used for new purchases and savings. The real issue in any major economic reorganization is who will gain and who will lose. In this case it will be the consumers and not the predatory lenders.
Axxiad News