UK News

In a time of crisis when you are under financial threat yourself, the news can be disorienting. Over the din of noise, as it were, things can be missed. I was struck today by the extent of the fear in commercial mortgage markets here.

Commercial mortgages pay for businesses, large and small. Many are up for renewal in the next three years. Many European loans were securitized against buildings, and then pooled, and then apportioned, in a global market inspired by America's collateralizing shenanigans.

Now, in the first mortgage bond issues to be liquidated--that is, paid back--since the beginning of the crisis, investors stand to lose one billion pounds. They're just held against a few buildings and some warehouses.

Thirty Five Billion of debt is left to be renewed across Europe. This debt sits critically in a crazy-architecture of loans and swaps and credits upon loans. If it fails significantly, and it will, banks will find that they money they are spending on their own debt and not lending to consumers cannot be lent out at low risk in renewed commercial mortgages; businesses suffering because individuals cannot spend will not be able to pay the high interest or charges to justify their renewed mortgages; unemployment will deepen.

Such a situation is a dagger at the heart of Germany and Britain in particular, since in different ways they depend on commercial debt and economic growth. It hurts British overdrafts and mortgage renewals as much as it endangers German savings and business lending. Of course, if it damages Germany significantly enough, the mooted eurozone blow-up and east european crisis will ignite.

This is going to end very badly. I don't think that it is long before governments start contemplating a mefo-bill solution of the sort Hitler and Schact used in the early thirties. That worked by government issuing paper that specifically underwrote commercial loans to create or uphold jobs, but which washed money back through to the regime's chosen rearmament objective. Obviously, the scheme could only work under pressure of coercion and in an atmosphere of emergency.

In our case, scrip and bills to underwrite commercial loans, built on air and government fiat but not translatable to cash, will be washed back into a pointless public sector that can't deliver value and which acts to enforce social conformity. The government, after all, can already remove cash from your bank account by declaring it inactive under changeable rules; it can require you to justify using your demented relative's money to care for them; it can rape your bank to provide sub-standard care itself.

In the States, California has already used IOUs effectively, if desperately, to support it's welfare, health and education programmes, reduced though they are. The bonds started maturing on September 4.

Sooner or later someone will join the dots. This all works best in a sort of Tony Blair or David Cameron punctuated style. A national sacrifice; pay for government underwriting of bills that keep people in work by taking from those not using fiat money, and get banks to keep commerical mortgages rolling by doing so; replace the sacrificed money with ious then let inflation or some minister wipe out the government's debt to you. As security sell banks the rest of the state on the cheap by transferring industries to the private sector in return for some of our taxpayer subsidies back. After all, we can't tax the bankers--that would just be written off as a tax loss. Modernise. Sacrifice. Jelly Beans for all.

Hard times require hard measures; I can almost imagine the muppets saying it now.

All of this as unemployment begins to bite and the government realises that it has given away all the money to the banks. We are in for interesting times. I am contemplating a way to leave London and get a place nearer to my family and people I know with a garden to supplement food--and, though my one demented reader will know that I may be a bit unbalanced, I would urge them to just look at the links and think. Oil is rising. Debt is straining. Deficits are growing. Things are bad and they are only just about to get going.

Here's a beautiful song to remind you that it will all pass, should you be reading this when it seems real. It took my mind off things, anyway--though of course, if you understand the reference, it shouldn't do.

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