One banker hasn’t given up

One banker hasn’t given up

Mark C The new Bank of England Governor, Mark Carney, had this to say, September 2013, as a column in the FT:

http://www.ft.com/intl/cms/s/0/a0e95652-1960-11e3-83b9-00144feab7de.html
A plan to finish fixing the global financial system“. 

Seems he hasn’t given up after all !

But oh how isn’t this simply echoing everything I wrote about in my book The downturn after 2007 was NOT just financial in nature; at its core it is a land / rent issue.  Let me say it again: if the economic rent is permitted to capitalize into a price, and be traded as a commodity, then we MUST get a real estate cycle.  Societal behaviour will ensure it.  The amount of credit that society allows banks to create upon this non-produced price determines the height of the boom and then of course the depth of the downturn. 

What has intrigued me over the years is why this cycle seems to have gone so regular at 18 or so years. 
(This link explains what we found, and requires an open mind: http://www.businesscycles.biz/pastrecording31.htm )

Fixing the financial system (in the manner proposed by Carney) cannot stop this cycle.  In fact any ‘fixing’, the banks will simply avoid, get around, ignore, or do their best to circumvent.  Banks are private institutions, owned by shareholders, whose job it is to maximize shareholder returns.  Banks do that by creating credit via a government granted license.  As soon as that license is created, they of course become then a vocal lobby group to both protect and maximize that license. 

We WILL get another real estate cycle, and then a further bust.  This is a fact.  It is my opinion (could be wrong) – one I have held right throughout the GFC – that the next cycle will be even bigger than the prior one.  This opinion looked totally daft to the mis or un-informed these past few years.  It looks decidedly more possible now does it not?  Every cycle since 1800 has built on the prior one and been far larger.  I think this will repeat.