I often see articles sympathetic to the banks, claiming they’re hard done by, and most certainly not responsible for the global financial collapse.

Holding the banks to be the epitome of financial rectitude, and apparently not responsible for their own risk management, they lump the blame onto miscreant borrowers.

When some clown called Irvine Renter recently said Robert Shiller has completely lost his mind in suggesting banks carry responsibility, I flew into a rant:

“I know who’s lost his mind – and it aint Robert Shiller.  Banks who lend on bubble-inflated land prices have deep structural problems with their risk management procedures – problems bordering on fraud.  Of course they should adjust their loan books back to the real market and renegotiate loans from there.

After hundreds of years, banks don’t know that real estate bubbles burst?  C’mon!  They want to tie mortgagors down to 30 year sky high mortgages – then expect to be bailed out when things go awry.

Guess where your true moral hazard lies, guys? It aint with Joe Sixpack.”

I expect those people who hold the FIRE sector (viz, finance, insurance and real estate) to be the paragons of morality–thereby helping to underpin the rationale behind obscene bank bailouts–will also find excuses for Barclays and other British banks for fiddling their LIBOR rates.

Their claim that criticising banks is “bank bashing” is every bit as hollow and meaningless as those who claim land taxes are “wealth taxes”. (What on earth does that mean anyhow?)

The sorry state into which the banking industry has descended won’t be reformed by bailing it out for its sins: it must be permitted to go to the wall and be replaced by private interests or governments unprepared to finance real estate bubbles.

As with calls for further financial regulation, the argument that we need to save such a fatally flawed financial system doesn’t hold water.

“The Bureau of Statistics says Tasmanian dwelling approvals in May fell by 12.1 per cent, in seasonally adjusted terms.”

“The Housing Industry Association’s Stuart Clues says there has been no good news for the industry for months.”

“The Premier, Lara Giddings, says her Government has maintained significant land tax cuts which inject about $30 million back into the economy each year.” [!!!]

[Sigh!]

…. “IT WAS THE CARBON TAX AND THE LABOR PARTY THAT CAUSED THE DEPRESSION IN AUSTRALIA!”

When, of course, it was Australia’s household debt invested in bubble-inflated mortgages.

And both the Liberal and Labor parties are EQUALLY responsible for that mess!

[GUESS WHY AUSTRALIA HAD A RESIDENTIAL REAL ESTATE BUBBLE?]

SIGH!

Direct bank bailouts instead of loans, Angela?  Twenty more years of arrant nonsense?

Sometimes you’ve just got to put an end to it.

Oh, what a tangled web we weave, when first we practise to deceive. – Sir Walter Scott

Although no political party other than the Australian Democrats and the Republican Party of Australia promote capture of publicly-generated land rent in their policies by way of land tax (the Australian Labor Party having written, but never voted, it out of the party platform), fortunately the major parties still seem to accept the need for an ad-valorem charge on real estate at local and state government levels.

The extreme right is quite different, however.  It doesn’t accept the principle that land and resource rents are owed, equally, back to all the nation’s inhabitants.  Ayn Rand is their god, and in their eyes economic rent belongs to individuals. ‘Royal libertarians’ still seem to be in Rand’s thrall.

And thus it has been that a healthy suspicion of government has been replaced by a mindless call of the right to privatise all those natural monopolies once understood should necessarily be controlled by government.

In the state of Victoria we’ve seen the supply of gas and electricity privatised, the metropolitan rail network privatised, and our freeways turned into private tollroads – the latter reversing the age-old English dictum of the freedom of the highways and byways.

Ironically, the hard economic times brought about by the failure to capture Victoria’s rents in the late 1980s boom made the public asset sell-off all the easier in the recession of the early 1990s. The legislation was able to be passed by the forces of the extreme right on the proposition Victorians had no real entitlement to retain these natural monopolies when they were so eminently saleable in the recession. (They were obviously undersold in the recession.)

In a tribute to this Ayn Randian neo-liberalism, Victoria has now had more of its public infrastructure sold off to big private rent-seekers than any other state – and we’re beginning to witness the devastating effects.

As with the privatisation of Australia’s privately-constructed once publicly-owned telephone network, there is little doubt these state privatisations are not working: under the questionable guise the ‘user pays (twice)’, they’re coming at far too great a cost to the public.

It’s almost certain Melbourne’s trains would be running supremely better under public ownership than the procession of private companies which have endeavoured to run them; that tollways have been responsible for poorer people being unable to use their major highways to the extent they’d like to be able to; that the supply and maintenance of gas and electricity are not up to the standard when these utilities were in the hands of the public.

Private ownership of natural monopolies will never work satisfactorily, full stop. [Thoughts of US Enron fraud loom large!]

AN ULTIMATE EXAMPLE?

Properly engineered embankments would certainly not have provided the outrageous sight of the Morwell River recently disappearing into Tru Energy’s brown coal mine.  [Want an ironic laugh?]

Whilst the Victorian Labor opposition is quite correct in calling for an inquiry into the incident, and federal Democratic Labor Party Senator John Madigan is to be commended for bringing the matter up in the Senate on Tuesday night—and warning New South Wales and Queensland governments against going down the same path as Victoria in selling off their electricity generators—the real hope of the side for Victoria is to reverse these privatisations at such extreme breaches of care, and otherwise as the opportunity arises.