Simplified, one of the great sayings i’ve read from the Austrian school is that “the scale of a Bust is directly proportional to the delusion that preceeded it.” So what form did the delusion that preceeded this bust take?

1. Anglo-American politicians of all colours (Labour, Conservatvie, Democrat, Republican) castigating the world for not adopting their “free-market” ways. The economic miracle in the US and UK is now seen as nothing other than a debt-fuelled binge built on the twin delusions of zero-regulation (fuelling excessive risk-taking by banks) and low interest rates (fuelled by an insane expansion in the money supply). So for Nationalists like me, the last 30 years have been like most of the last 1000 years, with the English-speaking world preaching to the rest how they should structure their societies. This arrogance and over-confidence now gets it’s come-uppance as we enter, probably, the Second Great Depression. There’s no schadenfreude intended here, just anger at the human misery that the coming years will unleash.

2. The Economic Miracle in the UK was only ever built on the unfettered expansion of credit. To fuel the expansion, interest rates were lowered by increasing the money supply, allowing banks to lend more. The more banks lent, the lower the credit rating of their customers became as the quality of borrowers from which they could make money diminished (there’s only a finite pool of credit-worthy people). To allow them to lend to people who should never have been lent money (the sub-prime borrower), the banks therefore devised off-balance sheet instruments (Collateraised Debt Obligations (CDOs) to pretend that they had solved the problem of risk in the banking sector. Incidentally, a major driver of lending to sub-prime borrowers was a misguided policy by Bush to get Americans at the bottom end of the income ladder to own a house – it was government interference in the housing market, allied to a lack of interference in the money markets of it’s allies in Wall St. that laid the foundations of this crisis.

As an ignorant and unsuspecting public kept borrowing, idiotic governments, who owed their mandates to re-election platforms boasting the “end of boom and bust” and “fiscal responsibility”, used the blunt tool of interest rates to attempt to quell inflation – inflationary pressures brought about ultimately by the increase in money supply that drove down long-term interest rates across the planet. Low interest rates are a function of government interference in the money markets, bad lending from banks due to too little – it’s an idealogical mish-mash, utterly confused, totally disastrous.

Unfortunately, the public were already over-indebted, and small increases in the interest rate were able to collapse the house of cards (if Bernie Madoff’s hedge fund was a Ponzi Scheme, the US and UK economies have been the world’s biggest Ponzi scheme driven by our idiotic fixation on property.)

3. Property, the mere mention makes my skin crawl with mental images of vacuous TV presenters eagerly persudaing us to become developers, eulogising the myth that “in the long terms, the property market never loses.” (I wonder if they’ll ever make a series called, “Repossession, Repossession, Repossession”?

In fact, property and associated government interference through interest rate and taxation policies lie at the heart of our boom and bust. The Left, unfortunately Plaid now peddles this nonsense, believes in the resdistribution of income through taxation of personal and corporate revenues. The Right (Labour and Tory alike) believe that interest rates are the sole way to manage an economy. Neither is right.

Let’s take taxation to start. Why tax personal and corporate income? Working people, not the fat cats but your Average Joes, sacrifice their time to keep their families fed and sheltered, to get meaning from their work, and to add value to their employer. The thanks for this value-adding activity is the legal robbery by the state of their income. People work for this money, if it wasn’t forcefully taken from them, we wouldn’t need the massive bureacracies that administer social security, tax credits, and a communist system of health care. Before you get all liberal and moral, bear with me!

But the country needs to raise money, income tax is the only way! Wrong! We have made our private wealth communal by the practice of income tax! It is an evil that robs hard working people (i’m not talking about the handful on £>150K nor the idle on tax-free benefits) of the ability and dignity to care for their families without the interference of the state.

However, the wealth we receive from the land is totally private. We are not taxed on the capital gains on the sale of our main homes – yet in this case we do not work for it. Our wage income is as a result of effort (getting out of bed, adding value), our property income is the result of idleness (the price of property rise or falls irrespective of whether we choose to get out of bed). What if we swapped our taxation lenses? What if we taxed land and not income? Studies show we would raise more income for the country this way – MORE not less! This would mean barely any income tax, less governement, more freedom! Also, greedy landowners (not your average mortagee) like supermarket and large builder land banks would have to pay their fair share for the profits that they make from land (remember, land profits aren’t earnt, it’s idle income).

So what!? How would this stop the kind of mess we’re in now?

It wouldn’t stop it all, Governments actually have to interfere in the Banking sector so that ALL capital risk is brought back onto Corporate balance sheets in full view of auditors and regulators – they must be prevented from hiding debt and risk using complex financial instruments that all but a few hundred people understand.

**** Government must also bring the hidden debt of unfunded public sector pensions and PFI onto its balance sheet. All final salary public sector schemes should be shut, and PFI should be banned – it’s about stopping the state from burdening our children and grand-children with our profligate debt ****

But, imagine you tax land, which stops runaway property booms. Banks would not lend as irresponsibily, people would not be repossessed, income would be retained, finally in the UK landowners would have to pay for their birthright.

Most improtantly, interest rates would not be used as a blunt weapon. Because of property appreciation, interest rates rise, depriving companies of capital and driving them out of business. When interest rates fall, land prices rise, diverting company capital into mortgage repayment or rental payments, leading to reduced capital investment. A massive, debt-fuelled, vicious circle. It’s crazy!!! Far from being the economic saviour fof the UK, the financial services sector, through moronic interest rate policy, diverts money from capital investment (companies) and personal expenditure / savings (individuals) into interest payments. Note that a mortgage is defined as “a transfer of an interest in land (or the equivalent), from the owner to the mortgage lender…..” – as such it is the banks who really profit from property booms, and it is individuals and non-financial companies who suffer when the banks are bailed-out.

This is truly criminal , and should lead us to ponder the true nature of our so-called democracy. As such, Wales, with her manufacturing base suffers disproportionatley from South-East interest rate policy – far from subsidising the parochial provinces, the South East enriches itself AT THE EXPENSE OF those regions of the UK who value manufacturing. Who subsidises who?

Individuals who cannot meet mortgage payments are taken to court and evicted like criminals, whilst the true criminals in Westminster and the City remain untouched – moral subsidy of the vilest kind. To paraphrase Churchill, “Never in the field of economics, was so much misery inflicted on so many by so few.”