You sometimes have to sit back and wonder – what exactly is the point of government?
Secure our borders, sure. Educate the kids. Look after those without other means. Oh, and make someone pay for it, of course, by taxing them.
What else? What about when it comes to the biggest investment most of us will ever make – a house?
I did most of my growing up during the ’80s, so I remember Margaret Thatcher’s great push towards home ownership. Back then, the government did far more than just the basics.
Quite the opposite, in fact – it was right in the middle of things. We had tax relief on mortgages, councils forced to flog homes to tenants, and banks with the green light to lend as they saw fit.
And I don’t know if it’s some kind of ’80s nostalgia, but now this government is trying it all over again!
But this time, they’ve gone too far. They’ve encroached upon a sacred place – an Englishman’s castle. And I think it’s all going to come crashing down.
Don’t believe me? There are signs everywhere.
The housing market’s debt trap
Here’s the first one – we’ve got the major house-builders geeing us up for a great season. This week, Taylor Wimpey told us to expect fantastic results when it reports later this month.
Doesn’t sound so bad, does it? But get this – they also indicate that nearly half of sales are now coming through the government’s Help to Buy scheme.
Remember that this is the scheme that was brought in to pull the housing market out of its post-recession funk. Well, that’s happened now – but it seems the government just can’t let go! That’s why the scheme has been extended all the way to 2020.
As I said on Monday, it’s a concerted, and indeed, controlled effort coming from the central planners. An effort that encourages as many people as possible into a debt trap.
Worse still, the planners even stick in a ‘Brucie Bonus’ from the taxpayer to ensure enough folk take up the debt challenge!
This isn’t how it’s supposed to work.
It shouldn’t work like this
We’re not supposed to be living in a command – or planned – economy.
It is not a government’s job to gerrymander demand or supply in an economy. And it’s certainly not for them to control where we invest our money.
At most, a government should use tax to steer citizens. If saving is good, give us a decent Isa, or pension wrapper. If you want us to emit less CO2, tax the hell out of petrol.
But don’t put taxpayers’ money on the block to guide people into an investment (or debt-trap, as I would call it in this case).
Sure, the builders are doing well out of the affair. And of course, the omnipresent banking industry is also making a tidy buck. And I do accept there are knock-on benefits for the economy at large.
But anyone with a sense of history just knows this will all come crashing down. Just think of all of these points…
Three big warning signs
First, don’t forget that it was actually US government policy to stoke up housing demand in the run-up to the 2008 sub-prime crisis.
We now have the UK government doing the exact same.
Second, though it was widely known that a speculative boom was underway, US punters piled in regardless – cheap mortgages always bring in the punters.
And heck, if they’re not coming, then just plant a government scheme to double the intake.
Third, when the house of cards collapsed, it was the central bank that bailed out its troublesome children banks.
I reckon that last point is the most worrying. What happens when things go wrong again?
The next bailout
Well, I’ve heard it said that the governments bailed out the banks last time. This time, there’s nobody big enough to bail out governments.
But that’s rot. The central banks will bail out governments in exactly the way they always have. Print, print and print! There’s always whisky in the jar.
Just think about it. Today, Western governments practically are the economy. You can’t dissect the two. You certainly can’t bring one down without the other.
Though I grew up during the ’80s, the ’90s were more instructive. The fall of the Berlin Wall opened up a whole new plain, and I saw buckled nations where the government was the economy.
Let’s not go back there! To avoid ruin, keep your investments as far away from the central planners as possible.
The guys in charge are going to bring down the whole facade. Just give them time.