måndag 19 maj 2008

Proposed stupid legislation item #2

Changes in banking regulation are another item in the government's programme. All sorts of measures are proposed such as depositor protection. But they key problem is lending for land purchase, which stoked up land values way beyond what was reasonable in the light of their actual values, which are the current annual streams of rental income that properties can yield.

If those streams of rental income were subject to a substantial ad valorem tax, banks would stop lending money for property (land) purchase and land would be useless as collateral for loans. So banks would have to change their mode of operation to cope with the different conditions and the whole land price bubble phenomenon could not happen. And so, by dealing with the cause of the problem most of this proposed regulation would be unnecessary.

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