Towers of Mammon Originally uploaded by seadipper . Banks perform essential functions in society. They provide people with a place to leave their money. And they give credit. Farmers, for instance, need credit so that they can live between the time they plant their seeds and when the crop has been harvested and sold, when the credit is extinguished. Trouble has arisen because banks lend money for land purchase, or proxies for land purchase, and do it on the basis of using the capital value of the land as collateral for the loan. The effect of this is to stoke up land prices. And the more land prices rise, the happier the banks are to advance money, again using the land as collateral. This leads to periodic land price bubbles. Then things go bad. The real value of land it its annual rental, which is not subject to the bubble effect to anything like the same extent. Yields, as a percentage of selling prices, gradually drop, which is acceptable to investors only so long as people think t...
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