Great post, making such an important point in a way that I haven’t seen made so clearly before.
I also think there’s a fix that needs to happen all the way up at the central banking level. Right now the Bank of England readily collateralises “mortgage backed securities” but not, e.g. loans to property developers or local councils for bui…
Great post, making such an important point in a way that I haven’t seen made so clearly before.
I also think there’s a fix that needs to happen all the way up at the central banking level. Right now the Bank of England readily collateralises “mortgage backed securities” but not, e.g. loans to property developers or local councils for building projects. This means that it’s low risk for a bank to lend into the *demand* side for housing but high risk to lend into the *supply* side. As a result, loans for mortgages grow faster than the housing stock, driving the inflation more. A simple adjustment to the BoE’s collateral framework could change all this, I think.
That is absolutely fascinating and I’m completely out of my depth to comment on it - but it definitely sounds to me like you’re on to something. Why don’t you think it has been done before?
I’m not sure why it hasn’t been done (or even proposed?), and I don’t know any central bankers to ask. Maybe messing with the Sterling framework is harder than I think it is. Or maybe politicians haven’t thought of it as a possibility. Or maybe the political dynamic you describe has got in the way there as well.
But if it could work, I think it would be mighty. Banks, as we all know, are invincibly powerful, so if you created a situation where they could make safe money by financing building, I don’t think any NIMBY could stop them.
Great post, making such an important point in a way that I haven’t seen made so clearly before.
I also think there’s a fix that needs to happen all the way up at the central banking level. Right now the Bank of England readily collateralises “mortgage backed securities” but not, e.g. loans to property developers or local councils for building projects. This means that it’s low risk for a bank to lend into the *demand* side for housing but high risk to lend into the *supply* side. As a result, loans for mortgages grow faster than the housing stock, driving the inflation more. A simple adjustment to the BoE’s collateral framework could change all this, I think.
That is absolutely fascinating and I’m completely out of my depth to comment on it - but it definitely sounds to me like you’re on to something. Why don’t you think it has been done before?
I’m not sure why it hasn’t been done (or even proposed?), and I don’t know any central bankers to ask. Maybe messing with the Sterling framework is harder than I think it is. Or maybe politicians haven’t thought of it as a possibility. Or maybe the political dynamic you describe has got in the way there as well.
But if it could work, I think it would be mighty. Banks, as we all know, are invincibly powerful, so if you created a situation where they could make safe money by financing building, I don’t think any NIMBY could stop them.