Or: I Learned Everything I Know About Economics From the Kyoto Accord
By Ian Angus
If liberal greens and mainstream economists were consistent, these are the solutions they would propose to the global financial meltdown.
A sub-prime mortgage tax: The government should introduce a tax on predatory mortgages, starting low and rising gradually over several decades. By “taxing bad things instead of good things,” we will encourage banks to reduce unfair loans to 20% below the 2006 level, by 2020, maybe. To avoid distorting the economy, the tax should be offset by tax reductions for financial industry CEOs.
A cap-and-trade system for complex derivatives: The government should set a limit on the volume of impossible-to-explain financial instruments allowed each year, and issue permits to financial institutions. Banks that can’t clearly explain exactly what is in their portfolios would have to buy permits from banks that can. Alternatively, banks whose holdings in hyper-exotic financial paper exceed the limit could pay into a special fund to conduct research into bad debt capture and storage systems.
A Clean Mortgage Mechanism: CMM would allow banks to offset the worthless paper in their financial portfolios by lending money at high interest rates to financially secure borrowers in the Third World. The smartest banks will claim offset credits for loans they would have made anyway.
Of course, no politician or economist is proposing anything like this, because they know such measures will not work. When the market itself is tanking, they want fast government intervention, backed by trillions of taxpayer dollars. They only favour “market solutions” when short-term corporate profits aren’t involved, and when the main victims are poor people.