Land Value Taxation Campaign

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Bank regulation deferred

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Anyone seriously concerned about the failures of the banking system should not lose sleep over the government's warning to defer the introduction of new regulations until after the next election. It would not have done much good. The underlying problem with the banking system is its standard model of lending: the use of land titles as security for loans, for, amongst other things, land purchase. This gives rise to a positive feedback loop and has always led to the growth, and subsequent collapse, of bubbles.

The underlying problem with the banking system is its standard model of creating and lending money, with the use of land titles as security for loans, for, amongst other things, land purchase. This gives rise to a positive feedback loop and has always led to the growth, and subsequent collapse, of bubbles.

Commercial banks lend money created out of nothing, charging interest above transaction fees, and through this use of land titles as security for the loans, are, in effect, land owners for the duration of the loan. What they call "interest" is actually, almost entirely, rent of the land. The system is little more than a device for capturing the economic rent of land.
 

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