Real Estate Fairy Tale

Once upon a time there was a businessman, a banker, and a Mexican. The Mexican might also have been a Polish worker or a Bulgarian. The businessman did his business, the banker could do magic with money, and the Mexican built houses. And all three they needed a house.

The businessman saw how things went well, and he asked the Mexican to build his house.  A house with many rooms, ten acres of soil, a fine kitchen, extensions, garage, shed, garden and so on. The Mexican agreed, because this way he could also earn a little money. The businessman was happy, and went to the banker to borrow enough money for the land, materials and labour.

The Mexican saw how things went well, and he decided to build a house for himself too. A smaller house, as he earned less than the businessman. Labour relations, profit margins, bigger bosses, and all that. He too went to the banker and asked for a loan for his future house. The banker said it was a good idea, as there was enough work in construction. This was a reliable debtor.


The banker saw that things went very, very well, and he too decided to build a house with his magically made money. He saw that he would profit from the interest the businessman an the Mexican would pay him on their loans, so he bought the biggest piece of land for himself. Naturally he also hired the Mexican to build his house, because he did a fine job and was cheap. Besides, the Mexican would pay him back in interest payments anyway.

The Mexican worked hard and efficiently. Amazingly. And finally he finished the house of the businessman, topped off the bankers estate, and he could evan start living in his own humble abode. He was proud. He had done a fine job indeed.

But then something happened that noone had foreseen. There was no more work for the Mexican. Because everybody already owned a house. The banker lived like a prince, the businessman was well to do, and the Mexican had a nice little home. Everyone lived under his own roof.

Perfect? No! Because the houses had not been paid for yet. Their loans were still outstanding. The Mexican did no longer earn money, because there was nothing left to do. The businessman soon also earned no money, because he mostly sold to the Mexican. And the banker no longer gained interest, because the businessman and Mexican could no longer pay him. There was only one thing left to do. They had to sell their houses.

But to whom? None of them earned enough money to buy the house that they wanted. Even if they already lived in it. Was there then nothing they could do? Couldn't the banker create some more magic money? No, said the banker, because then I will need another house. Only then I can make new magic money. The new house will be mortgaged, and it will be there.


Full of joy the businessman declared that he would build this new house. He would hire the Mexican to do the work for him, and the would also give the new house a swimming pool. Then certainly a rich new someone would come and buy the house, and pay for their debts. The banker thought it was a beautiful plan. There would be a new house, so he could mortgage it and magically make some new money. He used all the money already paid and let the businessman do his work. It would be a new palace: "Fata Morgana".


But even before the palace was finished it became clear that there would be no buyer. Because there was only the three of them. And none of them could earn enough money to buy the palace. And so they were all forced to leave their homes, to live next to their front porch. Because the money was gone, even if all their houses were built.

And they lived unhappily ever after. Shame.

Or do you think they would have dared to squat in their own homes?

Robot

A thought experiment.

In the Lexus factory there are just two people left working. One monitors the processes in the factory hall. The other one drives the car from the assembly train to the parking lot. The car itself is built entirely by robots.

My father in law always shines, when he tells about it. Himself he used to work in a department with forty accountants. Now there only are two left to do the same work. The second one being there to replace the first during illness or holidays. The rest is automated. That's why my father in law has gone with an early pension, and now is touring the world.

Automation is everywhere. The robots are coming. They start doing all the monotonous and heavy jobs for us. And if we like, they may be able to do much more.

Does that mean we will all be able to enjoy superfluous wealth, and that we will hardly have to work for it anymore?

I fear not. The robots and computers will most probably be bought by large investors. And they will reap the profits, beceuse they will need to hire fewer people. They are the ones that at first will become richer.

Those that will be fired may be compensated if they are lucky. Those that will no longer be hired will not. And those who never had to do anything with the production at all will be none the wiser either. Except maybe in that products may be cheaper, as they are produceed more efficiently. By robots. But whetheer they will be able to buy the products, that's the question.

Many people will lose their jobs because of the robots. And those who do not work, those who don't have jobs, seem to have no right to money. And those who do not have money, cannot live. At least not within the current system.

Then it will not be a world where hardly anyone has to work, and everyone lives in wealth. Instead it will be a world where no one may work, and almost all have to live in poverty.

Think about it.

That is why we have to revise our ideas about fair distribution of income, wealth, and about our work ethic. Or we may be too late.


Picture: Kuka Roboter, Augsburg

IceDebt

Iceland is going to pay back its debt! Hurrah! This week the Icelandic government will be signing an agreement. The four billion euros (3,4 billion pounds) the Dutch and British governments loaned to pay back the duped savers in Icesave, will now be reimbursed from the pockets of the common Icelander. Great! Or no?

I think not. There happen to be three hundred thousand Icelanders. Who have to pay... four billion divided by three hundred thousand... that's thirteen and a half thousand per person. Or a bit more than forty thousand per family. That's quite a lot. Especially since it's not the only debt the Icelander must face.

Icelanders with high education, who do not feel like joining in the repayment schedule, have already started emigrating. Understandable. But it also means that those who cannot pay must pay even more. I wonder how much can really be paid back, without literally selling Iceland to either the Russians or powerful bank J.P. Morgan.

Sourest may be that the debt is not even the fault of the average Icelander. They never promised to repay the money now lost. Maybe some did borrow too much money for a car or house. Maybe some did try to live above their station. But what they borrowed they also have to pay back. Over and above the aforementioned forty thousand per family. And added to both is interest. Come to think of it, I don't have to think at all whether it's possible. With the current Icelandic economy it's not possible in any case.

Iceland promised to pay back in fifteen years, with interest. To start in 2016. With an interest rate of five percent they will have to muster another 50 to 100%. That's between six and eight billion euros in total, or between sixty thousand and eighty thousand per Icelandic family. That's half a house.

Actually most Icelanders are just as guilty of the Icesave losses as we are in the Netherlands, Brittain, or the rest of Europe. Namely: entirely not.

We could also share the loss. If we add the population of the Netherlands and the UK to the Icelanders, then we are with eighty million people. Four billion divided by eighty million is... fifty euros per person. Let's say one hundred fifty per family.

If we spread the cost over three years, at five percent interest, then it will cost us... less than five euros per family per month. Less than the national lottery or a mobile phone insurance. Four point six billion will be raised this way. The debt is then paid for. In three years. And we'll pay two to four billion interest less to the banks. This way they at least will not profit from the very misery they helped bring about.

If we share costs among all Europeans, the amount of money per person is ridiculously low. Then it's four billion divided by four hundred sixty million people. That's less than ten euros per person. Say thirty euros per family in total.

As compensation for our effort we can then demand that Iceland joins the European Union, and will use euros from now on. That's better for trade. And we will gain a huge nature reservation for Europe this way: Iceland itself. With huge clean energy reserves, from geothermic sources and electricity gained from waterfalls. Of which they have plenty.

Bonus

There is one thing everyone seems to agree upon since the first credit crisis this century. The rewards for top bankers and top executives have been unjust. They were exorbitantly high, exorbitantly manyfold, and most of all without any meaningful results. Shame.

Therefor these rewards, salaries and bonuses must be pruned down. Not only because our prime minister Balkenende would then earn less than the rest. It's really not just for his ego. He is one of the pack even if his name is not on top in the Quote 500. Just give it a maximum. All top bankers should earn the same. You'd expect that this proposal would be unanimously voted in. Even internationally.

But no. Many negotiators for the USA and Britain at the latest G20 thought it a bad idea. Leave the bonuses as is. They would disappear underground otherwise. You'd get illegal bonus dealers, bonus smuggle, bonus addicts and an endless war on bonuses.

Would it really make a difference, if you could forbid these exorbitant rewards? Except morally, that is? How many human beings might actually be paid from such a bonus? Let's count. A one million bonus could pay for ten typical managers, or you could hire forty secretaries for a year, or maybe you could keep eighty mothers on welfare. For ten million you could buy ten times as many people. If there are a thousand bankers who each get a million too much, they misdeal eighty thousand welfare mothers. And for the three hundred million ING held in reserve for rewards one could indeed avoid three to five thousand layoffs.

The top five of bankers in the US of A divided ninety million dollars among themselves, last year. That is seven thousand welfare mothers. Would all these mothers fit in their five pleasure estates with pool?

But of course that's not how it works. Not exactly anyway. If all went well the top earners would also pay a hefty tax on their bonuses. If that would be a fifty percent income tax, then fifty percent of mentioned mothers on welfare would also profit. Or at least the civil servants who would be paid from that tax. Bonus catchers would be a welcome help in fattening the treasury. Each on his or her own would actually add an exordinate amount to our common wealth.

It's another matter that the tax will seldom come close to fifty percent in practice. Indeed, most of the moneys probably disappear in tax havens and secret back pockets. That's slightly unfortunate.

But what interests me much more, is that there are obviously parties who are prepared to pay these bonuses in the first place. And the rewards are also paid when businesses go entirely to waste, because of the deals made. If you were a cynic, you might think that this was exactly the purpose of the whole exercise. Who pays these rewards? And if they are willing to shell out such sums, how much profit do they make for themselves? Who are these people?

Suppose that top executives merely made a deal amongst themselves, and hollowed out businesses and economy to reward just each other. Wouldn't that be a simple case of theft? And if there really are others who pay them consciously, aren't then these others eluding justice? Should we not regard as a crime exactly the destruction, plunder and sucking dry of our economic livelihood, instead of the bonus you might receive for accomplishing these things?