Rock on

9 minutes to 3
Originally uploaded by ne15.

I had long invested in Northern Rock term bonds as they give a good rate of interest. But a year or so ago, when I saw their lending offers - I began to have my doubts and did not reinvest. They were offering silly loans, annual incomes multiplied by an absurd figure. All of which helped to stoke up house prices.

Only it is not house prices that have been stoked up. Builders' wages and the cost of building materials have hardly risen. What has been stoked up is the cost of land. And the stupid lenders imagine that land is solid wealth and perfect collateral for loans.

But when I was taught economics it was drummed into me that LAND IS NOT WEALTH. Every bank manager should have that slogan facing his or her desk.

This is an area where governments should intervene. Lenders should not be allowed to advance loans using land as collateral.