So What Would You Do If it was your Budget!

I'd abolish tax on savings interest and start taxing debt interest. We need incentives to move to a culture which saves and invests in industry rather than blows it on debt-driven consumerism.

To that end, and to kill any expectation that the credit/housing bubble will ever return to the postwar business-as-usual, I'd remove all tax exemption on housing (for example stamp duty starts at zero) and impose capital gains tax on housing increases greater than inflation). For good measure, I'd look at instituting a land tax and ultimately a means to replace income tax with it.

I'd also demand the cash back from the banks and let the insolvent ones go under. Only depositors would get protection, and that up to the standing limits.

If it produced an intitial depression? Well, that's what's needed anyway to liquidate the debt built up during the quarter-century credit bubble I don't believe that going the Japanese route, as Brown/Darling have elected to do, of zombie banks and taking another quarter century of debt-deflation and demi-recession to achieve the same result is at all a good plan.

I'm a liquidationist. Bite me.

FoFP