Why? Because, Dillow argues, future generations will be richer than our own, and it is basically OK for the relatively poor to affect a transfer of wealth from the relatively rich.

This is a Robin Hood economic argument that I find utterly immoral. Sure, the idea of taxing one set of people to support another is nothing new. In countries such as Zimbabwe and North Korea money is routinely taken from the poor to support the rich elite. Democracy does not put up with that and votes for the reverse.

So in every true democracy, in every civilized country that I can think of, money is transferred via the tax system from the rich to the poor. Few of us have a problem with the principle, even if the detail can sometimes raise objections. But the point is that in a democracy we have a vote, and a vote gives us a chance to influence events.

There are two things wrong with Dillow’s argument, the first of which is that there is no guarantee that the UK will prosper and generate enough surplus cash to pay off old debts. Admittedly this is unlikely… but what is certain, and this is where I really take issue with Dillow, is the fact that the future generations who will be saddled with these debts have no say in the matter.

Our children and grandchildren have no vote, and those that have not yet been born certainly don’t have one either.

What will these descendants of ours think in ten, twenty and thirty years’ time when they look back at these decades? The Labour government will borrow something like £50bn this year. Will future generations look back and say, ‘That was money well spent. That was invested wisely. Thanks to the money spent back then, we are now benefiting’.

I don’t think so

I can think of circumstances where it is fair for governments to borrow money. The first of these is to defend the nation. The most famous government debt of all was War Loan, issued in 1917 to finance the war effort.

Subsequent generations can hardly object to that, because without it they might never have come into existence. It is also possible to make the case for borrowing if the money raised will be used in such a way as to improve the productivity of the economy. A motorway built today will benefit the country for years to come and so why should those who will enjoy the benefits in the future not pay for it? You could just about make the same argument for schools.

But borrowing is a habit that should be discouraged. It is a slippery slope.

The real scandal of the 10p tax climb-down was not that the Government had to revise its budget. That just made it look stupid. The real scandal is that rather than go back and say, ‘Well if I must give £2.4bn to the 10p tax losers, I must take it from somebody else,’ Darling simply borrowed the money. He borrowed money that will have to be raised from some future generation through the tax system in order to save his party’s political skin.

Given that his promise to ‘balance the budget over the course of the economic cycle’ has not been kept, Gordon Brown perhaps regrets having made it in the first place. But it was at least a good idea in principle.

Governments should live within their means, and if they do so they will at the very least set a good example. If governments resort to borrowing as soon as they find that balancing the books is politically inconvenient then they are hardly in a position to criticise citizens from doing the same.

Far too many people in this country are able to get what they want now, because they borrow money without really knowing how they will pay it back. Some of these chickens are now coming home to roost as bailiffs knock on doors and repossess houses.

Debt is not a good thing. Mr Micawber recognised this. Mrs Thatcher recognised this. Even Gordon Brown paid lip service to the principle of living within one’s means. Debts have to be paid somehow and at some time… and this generation that should take responsibility for its debts, and for making ends meet.

The last thing we should do is to dump the problem upon our children and our children’s children.

Source: Don’t Let’s Rob Our Grandchildren! 

Many look like they’ll have to find more capital to shore up their balance sheets, and there was much speculation in the weekend papers about investment banks ganging up behind the scenes to prop the sector up.

With housing sales in freefall, builders aren’t building anymore. It now looks as though just 100,000 homes will be built this year compared to a Government target of 240,000. That would be the lowest number built since 1945.

David Sutherland, chairman of housebuilder Tulloch, tells The Telegraph: “The UK housing target does not have a cat in hell’s chance of being met this year or next. Somebody at central government needs to do something.”

Two questions immediately arise in response to this plea. “What can the Government do?” and “Why should anything be done?”

Housebuilders are calling for government aid now that the housing market has gone into self-destruct mode. The Home Builders Federation is calling for stamp duty to be suspended and interest rates to be cut.

Sales are down 60% on this time last year, says Roger Humber of the House Builders Association. “No business or industry can survive that.”

The housebuilders are indeed facing terrible times ahead. They’ve had their boom – a boom never seen before, the likes of which they could never have dreamed of. Now they’re having the bust that was always certain to follow that boom. Just as the boom was better than they could have hoped, so the bust will be worse than they’d ever imagined.

This is why housebuilders usually trade on low price to earnings ratios, by the way. It’s because they are so brutally cyclical. Once the market turns, it turns badly, and the ‘e’ part of the p/e ratio drops off a cliff.

When activity drops off, the builders find they are left with assets plunging in value (their land banks) and they have to rapidly lay off workers to slash costs as sales dry up.

So – no surprise that they now want someone to save them.

But this is capitalism, remember? This is the way it works. Throughout the boom, no one in the property industry was particularly keen to have the state intervening in the market any more than it already does. Home Information Packs (HIPs) for example, which started out as a broadly sensible idea, were ripped apart by the property industry until they were introduced in their current, worse than useless, state.

More to the point, there’s nothing the Government can do. Stamp duty cuts? House prices are falling by about 2% a month at the moment. That’s your stamp duty right there. Interest rate cuts? In case the builders hadn’t noticed, rates have already fallen by three quarters of a point, and it hasn’t made a bit of difference.

That’s because banks still aren’t keen to lend. There’s been a curious reaction to this in the press recently. One leading property writer seems to be blaming Halifax among others for the seizure in the housing market, complaining that they are causing the house price crash by refusing to lend to creditworthy borrowers. Meanwhile, in The Telegraph, a reader’s letter cites amazement at banks greedily ignoring the BoE’s interest rate cuts.

It’s important to understand that the banks aren’t doing this out of spite or greed. This is not a matter of simply persuading them to start dishing out the readies again. The banks – for anyone who didn’t notice Northern Rock or Bradford & Bingley’s travails – are undergoing a bit of a crisis themselves. Halifax parent HBoS is right now crossing its fingers for its £4bn rights issue, while Royal Bank of Scotland has just raised £12bn.

To put it bluntly, the banks are skint. They gave too much money to people who couldn’t pay it back, and now they’re paying for it. They need all the money they can get. They don’t care how good a credit risk you are – they simply aren’t in a position to be as profligate as they were before.

Sure, it’s their own fault they got into this mess. But if you want to blame the banks for their reluctance to lend now, you also have to acknowledge that they were wrong to have been so free and easy with the credit in the first place. And that’s something I suspect most property pundits would be reluctant to admit.

Anyway – back to the point in hand. There’s nothing the Government can do – short of actually giving the housebuilders money (don’t rule it out) – to save the construction companies.

The good news is that with the free and easy access to credit that created the boom in the first place now gone, house prices will settle back to a level that genuinely reflects supply and demand. And with builders unable to build more houses (bye-bye to Gordon Brown’s eco-towns, thank goodness), and foreign workers heading off back home in their droves, we’ll soon see just how much of a housing shortage Britain really has.

I think we’ll find it’s less of a problem than the bulls have been making out.

Turning to the wider markets…

The FTSE 100 recovered on Friday to rise 12 points to 5,802. HBoS was the biggest riser along with other banks as investors closed out short positions.

Meanwhile, in Europe, the German Xetra Dax climbed 50 to 6,765, while in Paris the French CAC 40 rose 10 points to close at 4,682.

In the US on Friday, stocks made strong gains as inflation data was in line with expectations and the dollar continued to rally. The Dow Jones rose 165 points to 12,307. The S&P 500 climbed 20 points to 1,360. And the Nasdaq rose 50 points to end at 2,454.

In the forex markets today, sterling was trading at 1.953 against the dollar and 1.2677 against the euro. The dollar stood at 0.6493 against the euro and 108.31 against the Japanese yen.

In Japan, stocks were higher as the weaker yen boosted earnings at car and electronics manufacturers. The Nikkei 225 climbed 380 points to close at 14,354.

Brent spot was trading this morning at $133.70, while in New York crude was trading at around $134.10. Spot gold was at $867 an ounce. Silver was trading at $16.49, while platinum was at $2,019.

This morning, Barclays’ share price has risen after it said that it is actively considering selling shares to prop up its balance sheet. Profit for May was “well ahead” of last year’s figure. Reports at the weekend suggest that any money raised would come both from sales to sovereign wealth funds and to existing investors.

Source: The Good News About the Housing Crash

“Give me a chance to get my coat off!” came the reply.

One de-coating and a cup of tea later, and Theo was buzzing.

“Jerry Yang just pushed his luck,” he said, referring to Yahoo’s chief executive. “Microsoft were bidding $33 a share; Yang and his board wanted $37. No dice!”

Let’s not forget, before the bid started Yahoo’s share price was below $20. The troubled courtship with Microsoft has served Yahoo shareholders well.

But yesterday the share price took a tumble when the deal looked to be dead. There’s an important lesson investors can draw from all this. It shows how a cantankerous CEO can sometimes turn down a good deal on your behalf.

Now the deal looks like it might go ahead after all. Yang is under pressure from his ultimate bosses – the shareholders. They want to know what plans he has to get the shares from where they currently are – around $25 – to the $33 they would have pocketed from Microsoft.

Theo also points out the contrast with the M&A frenzy of the last few years. When credit was cheap, speculative investors would load up on potential merger and acquisition targets, hoping to bag a nice premium from the predator firm. It was risky, but the potential rewards were worth it (witness the huge premium Royal Bank of Scotland paid for ABN Amro).

If one deal fell through, there was always a reasonable chance someone else would take the suitor’s place. But that was all pre-credit crunch. Yahoo’s share price tumble yesterday showed that such optimism has evaporated from the markets.

“This sort of M&A play is too risky now,” says Theo. “And that goes for Yahoo as well. Stay away!”

I would have gotten away with it if it wasn’t for that pesky Frank Field!

Labour rebelmeister, Frank Field, is brandishing his trouble-making stick again. Get ready for round two of the 10p tax fight!

Gordon Brown must just wish this issue would go away. It was Brown who, as Chancellor last year, got rid of the rate (a move he must surely now rue). Now, as Prime Minister, he’s presiding over the farcical consequences.

It’s estimated that the change will leave 5.3 million people worse-off (incidentally Gordon the Stubborn is disputing this figure, even though both the Treasury and the Institute for Fiscal Studies have confirmed it).

The Government faced down a backbench revolt by promising to ensure the worst-affected were compensated. Alistair Darling promised to make it all good again. This placated the rebels… for about a week. Now they’ve returned to ask the inevitable question: “Hang on… what are you actually going to do?”

Ah, there’s the rub. Brown says precise measures have been announced. But the message doesn’t seem to have reached his own party. Field and other MPs are baffled by the assertion.

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And how bad will it look if the Treasury refuses to publish this data.

Brown and Darling are like schoolboys who haven’t done their homework (though, as noted above, Brown insists he has). Now they’re being asked to show teacher their sums…

It’s all just so embarrassing, isn’t it?