lt's the english-speaking world'sfavourite game...property. and today the stakes in the gameare higher than ever. the original property game we knowtoday as monopoly was actually invented back in 1 903 to exposethe unfairness of a social system where a small minority of landlordsscrewed the majority of tenants. 30 years later, an unemployedplumber named charles darrow patented a new version of the game,with the board based on the streets here in atlantic city. lt was darrow who introducedthe little houses and hotels.
what the game of monopoly tells us,contrary to its inventor's intentions. is that it's smart to own property. and if it's smart to own property,it's even smarter to iend moneyto the peopie who own property. that's because the phrase,''safe as houses'' has a rather speciai meaning inthe worid of finance. what it means is there's nothing safer than to iendmoney to peopie who own reai estate. why? weii, because if theydefauit on the ioan, you can aiways repossess the property.
even if they run away,the house can't. what's more, the english-speakingworld's obsession with property has been the foundation for a uniqueeconomic and political experiment - the property-owning democracy. some say it's a modelthe whole world should adopt. the growth of property ownership gave rise to a new erain the history of finance. on the back of property,literally trillions of dollars have been borrowed, some of it byso-called sub-prime borrowers -
people who'd previously been contentto rent rather than own their homes. so it's come as rather a shockto millions of people that real estate is fundamentally no differentfrom any other financial asset. lts price can go down as well as up. lt turns out that no amountof financial alchemy can turn little suburban boxesinto treasure chests with roofs. which raises the question,is property really as safe as houses? or couid it be that we've ietour iove affair with reai estate get compieteiy out of proportion?
property ownership was oncethe preserve of an aristocratic elite. estates were passed down fromfather to son, along with titles and political privileges. everyone else was a mere tenant,paying rent to their landlord. even the right to vote in elections was originallya function of property ownership. in one respect, not much haschanged in britain since those days. of 60 miiiion acres of british iand,around 40 miiiion are owned by just 189,000 famiiies.
the difference is that they no iongermonopoiise the poiiticai system. indeed, thanks to reformof the house of lords, the hereditary peerageis being phased out of pariiament. now, you can expiain the deciineof the aristocracy in many ways. but, as far as i'm concerned,the main driver was finance. until the 1 830s, fortune smiledon the british land-owning elite - the 30 or so families with grossannual income from their lands above â£60,000 a year - roughly ⣠1 50 million pounds today.
with such vast property assetsbacking them and income from agriculture booming, it was hard to see howthe aristocracy could fail to flourish. yet, by ignoring a fundamental truthabout property, they ensured their own decline. gunshot crows caw like many of us today,the great magnates saw the value of their property as a cash cowand used it to borrow to the hilt...
..often more thanthe property was worth. what they'd failed to understandis that property is only a security to the person who lends you money. as a borrower, you still have toearn the money to pay back the loan. and for the great landowners of victorian britain, that suddenlybecame a very difficult thing to do. nowhere was the pain more acute than herein the heart of rural buckinghamshire. there's something undeniabiymagnificent about this huge, neociassicai paiace -
stowe house - arguabiythe greatest private residence buiit in engiand in the 18th century. just iook at these extraordinaryscagiioia piiiars or the stunning eiiipticaipiaster ceiiing. and yet there seems to besomething missing. or rather many things. because once in each of these aicovesthere was a roman statue. the exquisite georgian firepiaceshave been ripped out and repiaced bybog-standard ones iike this.
why? how did this most stately of stately homesbecome a mere shell of its former self? the answer is that this house beiongedto the principai victim of the first modern property crash - richard piantagenettempie-nugent-brydges-chandos-grenviiie, 2nd duke of buckingham. stowe was only part of the duke'svast empire of real estate. ln all, he owned around 67,000 acresin england, lreland and jamaica. these immense propertiesseemed more than adequate
to back his extravagant lifestyle. and he spent moneyas if it might go out of fashion on mistresses, on illegitimate children, on anything that he felt was compatiblewith his standing as a duke of the realm. peacock cries by 1 845, the jig was up. grain prices had beguntheir long slide downwards, and so had the incomefrom agricultural land. rural property prices plummeted.
suddenly, the aristocracy foundthat their borrowings had outrun the value of their estates. the duke was spendingfar more than his income and most of that was being absorbedby interest payments. but there was to be one final boutof conspicuous consumption. in preparation for a visitby queen victoria and prince aibert, the duke decided to spiash out andrefurbish stowe house from top to bottom. 15 saioons were stuffed fuiiof the most expensive furniture that money couid buy.
the fioorboards were groaningunder the weight of genoa veivet, embroidered satin and goid brocade. when the queen saw the resuits,she commented rather waspishiy, ''i am sure i have no such spiendidapartments in either of my paiaces. '' sadiy, the cost of this mega-makeoverproved to be the finai straw for the ducai finances. ln august 1 848, to the duke's horror, his son had the entire contentsof stowe house auctioned off. now, his ancestral stately homewas thrown open
for throngs of bargain-hunters to bidfor the silver, the wine, the china. today, stowe is a private boarding school. lt's a poignant symbolof the transience of landed wealth. ln the modern world, it turned out, a regular job and a steady incomemattered more than an inherited title - no matter how many acres you owned. divorced by his iong-sufferingand much-betrayed scottish wife, whose entire wardrobe had been seizedby sheriffs officers in london, the duke was finaiiy forcedto reiinquish stowe
and move into rented accommodation. he eked out his daysat his ciub, the cariton, writing a successionof highiy unreiiabie memoirs and incorrigibiy chasing actressesand other men's wives. the fall of the duke of buckinghamwas a kind of harbinger for a new democratic age in whichevery adult would be given the vote whether they owned a stately homeor paid rent for a humble flat. as aristocratic fortunesfrom agriculture declined, so the franchise was widened.
yet the advent of universai suffragedidn't mean that property ownership had become universai. on the contrary, as recentiy as 1938, iess than a third of the uk housing stockwas in the hands of owner-occupiers. it was on the other side of the atiantic that the first true property-owningdemocracy wouid emerge. and it wouid emerge fromthe biggest financiai crisis ever seen. an engiishman's home is his castie and americans know thatthere's no piace iike home too,
even if aii the homes are rather simiiar. today we take the universal rightto own our own home for granted. but before the 1 930s, no more than two-fifths of americanhouseholds were owner-occupiers. lf the old class system, based on elite property-ownershipwas distinctively british, the revolution that createda new property-owning democracy was born out of a greatamerican financial crisis. when the depression struck in 1 929,the us economy nose-dived.
the minority of peoplewho did own their own homes couldn't afford the mortgage payments. tenants too struggled to pay the rentwhen all they had coming in was the dole. nowhere were the effects of the depressionmore painful than in detroit. soon the automobile industry here employed only half the numberof workers it had in 1 929, and at half the wages. by 1 932, the dispossessed of detroithad had enough. on march 7th, 5,000 workerslaid off by the ford motor company
marched to the factoryto demand unemployment relief. what followed would force americansto completely rethink their attitude to property ownership. as the unarmed crowd reached gate 4 of the company's river rougeplant in dearborn, scuffles broke out. suddenly, the factory gates opened and a phalanx of policeand security men rushed out and fired into the crowd.
gunshots five workers were killed. days later, 60,000 people sangthe lnternationale at their funeral. the communist party newspaperaccused edsel ford, son of the firm's founder, henry,of allowing a massacre. could anything be done to defuse what was beginningto seem like a revolutionary situation, pitting the seriously propertied fordsagainst their property-less ex-employees? ln a remarkable gesture of conciliation,
edsel ford turned to a mexican artistnamed diego rivera. he invited him to paint a muralthat would show detroit's economy as a site of cooperation,not class conflict. diego rivera was a iifeiong communist. his ideai was of a society in whichthere wouid be no private property, in which the means of productionwouid be commoniy owned. in his eyes, ford's river rouge piantwas the very opposite, a capitaiist societyin which the workers worked and the property owners, who reapedthe rewards of their efforts,
mereiy watched. when the murals were unveiled in 1 933,the city's dignitaries were appalled. they saw them as communist propaganda,''a travesty on the spirit of detroit''. the power of art is a wonderful thing. but it was clearly going to take somethingrather more powerful than art to heal a society so deeply splitby the depression. other countries turned to the extremesof totaiitarianism. but in the united statesthe answer was the new deai. and that inciudeda new deai on housing.
in radicaiiy increasingthe number of americans who couid hope to own their own homes, the rooseveit administration pioneeredthe idea of a property-owning democracy. it proved to be the perfect antidoteto red revoiution. ln effect, the governmentwould rig the housing market to incentivise americansto become property owners. customers at local mortgage lenders,known as savings and loans, the equivalent ofbritish building societies, would have their deposits guaranteedby the government
even if a bank went bust. crucially, a newfederal housing administration was set up to offer larger, longerand lower-interest loans. after the 1 930s, most mortgagesin the united states were fixed for 20 or 30 years. a new federal national mortgageassociation, nicknamed fannie mae, was set up to createa nationwide market for home loans. (tv reporter) this coupieis going through a modei house now. the husband, apparentiy,isn't very keen about it aii,
but his wife is entrancedby such convenient features as the sturdy buiit-in ironing board. by reducing the monthly costof a mortgage, these reforms madehome-ownership possible for many more americans than ever before. (tv reporter) they both wouid iiketo have this piace for their very own. too bad they can't afford it. ah! but maybe they can. for according to this sign,they can buy this house
with monthiy payments that are iessthan they now spend for rent! lt's not too much to saythat the modern united states, with its seductively samey suburbs,was born out of these new deal reforms. from the 1930s then,the us government effectiveiy underwrote the mortgage market,bringing borrowers and ienders together. and that was the reason forthe big expiosion in property ownership and mortgage debt in the decadesafter worid war ii. there was just one catch - not everyone in american society had aninvitation to the property-owning party.
when these houses were builtin detroit back in 1 941, whether you got the money or notfor a mortgage depended on which sideof this divide you lived. it was a reai estate deveioperwho buiit this six-foot high waii right through the middieof detroit's 8 miie district. he had to buiid itin order to quaiify for ioans from the federai housing administration. the ioans were to be given forconstruction on that side of the waii, which was a predominantiywhite neighbourhood.
on this side, on the biack side,there was to be no federai credit, because african americans were regardedas fundamentaiiy uncreditworthy. lt was part of a systemthat divided the whole city - in theory by credit-rating, in practice by colour. segregation, in other words,wasn't accidental, but a direct consequenceof federal policy. this map by thefederai home loan board shows the predominantiy biack areasof detroit, the iower east side
and so-caiied coionies iike the onewe're in now in birwood-griggs, marked with a ietter dand coioured red. you can see why the practice of giving whoie neighbourhoodsa negative credit rating came to be known as ''red-iining''. the resuit was that when peopiefrom round here needed mortgages, they had to pay significantiyhigher interest rates than the foiks in the white part of town. half a century later,the two categories of borrowers
would come to be known euphemisticallyas prime and sub-prime. but in the 1 960s, this dividewas the hidden financial dimension of the civil rights struggle. blacks were to be excludedfrom the new property-owning society. there would be a heavy priceto pay for this exclusion. on july 23rd 1 967, property in detroitliterally went up in flames. (tv) four days of rioting, iootingand arson rocked the city of detroit in the worst outbreakof urban raciai vioience this year. anger at economic discriminationspilled over into five days of rioting
that left 43 people dead. significantly, most of the violencewas directed not against people, but against property. nearly 3,000 buildingswere looted or burned. the real lesson for policy makerswas that excluding ethnic minorities from the property-owning democracywas a fast track to trouble. to make people feel like stakeholdersin the social status quo, you had to make them property owners. lndeed, widening home ownershipmight even turn the malcontents
into conservatives. this was a lesson thatmargaret thatcher was quick to learn. here in britain, the ideaof the property-owning democracy became a keystone of 1 980s conservatism. by selling off council housingat bargain-basement prices, thatcher ensured that more and morebritish couples had a home of their own. that also meant that more peoplethan ever had mortgages. up untii the 1980s, government incentivesto borrow money and buy a house made pretty good sensefor the average british famiiy.
interest rates were reiativeiy iowin the '60s and '70s, and the infiation rate tended to creep up, so that the reai vaiue of mortgage debttended to faii. but there was a sting in the taii. the very same governmentsthat professed their faith in the property-owning democracywere aiso committed to fighting infiation, and that meant raising interest rates. the british and american policyof encouraging people to take out mortgages and then crankingup interest rates led in the late '80s
to one of the most spectacular booms andbusts in the property market's history. lt was to the '80s what the sub-primemeltdown has been in our own time - the first, but not the last timethat america's mortgage market has gone stark raving mad. to many of us, it's come as a shock that a crashin the american property market could trigger a major financial crisis. ln fact, as so often in the ascentof money, it's happened before. ln march 1 984, americangovernment regulators received a copy
of a video showing mile after mileof half-built houses and condominiums along lnterstate 30,just outside dallas in texas. you can still seethe empty slabs today. the investigation triggeredby these un-buiit homes wouid expose one of the biggest financiai scandaisof aii time - a scam that wouid makea mockery of the idea of propertyas a safe form of investment. this isn't a story about reai estate - more iike surreal estate.
savings and loan associations -america's building societies - were not only central to roosevelt'snew deal on housing. by the 1 97 0s, they were the foundationof america's property-owning democracy. then, in the 1970s,the savings and ioan industry was hit first by doubie-digit infiationand then by higher interest rates. lt was a lethal double punch forinstitutions that were forbidden by law to raise the rates they paid to savers, and which were receiving interest paymentsfrom local mortgage borrowers that had been fixed decades before.
the response in washington wasto remove nearly all these restrictions. when deregulationwas enacted in 1 982, president reagan was cock-a-hoop. aii in aii,i think we hit the jackpot. well, some people certainly did. liberated from the old constraints,the people running savings and loans suddenly saw a chanceto make some serious money from the once boring businessof mortgage lending. by raising savings rates, they couldattract much more money from depositors.
then they could use these deposits as the basisfor as many loans as they liked. crucially, though,one thing didn't change. savers' deposits were still insuredby the government. lt was an invitation to a giganticfree lunch for financial cowboys. this is the wise circle grilljust outside dallas, filled every lunchtime with localcitizens of unblemished integrity. twenty years ago,the clientele was rather different. the city of daiias had more than its fairshare of frauduient savings and ioans,
and this was where the daiiasproperty cowboys came to hang out. the wise circie griiiwas the piace to have brunch when they weren't whooping it upon their southfork-styie ranches. it was aii very, very 1980s. to one group of daiias deveiopers,the empire savings and loan association offered the perfect opportunityto make money out of thin air... or rather, out of fiat, texan iand. the surreal sagaof empire savings and loans began when chairman spencer blain teamed up
with a flamboyant high-school dropoutturned property developer named danny faulkner, whose specialitywas extravagant generosity... with other people's money. coins cascade the money in questioncame in the form of deposit accounts on which empire paidalluringly high interest rates. this is fauikner point,one of the very first deveiopments that danny fauikner ever buiit,and it spawned a veritabie empire of fauikner crest, fauikner creek,fauikner crescent,
fauikner fountains, fauikner oaks. danny fauikner's favourite trickwas ''the fiip''. he'd buy some parcei of iand for peanuts,and then seii it on to naive investors who got the money ient to them by - you've guessed it -empire savings and loans. danny fauikner may have ciaimedthat he was iiiiterate, but he certainiy wasn't innumerate. many investors never even got a chanceto view their properties close up. faulkner would simply fly them overin his helicopter without landing.
by 1 984, property developmentin texas was out of control, paid for by government-guaranteed deposits that were effectively going straightinto the pockets of the developers. on paper at least,the assets of empire had grown from $1 2 million to $257 millionin just over two years. the troubie was that the demandfor condos by interstate 30 couid never possibiy have kept upwith the vast suppiy that was being generatedby fauikner, biain and their cronies. when the reguiators finaiiybiew the whistie in 1984,
that reaiity couid no ionger be escaped, and hundreds of the buiidingsthat they erected ended up being buiidozedor burnt to the ground. today, 24 years on, it's stiii a texan wasteiand. ln 1 991, faulkner and blain were bothconvicted and jailed for fraud. one investigator called empire''one of the most reckless ''and fraudulent land investment schemesin american history. '' ln all, nearly 500 savings and loanscollapsed.
according to one official estimate, nearly half had seen''criminal conduct by insiders''. the full cost of the crisiswas $1 53 billion, making it one of the most expensivefinancial crises in american history. and the federal governmentwhich had deregulated the savings and loans in the first place had to pick up the bill, which is anotherway of saying that taxpayers forked out. it was the first ciear signthat there might be a downside to the ideaof the property-owning democracy.
yet the savings and loans crisiswas a mere tremor compared with the property earthquake that would strike the us market20 years later. savings and loanswas an all-american crisis. but the sub-prime quake would shake the entire world of financeto its very foundations. when this wall was built to divide white homeownersfrom black renters in the 1 940s, black families found it virtuallyimpossible to get mortgages.
sixty years later,that had all changed. ''we want everybody in americato own their own home, '' president george wbush declaredin october 2002, challenging lenders to create 5.5 millionnew minority homeowners by the end of the decade. positively encouraged by the federalgovernment to relax lending standards, mortgage companies swarmedinto areas like this one, offering all kinds of alluring deals. because so many of the new borrowershad patchy credit histories,
these loans came to be knownas ''sub-prime''. that made you a perfect candidatefor a nlnj a loan. the problem was that behindlow introductory payments, these new mortgage loanswere very different from the old, 30-year fixed-rate repayment loansof the past. since the 1980s, the housing game has radicaiiy changedthroughout the engiish-speaking worid. mortgages are for shorterand shorter durations and more and more borrowers areopting for interest-oniy mortgages.
that makes househoids far more sensitivethan they were to interest-rate hikes. so how come the lenders didn't worrythat these sub-prime borrowers were almost certain to defaultif interest rates rose? the answer to that question and the key to the sub-prime crisiswas another ''s'' word... instead of puttingtheir own money at risk, sub-prime iendersimmediateiy soid the ioans on to banks here, in and around waii street. and the banks thensecuritized the ioans,
which means they bundied themtogether and then siiced and diced them so that at ieast the top tier couid be ciassified as tripie-a-rated,''investment grade'' securities. and the banks then soid these securitiesto investors 1 ,000 miies away from detroit who were happy to pay for just a few extra hundredthsof a percentage point in interest. the key to securitizationwas the distance between the mortgage borrowersin, say, detroit, and the people who ended upreceiving their interest payments.
by the time small towns in norwaybought these securities, they had no idea what wasreally behind their investment. financiai aichemy? weii, it was a business modeithat worked beautifuiiy as iong as interest rates stayed iow,peopie kept their jobs, and reai-estate prices continued to rise. unfortunately, none of these thingshappened in detroit. ln 2006 alone, sub-prime lendersinjected more than a billion dollars
into those areas of the citywhere home values were already falling and unemployment and mortgage rateswere already rising. where detroit led,other cities soon followed. men read out addresses it's thursday at noonand i'm witnessing a twice-daiiy rituai here on the stepsof the memphis courthouse. about 30 homes are about to beauctioned off here, and the reason is that the mortgage ienders have foreciosedon the homeowners for faiiing to keep upwith their interest payments.
2926 south radford avenue... memphis is reaiiy becomingforeciosure city these days. in the past five years,something iike one in four househoids has received a noticethreatening them with foreciosure. since the sub-prime mortgage marketbegan to turn sour in the early summer of 2007,shockwaves have been spreading through all the world's financial markets, wiping out hedge funds,obliterating venerable investment banks and costing the survivorshundreds of billions of dollars.
remember that pillar of the 1 930snew deal mortgage market, fannie mae? with its younger brother, freddie mac,it grew to own or guarantee around half of all american home loans. ln september 2008, fannie and freddie were effectively nationalised to avoid a complete collapseof the mortgage market. established wall street nameslike bear stearns, lehman brothers and merrill lynch have vanished.
unlike savings and loans, this crisisextends right around the world. the four norwegian municipalities of rana,hemnes, hattfjelldal and narvik, which had invested their citizens' taxesin sub-prime backed securities, are now sitting on an investment worthroughly 1 5% of what they paid for it - a loss of $1 00 million. in the engiish-speaking worid, we tend to think of propertyas a one-way bet. the simpiest way of getting richis to piay the property market. in fact, you'd be a mugto invest your money in anything eise.
but the remarkable thingabout this supposed ''truth'' is how often reality gives it the lie. for like stock markets,property can soar in value only to crashin the most spectacular way. ln britain, between 1 989 and 1 995, the average house price fell by 1 8%. but that was nothing comparedwith what happened here in japan. the view's good. very austin powers decor.i'm ioving that.
oh, that's the boiier. ok, weii, iet's cut to the chase. how much is this piace going to costif i put the money down now? speaks japanese so that wouid be ciose to $2 miiiion. ok, that's iike a miiiion... a miiiion pounds buys methis bijou apartment in tokyo. but this is a smart neighbourhood, right? that may sound like a lot, but in recentjapanese history, it's a real bargain.
between 1 985 and 1 990, property prices in japan roseby a factor of roughly three. banks fell over themselvesto ride this wave. but it wasn't a wave.lt was a bubble. and in 1 990 it burst. prices here in tokyo fell... ..by 7 5%,wiping out all the previous gains. this costs â£1 miiiion now. how much did it cost back in 1990,at the peak of the property bubbie?
- so roughiy three times the vaiue.- three times? so ciose to...possibiy $6 miiiion. â£3 miiiion. wow! we think we've had a property crash in thewest, but this is a reai property crash. so no, property isn'ta uniqueiy safe investment. house prices can go downas weii as up. and as assets go,houses are pretty iiiiquid, which means you can't unioad them ina hurry if you get into a financiai jam. and that, pretty much, is the downside
of the ideaof a property-owning democracy. the question nowis whether we engiish-speakers have any business trying to exportour modei to the rest of the worid. the real flaw in the property-owningdemocracy, as recent events have proved, is that the housing market, like any assetmarket, is prone to booms and busts. but maybe there's anotherway of looking at property - as a means of unlocking new wealth by providing collateralfor aspiring entrepreneurs. could property ownership bethe answer to the problems
of the world's poorest countries? you've heard of sub-prime borrowers.well, welcome to a sub-prime country... ..argentina,where economic underachievement has been a way of life for a century. these slums on the outskirtsof buenos aires seem a million miles from the elegant boulevardsof the argentine capital's centre. but are people herereally as poor as they look? one man didn't believe so. peruvian economist hernando de sotosaw the shabby residences like these
in developing countries all over the worldas representing literally trillions of dollarsof unrealised wealth. the probiem isthat the peopie who iive here, and in countiess shanty townsaround the worid, don't have secure iegai titieto their homes. that's bad, because withouta iegai titie to property, you can't use it as coiiateraito borrow money. and if you can't borrow money, then you can't possibiy raise the capitaiyou need to start a business.
part of the trouble is that in poorcountries, it's a bureaucratic nightmare to establish secure legal titleto property. lt can take months - sometimes years -longer than in the english-speaking world. for hernando de soto, breathing financiai iifeinto aii this dead capitai is the key to providing the poorwith a more prosperous future. the shanty town of quilmes,on the southern outskirts of buenos aires, provides a natural experimentto test de soto's theory. on one side of the town, there are someof the most squalid slums l've ever seen.
but just a few miles away,it's a very different story. it was in the eariy 1980sthat a group of squatters here iobbied the governmentfor secure iegai titie to their homes. they were successfui, and those wiiiingto pay a nominai rent were granted ieases which, after 20 years,converted into fuii ownership. you can teii they're owner-occupiedby the fact that there's a fence, the waiis are painted,there's even a rather excitabie guard dog. after aii, owners tend to iook afterproperties better than tenants. and some of the owners here
are even reaiising the vaiue of theirproperties by putting them up for saie. yet there seems to be a flaw inthe theory, for owning their own homes hasn't made it significantly easierfor people here to borrow money. just 4% of themhave managed to secure a mortgage. the reaiity is that owning propertydoesn't give you security - it just gives your creditors security. reai security comesfrom having an income, as the duke of buckinghamdiscovered in the 1840s, as detroit homeownersare discovering today,
and as i suspect the peopie of quiimeswouid probabiy agree. for that reason,it probabiy isn't necessary for every entrepreneur in the deveiopingworid to take out a mortgage on his home or, for that matter, on her home. in fact, property ownership may not bethe key to weaith-generation at aii. this is betty flores. she runs a small coffee shop in el alto, a poor suburb of the bolivian capital,la paz. betty is one of an increasingly largenumber of women around the world
who have borrowed moneywith no security at all. she's the personification of an extraordinary new financial movementknown as microfinance. did you borrow the moneyto set up this coffee stand? yes, to make the...the stand.she borrowed money to make the stand. has she paid it aii back? - she's paid it off a iong time ago.- oh, i see. stories iike betty's pointto one of the great reveiations of the microfinance movementin a country iike boiivia.
it turns out that women are actuaiiya better credit risk than men, with or without a homeas security for the ioan. it aii rather fiies in the faceof the conventionai image of the spendthrift femaie. these women are hardly whatyou would call good financial risks. they probably havejust a few dollars between them. yet with no security, they are beinglent money. here in bolivia, lenders have come to realise that creditworthinessmay in fact be a female trait.
carmen velasco set up pro mujer to provide financeto poor but enterprising women. because the loansare unsecured by property, the challenge is to get the womento pay them back...but they do. from day one, they have to knowthat they have to repay on time, that they have interest ratesand they have to save. so it's a process of iearning,and at the beginning it's very difficuit, because they are not used tohandiing a ioan. but iittie by iittie, they get used to it,and they feei so proud when they repay.
i must say, i'm hugeiy impressedby what i'm seeing here at pro mujer. you can sense in this hive of activity the transformation that microfinancehas brought into these women's iives. and behind meyou can see the bottom iine... women iining upto repay their ioans punctuaiiy. maybe it's time to change that oidcatch phrase from ''as safe as houses'' to ''as safe as housewives''. of course, it would be a mistaketo assume that microfinance is some kind of economic magic bullet.
just giving out loans won't necessarilyconsign poverty to the museums. but then, betting everythingon the house won't do that, either. financial illiteracy may be rampant, but somehow we were all expertson one branch of economics - the property market. we all knewthat property was a one-way bet. except that it wasn't. all over the world, it seems,property prices are falling... ..from memphis to santiago,
from london to la paz. encouraging home ownershipmay weii create a poiiticai constituency for capitaiism. but it aiso distorts the capitai market bypersuading peopie to bet the house on... weii, the house. peopie need to borrow money, of course, to start up businessesor to buy expensive assets. but it seems dangerous to iure theminto staking everything on the far from risk-free property market.
from buckinghamshire to boiiviato bonny scotiand, the key is to strike the right baiancebetween debt and income. and next week i'ii be suggestingthat the entire worid economy is in the process of gettingthat baiance periiousiy wrong.
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