Unsettling events on the UK front at the moment with rumours flying everywhere. There are risks certainly, but there is no doubt a little of that 'I hope it doesn't happen to me" (so much that I'd rather believe that it's happening to someone else) syndrome going on globaly.

It's time to stay calm and stick together.

We've developed a global economy and of course now any problem is a global problem.

It's nothing unexpected. Obviously everyone has some bad numbers somewhere, but unless everyone gets together globaly, there may be more losers than winners. As a 'noneconomist' I have absolutely no qualifications to make suggestions, but why should that stop me? I'm not the one with a collapsing bank/financial system. Everyone's actions right now will no doubt be very closely examined in the light of day. Best not try to be greedy. I'm not advocating socialism but a bit of social interest might help.

What Went Wrong?
What's changed? Some folks got to buy houses, and some acquired real estate portfolios and a lot of people made too much money out of it. Shouldn't people have houses? At least one, surely.

It's not like it was spent on bombs or something perishable, unless real estate has become perishable, and if it was then see 'managing consumption' below. It's the 21st century and I thought we aspired to live in democracies where an individual has a right to have a place they called home. Perhaps a new economic or banking instrument which guaranteed at least one chance to get a home. Treat the primary home differently and take some of the inflated costs out acquiring a home. Perhaps altering tax treatment for speculators, so that for the long haul family home owner there is a chance to actually own one.

It's no wonder Prosper and the like are growing so fast. At least their terms are fixed at the beginning of the loan. The trend to variable rates has homogenised borrowings on real estate and has homeowners effectively paying speculators rates for the most basic of housing needs.

This current fad of interest rates up and interest rates down to curb spending aren't funny when it comes to mortgages. If interest rates are used as a blunt weapon that hits those who can least afford it most heavily and threatens family homes - it undermines society an so many ways. There is little to be gained with such actions. Next time you want to stimulate the economy you have to be even more lax with lending rules to get any effect. Those caught up in the last wave of rises are once bitten and likely to have less borrowing ability next time around.

Using mortgage rates as a consumption club seems a little 'cave man' for me and it really isn't democratic. If you have paid your loan on time you can still be in trouble because the bank was foolish enough to lend money to someone who didn't. It should be their risk, not yours.
Variable rates will be a lot harder to sell next time. The level of interest rates fear which pervades society does not promote optimism and trust, nor does it lead to investment in either new businesses or housing.

In the absence of a financial instrument which differentiates between a home mortgage and a real estate investment mortgage, supported by equitable taxation, there is no order in the market.  If speculators can finance merely the portion of the real estate market up for sale at any time, and receive taxation incentives to play, there is no way to maintain orderly pricing. In a small market it is even easier.

What happens now depends purely on government policy. Some already have a housing crisis, so how does the government intend to stimulate further housing development with rates pushed up? More incentives to developer investors? This leaves a lot of voters paying high rates on overvalued properties and they didn't enjoy the benefits developers receive, yet they are only paying for their family home, an asset which can't be realised without selling and downgrading, moving to rental accomodation or a tent. Is this the job the governments are here to do? Governments lose power when citizens lose homes.

What Can Be Done?
Governments are already having to chip in citizen's money and should use the opportunity to negotiate the best result for those citizens. If they are to assume risk then they should demand a vote getting deal. Governments should buy out only homeowners sole residence mortgages which fit a rational lending and risk profile.

Rates could be fixed for homeowners and new home builders and variable for investors buying existing homes. Of course I doubt that'll be popular with landlords. Lending has to be restricted to a level where it can be serviced and repaid, if necessary by making the financial institutions carry more of the risk in a loan over a legislated threshold. The gains should be for the wise and brave.

This may be more palatable for governments and the majority of society. Would it free up capital for business investment? Homeowners would be able to build up savings and become investors again.

With the current veiw of the warming globe, consumption needs to be managed more than ever.

Managing Consumption
Perhaps a tax which varied depending on the class of item and when you most recently bought a class of item? Instead of the value added tax (VAT) why not get rid of it and introduce a warming added tax (WAT)?

This could allow first time buyers and conservative consumers to be rewarded for constraint and rampant wasters to be taxed to the eyeballs. A way to earn carbon credits, and be encouraged to buy cleaner technology. Profits made from investments in carbon reducing businesses could earn extra credits in WAT so that you could get a double windfall by being allowed to upgrade to that more efficient car, boat or jet without being taxed to the max because you upgraded last year. The WAT tax raised must be invested in green industry and we all benefit. Manipulating the WAT tax would regulate consumption and will influence demand for credit in areas which are counter productive, without penalising low consuming homeowners.

Developing Nations
Could a portion of each government's 'rampant consumer tax' , part of the WAT raised by taxing the most excessive consumers, be delivered to some sort of global development fund?

Get Together
Everything that happens on this planet has some effect on every one of us. The markets are global, the problems are global, perhaps a little coming together and a little good news is in order. The consequences of a loss of confidence will be rather severe and long term for some. Best try and pull something out of the hat before the commodities markets go flat too.

The numbers can be worked if there's a long term plan.

I believe that this may be a good time to get together and seize this hopefully unique moment in history. The governments and the banks can make Pheonix rise from the ashes before we all get burned (well, I'm cool of course). Are there any real leaders out there? What is Barrack Obama's view? Mr Brown? Mr Rudd? Angela Merkel?

Give us some confidence building and 21st century leadership and most of all, some hope.