Long Live Lehman Brothers

Definition:
Defaulting : Taking loan for buying a property, and also buy an option of (mortgage) loosing property when repayment of loan is no longer possible.

Unbanking: Undertaking a loan valuation what is considered a safety in mortgaging property at current prices and also, in influence of competition with other money suppliers.

Over production: Boom in property markets for more profits and over supply forces the price to go down by increased competition

Discounting: Lower prices of property is incentive for default of loan by surrendering property mortgaged to bank. Defaulters can now get better property at cheaper prices

Problem Analysed:
Demand and Supply logic was distorted by money supply. Availability of more money in market increased demand and increased the supply, but over supply created price distortions and damaged the bank who actually was mother of the demand.

Trust vs. Greed
Consumers (traders, home buyers) smarter than Producers (of money and property)


Solution:
Banking and property market have common interest, and consumers acted here as intermediary or a trader without risks. This power of retail consumers to default loan payment, and using mortgage as tradable derivative is main cause.

To combat power of retail home buyers, suppliers of money and suppliers of real estate should together have an agreement.

Every house owners should pay rent for use and for ownership equity, as per current income and changing value of their property. Banks should invest in equity or stock of a listed property and sell the stock of that property to retail investors in a stock exchange.

Stock owners of a listed property act as renting agency to rent it out to users instead of users owning the property, by taking loans against mortgages, that they cannot repay, and that destroys the bank and turbulence in property market and real estate companies.

Creating a Reality Stock Market
Property buyers should buy part of the stock or equity in a given listed property in a Reality Stock Exchange (RSE).

Buyers instead of going to bank and take loan against mortgages; and banks in trouble by selling the mortgage at lower prices when buyer defaults repayment.

For example, a house XYZ with selling price of 1000 USD at time/date dd/mm/yy is listed in RSE.

Any one becomes owner of property by having share in amount of total equity in XYZ house in RSE. Any retail investor can sell and buy reality stocks in Exchanges as any stock of a company at Wall Street, and becomes part owner or majority owner.

Users of property pay a rent to the Exchange and this is considered income for the stock holders. The rent income and market value of equity in future will be basis of US economy in Reality Stock Market.

This new market will have distributed risk and will add to economic development at least risk. USA need to develop this Reality Stock Exchange Sooner than later.

Do not allow Federal Bank to be in Market
This is unhealthy trend to allow Federal bank to operate in markets, otherwise the Federal Bank will collapse one day.

The cause of death of Lehman Brothers should be understood, and framework for retail investors in acquiring capital assets should be developed.

Failure of Fed Bank is not new in USA, and because any government attitude cannot work efficiently as markets, and use of legal controls in democracy without self-calibrated financial tools is dangerous.

Government is not a substitute of market. Failure of Lehman Brothers should not be considered failure of a business but a process. So, the process should be corrected and nobody should get into panic.

India is another balloon to burst. India is little bit safe because of its major economy is informal or trust based where personal integrity is more important than legal integrity. The strength is not based on any market framework of government but on the mutual trust. India is a free market in true sense, and that is strength of the retail economy.

As India is developing its markets, and it is a matter of establishing Reality Stock Market whereby retail investors can acquire capital assets by similar financial instruments in Stock Market of companies.