Painful Correction

Private banks have the ability to create new money out of nothing by lending it into existence. This has had the effect of ramping up house prices way beyond the realistic 3X annual income. The people who lose out in this pyramid selling scheme are those who come late into the market. Prices have a long way to fall yet given the high price of energy and food, and a slowing economy. The banks have helped to create 3 boom and bust cycles in the last 30 years, and Japanese property prices are still not back to the peak they reached in 1991. The only long term solution is to allow banks to only lend what is saved with them and create new money through public works.

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