Told'cha, ya shoulda killed me last year!

Why PS-accounts aren't selling?

Hmm... Could it have something to do with the unpredictable tax regime of Finland and the fact that the current climate seems to suggest that not only will taxes be going up but every succeeding government seems to aggressively change pension legislation. So excuse me while I don't see any point in locking my assets up for over 40 years with a product that very efficiently ties me to a Finnish banks, tax authorities, and government. If someone, however, offered good productized solutions for small investors to spin their savings into a offshore fund so that the government couldn't constantly kick your teeth. That I could be interested int.

Money

Many small, and large, companies have been ruined with too much money. --Jorma Ollila

Home ownership

One thing I've never understood is why the government absolutely feels that it is highly important to get everyone their own home. The latest subprime crisis in the US, which has its roots firmly tied to governmental practices of encouraging banks to lend to more and more people is a good example of what can ultimately happen (of course there were quite a few other factors in play as well, but the last couple of administrations have essentially shoved home ownership down the throat of just about everyone).

In Finland it may not necessarily be so blatant, but the government clearly encourages home ownership. Home loan interest is tax deductible to a certain point, first-time buyers get preferential treatment in the form of government backed loans, protection from increasing interest rates, and so on. And the profit from selling your home is exempt from taxation. With all these factors in play, is it really that strange that housing prices in Finland are what they are? Or is it that strange that in the past years news have emerged of individuals purchasing homes with little (less than 10%) or no own capital?

I talked about this issue at work with some people, and the general consensus that people appeared to have was that all of this is entirely acceptable. Buying property is very safe, prices nearly always rise, etc. Seriously. Only a few years have passed since we saw what this type of thinking can potentially bring about and already the lessons have been forgotten. Not too many people make the largest investments of their life with a leverage of over 9:1 in respect to their own capital. Especially in a market which appears to be a bubble that is being sanctioned and built by the government.

Based on this I'm having a terribly hard time seeing myself investing any of my wealth into Finnish property markets: 30-year-loans and state subsidies smack of a horribly bad idea. But I hope that if and when the bubble bursts, this time around we won't encourage moral hazard by bailing out any of the people who have voluntarily put their heads in the guillotine.

And what about home ownership in general? You are of course free to buy your home. But only if you can afford it. As of now, I don't feel that I can afford to purchase a home for myself and thus I will not buy one. Despite the fact that the banks would be more than happy to provide financing for just about any type of apartment.

Some ideas

I was listening to Simon Cole give a presentation earlier today about value creation in the media industry these days. Overall I think the message was very much in line with intuition, but the two items that I thought worth picking out from there were related to inertia and to democratization.

I've often talked about inertia and I'm increasingly confident that in the longer run the negative aspects of inertia will outweigh the relative benefits of being big once the basic infrastructure for companies matures and does not penalize for smallness as much as it used to. In respect to dinosaurs attempting to rejuvenate themselves, Simon cited the interesting anecdote about how Disney sets aside money to a fund from which some employees can request capital to launch their companies that aim to kick Disney underneath its belt. The assumption naturally is that if you succeed in doing that, Disney will own you and thus learn from it and potentially embrace the disruption you either identified or triggered. As an idea that is brilliant and I think more companies should actively try to spar themselves with these types of initiatives. The most recent example to come to mind is of Mark Zuckerberg making an investment in Diaspora.

The second thing was Simon's comment on how Sky News gives first priority to the time-to-market of news whereas BBC emphasizes qualitative issues and will spend time to double-check stories before running them. The interesting bit here is if you think about how this actually is another situation where the underlying dynamic is that of democratization and giving the people responsibilities and freedom, or in this case that the consumer should do the editorial bit of the news process themselves. Not surprisingly with everything that's floating around on the internet, I guess most are becoming very information-savvy and are, hopefully, able to do basic fact checking and apply common sense to weed through the news. So interestingly this links back to the dynamic where things are getting chopped up into smaller pieces and individuals are becoming more empowered and free.

Amusingly enough I guess neither of these points directly related to the topic at hand, but then again, weak ties are often the source of the most interesting things.

Progression

Considering that progressive taxes seem to be all the rage right now, I would in fact like to propose a very holistic approach to all of this: instead of using currencies like the EUR, we could instead move to percentages. A bottle of milk would cost 0.1%, for instance. In practice this means that regardless of income, the individual would pay 0.1% of their monthly income for the product.

This type of solution would permanently resolve these pesky issues of some people earning more money than others by ensuring that regardless of the amount of money that a person makes, they will still be able to get the exact same amount of goods or services as any other person.