Original subtitles

lt's the English-speaking world's favourite game...property.

And today the stakes in the game are higher than ever.

The original property game we know today as Monopoly was actually

invented back in 1 903 to expose the unfairness of a social system

where a small minority of landlords screwed the majority of tenants.

30 years later, an unemployed plumber 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 introduced the 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 money to the peopIe who own property.

That's because the phrase, ''Safe as houses''

has a rather speciaI meaning in the worId of finance. What it means

is there's nothing safer than to Iend money to peopIe who own reaI estate.

Why? WeII, because if they defauIt on the Ioan,

you can aIways repossess the property.

Even if they run away, the house can't.

What's more, the English-speaking world's obsession with property

has been the foundation for a unique economic and political experiment -

the property-owning democracy.

Some say it's a model the whole world should adopt.

The growth of property ownership

gave rise to a new era in the history of finance.

On the back of property, literally trillions of dollars

have been borrowed, some of it by so-called sub-prime borrowers -

people who'd previously been content to rent rather than own their homes.

So it's come as rather a shock to millions of people that real estate

is fundamentally no different from any other financial asset.

lts price can go down as well as up.

lt turns out that no amount of financial alchemy

can turn little suburban boxes into treasure chests with roofs.

Which raises the question, is property really as safe as houses?

Or couId it be that we've Iet our Iove affair with reaI estate

get compIeteIy out of proportion?

Property ownership was once the preserve of an aristocratic elite.

Estates were passed down from father 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 originally a function of property ownership.

In one respect, not much has changed 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 Ionger monopoIise the poIiticaI system.

Indeed, thanks to reform of the House of Lords,

the hereditary peerage is being phased out of ParIiament.

Now, you can expIain the decIine of the aristocracy in many ways.

But, as far as I'm concerned, the main driver was finance.

Until the 1 830s, fortune smiled on the British land-owning elite -

the 30 or so families with gross annual income from their lands

above �60,000 a year -

roughly � 1 50 million pounds today.

With such vast property assets backing them

and income from agriculture booming,

it was hard to see how the aristocracy could fail to flourish.

Yet, by ignoring a fundamental truth about 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 cow and used it to borrow to the hilt...

..often more than the property was worth.

What they'd failed to understand is that property is only a security

to the person who lends you money.

As a borrower, you still have to earn the money to pay back the loan.

And for the great landowners

of Victorian Britain, that suddenly became a very difficult thing to do.

Nowhere was the pain more acute than here in the heart of rural Buckinghamshire.

There's something undeniabIy magnificent about this huge,

neocIassicaI paIace -

Stowe House - arguabIy the greatest private residence

buiIt in EngIand in the 18th century.

Just Iook at these extraordinary scagIioIa piIIars

or the stunning eIIipticaI pIaster ceiIing.

And yet there seems to be something missing.

Or rather many things.

Because once in each of these aIcoves there was a Roman statue.

The exquisite Georgian firepIaces have been ripped out

and repIaced by bog-standard ones Iike this.

Why?

How did this most stately of stately homes become a mere shell of its former self?

The answer is that this house beIonged to the principaI victim

of the first modern property crash -

Richard PIantagenet TempIe-Nugent-Brydges-Chandos-GrenviIIe,

2nd Duke of Buckingham.

Stowe was only part of the Duke's vast empire of real estate.

ln all, he owned around 67,000 acres in England, lreland and Jamaica.

These immense properties seemed more than adequate

to back his extravagant lifestyle.

And he spent money as if it might go out of fashion

on mistresses, on illegitimate children,

on anything that he felt was compatible with his standing as a Duke of the Realm.

PEACOCK CRIES

By 1 845, the jig was up.

Grain prices had begun their long slide downwards,

and so had the income from agricultural land.

Rural property prices plummeted.

Suddenly, the aristocracy found that their borrowings

had outrun the value of their estates.

The Duke was spending far more than his income

and most of that was being absorbed by interest payments.

But there was to be one final bout of conspicuous consumption.

In preparation for a visit by Queen Victoria and Prince AIbert,

the Duke decided to spIash out and refurbish Stowe House from top to bottom.

15 saIoons were stuffed fuII of the most expensive furniture

that money couId buy.

The fIoorboards were groaning under 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 spIendid apartments in either of my paIaces. ''

SadIy, the cost of this mega-makeover proved to be the finaI straw

for the ducaI finances.

ln August 1 848, to the Duke's horror,

his son had the entire contents of Stowe House auctioned off.

Now, his ancestral stately home was thrown open

for throngs of bargain-hunters to bid for the silver, the wine, the china.

Today, Stowe is a private boarding school.

lt's a poignant symbol of the transience of landed wealth.

ln the modern world, it turned out,

a regular job and a steady income mattered more than an inherited title -

no matter how many acres you owned.

Divorced by his Iong-suffering and much-betrayed Scottish wife,

whose entire wardrobe had been seized by Sheriffs Officers in London,

the Duke was finaIIy forced to reIinquish Stowe

and move into rented accommodation.

He eked out his days at his cIub, the CarIton,

writing a succession of highIy unreIiabIe memoirs

and incorrigibIy chasing actresses and other men's wives.

The fall of the Duke of Buckingham was a kind of harbinger

for a new democratic age in which every adult would be given the vote

whether they owned a stately home or paid rent for a humble flat.

As aristocratic fortunes from agriculture declined,

so the franchise was widened.

Yet the advent of universaI suffrage didn't mean that property ownership

had become universaI.

On the contrary, as recentIy as 1938,

Iess than a third of the UK housing stock was in the hands of owner-occupiers.

It was on the other side of the AtIantic

that the first true property-owning democracy wouId emerge.

And it wouId emerge from the biggest financiaI crisis ever seen.

An EngIishman's home is his castIe

and Americans know that there's no pIace Iike home too,

even if aII the homes are rather simiIar.

Today we take the universal right to own our own home for granted.

But before the 1 930s,

no more than two-fifths of American households were owner-occupiers.

lf the old class system,

based on elite property-ownership was distinctively British,

the revolution that created a new property-owning democracy

was born out of a great American financial crisis.

When the Depression struck in 1 929, the US economy nose-dived.

The minority of people who did own their own homes

couldn't afford the mortgage payments.

Tenants too struggled to pay the rent when all they had coming in was the dole.

Nowhere were the effects of the Depression more painful than in Detroit.

Soon the automobile industry here

employed only half the number of workers it had in 1 929,

and at half the wages.

By 1 932, the dispossessed of Detroit had had enough.

On March 7th, 5,000 workers laid off by the Ford Motor Company

marched to the factory to demand unemployment relief.

What followed would force Americans to completely rethink

their attitude to property ownership.

As the unarmed crowd reached Gate 4

of the company's River Rouge plant in Dearborn,

scuffles broke out.

Suddenly, the factory gates opened

and a phalanx of police and security men rushed out

and fired into the crowd.

GUNSHOTS

Five workers were killed.

Days later, 60,000 people sang The lnternationale at their funeral.

The Communist Party newspaper accused Edsel Ford,

son of the firm's founder, Henry, of allowing a massacre.

Could anything be done

to defuse what was beginning to seem like a revolutionary situation,

pitting the seriously propertied Fords against their property-less ex-employees?

ln a remarkable gesture of conciliation,

Edsel Ford turned to a Mexican artist named Diego Rivera.

He invited him to paint a mural that 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 which there wouId be no private property,

in which the means of production wouId be commonIy owned.

In his eyes, Ford's River Rouge pIant was the very opposite,

a capitaIist society in which the workers worked

and the property owners, who reaped the 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 something rather more powerful than art

to heal a society so deeply split by the Depression.

Other countries turned to the extremes of totaIitarianism.

But in the United States the answer was the New DeaI.

And that incIuded a New DeaI on housing.

In radicaIIy increasing the number of Americans

who couId hope to own their own homes,

the RooseveIt administration pioneered the idea of a property-owning democracy.

It proved to be the perfect antidote to Red revoIution.

ln effect, the government would rig the housing market

to incentivise Americans to become property owners.

Customers at local mortgage lenders, known as savings and loans,

the equivalent of British building societies,

would have their deposits guaranteed by the Government

even if a bank went bust.

Crucially, a new Federal Housing Administration was set up

to offer larger, longer and lower-interest loans.

After the 1 930s, most mortgages in the United States were fixed

for 20 or 30 years.

A new Federal National Mortgage Association, nicknamed Fannie Mae,

was set up to create a nationwide market for home loans.

(TV REPORTER) This coupIe is going through a modeI house now.

The husband, apparentIy, isn't very keen about it aII,

but his wife is entranced by such convenient features

as the sturdy buiIt-in ironing board.

By reducing the monthly cost of a mortgage,

these reforms made home-ownership possible

for many more Americans than ever before.

(TV REPORTER) They both wouId Iike to 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 Iess than they now spend for rent!

lt's not too much to say that 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 for the big expIosion in property ownership

and mortgage debt in the decades after WorId War II.

There was just one catch -

not everyone in American society had an invitation to the property-owning party.

When these houses were built in Detroit back in 1 941,

whether you got the money or not for a mortgage

depended on which side of this divide you lived.

It was a reaI estate deveIoper who buiIt this six-foot high waII

right through the middIe of Detroit's 8 MiIe district.

He had to buiId it in order to quaIify for Ioans

from the FederaI Housing Administration.

The Ioans were to be given for construction on that side of the waII,

which was a predominantIy white neighbourhood.

On this side, on the bIack side, there was to be no federaI credit,

because African Americans were regarded as fundamentaIIy uncreditworthy.

lt was part of a system that divided the whole city -

in theory by credit-rating,

in practice by colour.

Segregation, in other words, wasn't accidental,

but a direct consequence of federal policy.

This map by the FederaI Home Loan Board

shows the predominantIy bIack areas of Detroit, the Iower east side

and so-caIIed coIonies Iike the one we're in now in Birwood-Griggs,

marked with a Ietter D and coIoured red.

You can see why the practice

of giving whoIe neighbourhoods a negative credit rating

came to be known as ''red-Iining''.

The resuIt was that when peopIe from round here needed mortgages,

they had to pay significantIy higher 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 euphemistically as prime and sub-prime.

But in the 1 960s, this divide was the hidden financial dimension

of the Civil Rights struggle.

Blacks were to be excluded from the new property-owning society.

There would be a heavy price to pay for this exclusion.

On July 23rd 1 967, property in Detroit literally went up in flames.

(TV) Four days of rioting, Iooting and arson rocked the city of Detroit

in the worst outbreak of urban raciaI vioIence this year.

Anger at economic discrimination spilled over into five days of rioting

that left 43 people dead.

Significantly, most of the violence was directed not against people,

but against property.

Nearly 3,000 buildings were looted or burned.

The real lesson for policy makers was that excluding ethnic minorities

from the property-owning democracy was a fast track to trouble.

To make people feel like stakeholders in the social status quo,

you had to make them property owners.

lndeed, widening home ownership might even turn the malcontents

into conservatives.

This was a lesson that Margaret Thatcher was quick to learn.

Here in Britain, the idea of the property-owning democracy

became a keystone of 1 980s Conservatism.

By selling off council housing at bargain-basement prices,

Thatcher ensured that more and more British couples had a home of their own.

That also meant that more people than ever had mortgages.

Up untiI the 1980s, government incentives to borrow money and buy a house

made pretty good sense for the average British famiIy.

Interest rates were reIativeIy Iow in the '60s and '70s,

and the infIation rate tended to creep up,

so that the reaI vaIue of mortgage debt tended to faII.

But there was a sting in the taiI.

The very same governments that professed their faith

in the property-owning democracy were aIso committed to fighting infIation,

and that meant raising interest rates.

The British and American policy of encouraging people

to take out mortgages and then cranking up interest rates led in the late '80s

to one of the most spectacular booms and busts in the property market's history.

lt was to the '80s what the sub-prime meltdown has been in our own time -

the first, but not the last time that America's mortgage market

has gone stark raving mad.

To many of us, it's come as a shock

that a crash in the American property market

could trigger a major financial crisis.

ln fact, as so often in the ascent of money, it's happened before.

ln March 1 984, American government regulators received a copy

of a video showing mile after mile of half-built houses and condominiums

along lnterstate 30, just outside Dallas in Texas.

You can still see the empty slabs today.

The investigation triggered by these un-buiIt homes wouId expose

one of the biggest financiaI scandaIs of aII time -

a scam that wouId make a mockery of the idea

of property as 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's New Deal on housing.

By the 1 97 0s, they were the foundation of America's property-owning democracy.

Then, in the 1970s, the savings and Ioan industry was hit

first by doubIe-digit infIation and then by higher interest rates.

lt was a lethal double punch for institutions that were forbidden by law

to raise the rates they paid to savers,

and which were receiving interest payments from local mortgage borrowers

that had been fixed decades before.

The response in Washington was to remove nearly all these restrictions.

When deregulation was 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 chance to make some serious money

from the once boring business of mortgage lending.

By raising savings rates, they could attract much more money from depositors.

Then they could use these deposits

as the basis for as many loans as they liked.

Crucially, though, one thing didn't change.

Savers' deposits were still insured by the government.

lt was an invitation to a gigantic free lunch for financial cowboys.

This is the Wise Circle Grill just outside Dallas,

filled every lunchtime with local citizens of unblemished integrity.

Twenty years ago, the clientele was rather different.

The city of DaIIas had more than its fair share of frauduIent savings and Ioans,

and this was where the DaIIas property cowboys came to hang out.

The Wise CircIe GriII was the pIace to have brunch

when they weren't whooping it up on 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 opportunity to make money out of thin air...

or rather, out of fIat, Texan Iand.

The surreal saga of Empire Savings and Loans began

when chairman Spencer Blain teamed up

with a flamboyant high-school dropout turned property developer

named Danny Faulkner, whose speciality was extravagant generosity...

with other people's money.

COINS CASCADE

The money in question came in the form of deposit accounts

on which Empire paid alluringly 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 trick was ''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 cIaimed that he was iIIiterate,

but he certainIy wasn't innumerate.

Many investors never even got a chance to view their properties close up.

Faulkner would simply fly them over in his helicopter without landing.

By 1 984, property development in Texas was out of control,

paid for by government-guaranteed deposits

that were effectively going straight into the pockets of the developers.

On paper at least, the assets of Empire had grown

from $1 2 million to $257 million in just over two years.

The troubIe was that the demand for condos by Interstate 30

couId never possibIy have kept up with the vast suppIy

that was being generated by FauIkner, BIain and their cronies.

When the reguIators finaIIy bIew the whistIe in 1984,

that reaIity couId no Ionger be escaped,

and hundreds of the buiIdings that they erected

ended up being buIIdozed or burnt to the ground.

Today, 24 years on,

it's stiII a Texan wasteIand.

ln 1 991, Faulkner and Blain were both convicted and jailed for fraud.

One investigator called Empire ''one of the most reckless

''and fraudulent land investment schemes in American history. ''

ln all, nearly 500 savings and loans collapsed.

According to one official estimate,

nearly half had seen ''criminal conduct by insiders''.

The full cost of the crisis was $1 53 billion,

making it one of the most expensive financial crises in American history.

And the federal government which had deregulated

the savings and loans in the first place

had to pick up the bill, which is another way of saying that taxpayers forked out.

It was the first cIear sign that there might be a downside

to the idea of the property-owning democracy.

Yet the savings and loans crisis was a mere tremor

compared with the property earthquake

that would strike the US market 20 years later.

Savings and loans was an all-American crisis.

But the sub-prime quake

would shake the entire world of finance to its very foundations.

When this wall was built

to divide white homeowners from black renters in the 1 940s,

black families found it virtually impossible to get mortgages.

Sixty years later, that had all changed.

''We want everybody in America to own their own home, ''

President George WBush declared in October 2002, challenging lenders

to create 5.5 million new minority homeowners

by the end of the decade.

Positively encouraged by the federal government to relax lending standards,

mortgage companies swarmed into areas like this one,

offering all kinds of alluring deals.

Because so many of the new borrowers had patchy credit histories,

these loans came to be known as ''sub-prime''.

That made you a perfect candidate for a NlNJ A loan.

The problem was that behind low introductory payments,

these new mortgage loans were very different from the old,

30-year fixed-rate repayment loans of the past.

Since the 1980s,

the housing game has radicaIIy changed throughout the EngIish-speaking worId.

Mortgages are for shorter and shorter durations

and more and more borrowers are opting for interest-onIy mortgages.

That makes househoIds far more sensitive than they were to interest-rate hikes.

So how come the lenders didn't worry that these sub-prime borrowers

were almost certain to default if interest rates rose?

The answer to that question

and the key to the sub-prime crisis was another ''S'' word...

Instead of putting their own money at risk,

sub-prime Ienders immediateIy soId the Ioans on

to banks here, in and around WaII Street.

And the banks then securitized the Ioans,

which means they bundIed them together 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 securities to investors 1 ,000 miIes away from Detroit

who were happy to pay

for just a few extra hundredths of a percentage point in interest.

The key to securitization was the distance

between the mortgage borrowers in, say, Detroit,

and the people who ended up receiving their interest payments.

By the time small towns in Norway bought these securities,

they had no idea what was really behind their investment.

FinanciaI aIchemy?

WeII, it was a business modeI that worked beautifuIIy

as Iong as interest rates stayed Iow, peopIe kept their jobs,

and reaI-estate prices continued to rise.

Unfortunately, none of these things happened in Detroit.

ln 2006 alone,

sub-prime lenders injected more than a billion dollars

into those areas of the city where home values were already falling

and unemployment and mortgage rates were already rising.

Where Detroit led, other cities soon followed.

MEN READ OUT ADDRESSES

It's Thursday at noon and I'm witnessing a twice-daiIy rituaI

here on the steps of the Memphis Courthouse.

About 30 homes are about to be auctioned off here, and the reason is

that the mortgage Ienders have forecIosed on the homeowners

for faiIing to keep up with their interest payments.

2926 South Radford Avenue...

Memphis is reaIIy becoming ForecIosure City these days.

In the past five years, something Iike one in four househoIds

has received a notice threatening them with forecIosure.

Since the sub-prime mortgage market began 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 survivors hundreds of billions of dollars.

Remember that pillar of the 1 930s New 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 collapse of the mortgage market.

Established Wall Street names like Bear Stearns, Lehman Brothers

and Merrill Lynch have vanished.

Unlike savings and loans, this crisis extends right around the world.

The four Norwegian municipalities of Rana, Hemnes, Hattfjelldal and Narvik,

which had invested their citizens' taxes in sub-prime backed securities,

are now sitting on an investment worth roughly 1 5% of what they paid for it -

a loss of $1 00 million.

In the EngIish-speaking worId,

we tend to think of property as a one-way bet.

The simpIest way of getting rich is to pIay the property market.

In fact, you'd be a mug to invest your money in anything eIse.

But the remarkable thing about this supposed ''truth''

is how often reality gives it the lie.

For like stock markets, property can soar in value

only to crash in the most spectacular way.

ln Britain, between 1 989 and 1 995,

the average house price fell by 1 8%.

But that was nothing compared with 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 cost if 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 me this bijou apartment in Tokyo.

But this is a smart neighbourhood, right?

That may sound like a lot, but in recent Japanese history, it's a real bargain.

Between 1 985 and 1 990,

property prices in Japan rose by a factor of roughly three.

Banks fell over themselves to 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 �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.

�3 miIIion. Wow!

We think we've had a property crash in the West, but this is a reaI property crash.

So no, property isn't a uniqueIy safe investment.

House prices can go down as weII as up.

And as assets go, houses are pretty iIIiquid,

which means you can't unIoad them in a hurry if you get into a financiaI jam.

And that, pretty much, is the downside

of the idea of a property-owning democracy.

The question now is whether we EngIish-speakers

have any business trying to export our modeI to the rest of the worId.

The real flaw in the property-owning democracy, as recent events have proved,

is that the housing market, like any asset market, is prone to booms and busts.

But maybe there's another way of looking at property -

as a means of unlocking new wealth

by providing collateral for aspiring entrepreneurs.

Could property ownership be the 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 outskirts of Buenos Aires seem a million miles

from the elegant boulevards of the Argentine capital's centre.

But are people here really as poor as they look?

One man didn't believe so.

Peruvian economist Hernando de Soto saw the shabby residences like these

in developing countries all over the world as representing

literally trillions of dollars of unrealised wealth.

The probIem is that the peopIe who Iive here,

and in countIess shanty towns around the worId,

don't have secure IegaI titIe to their homes.

That's bad, because without a IegaI titIe to property,

you can't use it as coIIateraI to borrow money.

And if you can't borrow money,

then you can't possibIy raise the capitaI you need to start a business.

Part of the trouble is that in poor countries, it's a bureaucratic nightmare

to establish secure legal title to property.

lt can take months - sometimes years - longer than in the English-speaking world.

For Hernando de Soto,

breathing financiaI Iife into aII this dead capitaI

is the key to providing the poor with a more prosperous future.

The shanty town of Quilmes, on the southern outskirts of Buenos Aires,

provides a natural experiment to test De Soto's theory.

On one side of the town, there are some of 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 1980s that a group of squatters here

Iobbied the government for secure IegaI titIe to their homes.

They were successfuI, and those wiIIing to pay a nominaI rent were granted Ieases

which, after 20 years, converted into fuII ownership.

You can teII they're owner-occupied by 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 after properties better than tenants.

And some of the owners here

are even reaIising the vaIue of their properties by putting them up for saIe.

Yet there seems to be a flaw in the theory, for owning their own homes

hasn't made it significantly easier for people here to borrow money.

Just 4% of them have managed to secure a mortgage.

The reaIity is that owning property doesn't give you security -

it just gives your creditors security.

ReaI security comes from having an income,

as the Duke of Buckingham discovered in the 1840s,

as Detroit homeowners are discovering today,

and as I suspect the peopIe of QuiImes wouId probabIy agree.

For that reason, it probabIy isn't necessary

for every entrepreneur in the deveIoping worId to take out a mortgage on his home

or, for that matter, on her home.

In fact, property ownership may not be the 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 large number of women around the world

who have borrowed money with no security at all.

She's the personification

of an extraordinary new financial movement known as microfinance.

Did you borrow the money to set up this coffee stand?

COMPANION TRANSLATES

SHE REPLIES IN SPANISH

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 point to one of the great reveIations

of the microfinance movement in a country Iike BoIivia.

It turns out that women are actuaIIy a better credit risk than men,

with or without a home as security for the Ioan.

It aII rather fIies in the face of the conventionaI image

of the spendthrift femaIe.

These women are hardly what you would call good financial risks.

They probably have just a few dollars between them.

Yet with no security, they are being lent money. Here in Bolivia,

lenders have come to realise

that creditworthiness may in fact be a female trait.

Carmen Velasco set up Pro Mujer

to provide finance to poor but enterprising women.

Because the loans are unsecured by property,

the challenge is to get the women to pay them back...but they do.

From day one, they have to know that they have to repay on time,

that they have interest rates and they have to save.

So it's a process of Iearning, and at the beginning it's very difficuIt,

because they are not used to handIing 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 impressed by what I'm seeing here at Pro Mujer.

You can sense in this hive of activity

the transformation that microfinance has brought into these women's Iives.

And behind me you can see the bottom Iine...

women Iining up to repay their Ioans punctuaIIy.

Maybe it's time to change that oId catch phrase from ''as safe as houses''

to ''as safe as housewives''.

Of course, it would be a mistake to assume that microfinance

is some kind of economic magic bullet.

Just giving out loans won't necessarily consign poverty to the museums.

But then, betting everything on the house won't do that, either.

Financial illiteracy may be rampant,

but somehow we were all experts on one branch of economics -

the property market.

We all knew that 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 ownership may weII create

a poIiticaI constituency for capitaIism.

But it aIso distorts the capitaI market by persuading peopIe to bet the house on...

weII, the house.

PeopIe need to borrow money, of course,

to start up businesses or to buy expensive assets.

But it seems dangerous to Iure them into staking everything

on the far from risk-free property market.

From Buckinghamshire to BoIivia to bonny ScotIand,

the key is to strike the right baIance between debt and income.

And next week I'II be suggesting that the entire worId economy

is in the process of getting that baIance periIousIy wrong.