The next phase of the financial crisis is now taking centre stage thanks to an eye-opening article by UCD economics professor Morgan Kelly in The Irish Times last week. The subject of mortgages filled the air­waves and even crossed into the Dáil, where the problem was downplayed by Brian Lenihan. I think a little history and context regarding the origins of the word 'mortgage' might add to this debate.

The word 'mortgage' emerged in English during the middle ages and literally means 'death-pledge' or 'death-grip'. Historically, a mortgage was only ever entered into if you had fallen on hard times, and it was the last resort at a time of dire financial need. Most of these mortgages were never paid off, and death was the only release, hence the original meaning.

This will be familiar to all players of the board game Monopoly. In this game, property is purchased without the need for a mortgage, and it is only ever mortgaged when you have run out of money. Once you start mortgaging property, the game is almost always nearly up. And I can't ever remember recovering from mortgaged property and going on to win at Monopoly. This Monopoly take on mortgages exactly matches the middle ages and it is historically correct.

None of this seems to fit into the picturesque world of modern mortgages and the mirage of home ownership. In truth, the modern mortgage is subject to a lot more spin, and it has had a huge PR makeover since the middle ages. There is a reason for this.

Mortgages make up the largest portion of debt in the financial system. They are central to the expansion and creation of money. Without mortgage debt, the stock of money in the world would be reduced by over 50%. The financial system is addicted to an ever-expanding amount of money created through debt. Mortgages became the most efficient way to grow this stock.

The shocking reality of this leads us to the current situation, where a large amount of the housing stock in Ireland is now effectively owned by the banks through mortgages. Have no doubt about it, a mortgage on your home passes it into the ownership of the bank. The annual compounding of interest on these loans makes it impossible for everybody to repay their mortgage. It is financially and systemically impossible. €1 compounded at 10% for 200 years equates to over €189,000,000. Compound interest on debt is a race we can never win.

Set against this background of bank ownership, I cannot see how a property tax can be levied on home owners who do not in reality own their homes. The mirage of home ownership financed through mortgage-lending is beginning to be unravelled, and the crisis in this area looks set to roll and roll. The government response seems to be the usual inaction. Rabbits frozen in headlights springs to mind.

The current fractional reserve banking system ultimately means that banks, through debt and the compounding of interest, will own all the homes and assets of a country. The tipping point where people realise this seems to move ever closer.

My great great-grandfather Paddy Kelly was sent to prison in 1882 for promoting Michael Davitt's Land League and land reform. "The land of Ireland for the people of Ireland" was their slogan. He and many others died for the right to own land. He must be turning in his grave as he watches all of Ireland pass this same land over to the banks through the 'death-pledge' that our mortgages have become.

Brian and the bonds

I am an avid watcher of statistics and trends and I see an interesting conver­gence emerging in an unlikely pairing. Irish 10-year bond yields at over 8.5% appear to be converging with the popularity of Brian Cowen at 11%. I see this pair crossing over the coming weeks, with a further uptick in the bond yields and a bit more softening on the Brian bid. I think they might meet somewhere above 9%. I'll log on to PaddyPower.com to see if they are making a book on this yet. The bet should be when, rather than if, these stats meet.