Last week I made a quick observation that whilst the Government will happily accept a role when the stock market is doing well they are quick to provide reasons why it's nothing to do with them when it's doing bad.
The point of course here is that the former is just opportunism that ignores reality, whilst the latter is desperate rowing to avoid anyone blaming you. Politicians will never learn of course on this point and you can guarantee that the next time the market is up someone will claim personal crdit for it.
Anyways, something I noticed around blogs during the recent crash has been Labour supporters noting that it's not as bad as it was in 1990. This sort of attitude is a bizarre one for someone who claims to be on the Left to take I think. After all, just because it's not as bad, there are still vast numbers of people being impacted by it in very bad ways. So much for caring.
One thing I would like to say about today's situation and the early 1990s is that it's a dodgy comparison. IN the early 1990s most people had one single large debt in the from of a mortgage. So when interest rates hiked, most people found their mortgage payment increase but had very little personal debt as well. In the panacea "low interest rate" world of New Labour, personal finance has exploded though.
This means that interest rate rises, even to say 6% or 7% could be, for many comparable to interest rates at 15% when you factor in their personal debt that was so cheap when they took it.
8 comments:
Too true. I still do not see how Labour have not been held to account for this rampant house price inflation for the last 10 years. Their total lack of control of the lending institutions granting mortgages and credit card debt at historically epic proportions is scandalous.
Want a mortgage? 2.5 joint income? no we'll do 4.25 joint income. Can't afford a repayment mortgage? don't worry we'll do interest only. Can't prove your income? Don't worry just make it up we won't check.
I agreed with the point you make about the big difference between the situation now and back in the early 1990s.
Many people will have taken out second mortgages, or loans, based upon the hidden equitity in their homes because of property value increases.
Also due to loose and easy access to credit more people nowadays will have credit card(s).
It will be the combined interest rate increases on all these forms of personal debt that will have a greater potential for being the final straw.
But let us not also forget that many business investors have been using "cheap" debt to finance their borrowings.
Working on the asumption that the sun will always come up tomorrow.
Well I think many personal and financial debtors are going to find out that a total eclipse of the sun has arrived.
How long it lasts for is going to be the interesting factor.
The price of an unsold house is an opinion.
The price of a debt is reality.
The situation is different in all kinds of ways. And yes, less bad. Clearly the sub prime market in the USA is a risky business. Not at all safe as houses. The Fed should not be rewarding bad investment decisions and speculation by bailing gamblers out.
It is also quite possible I think for there to be credit due - for relative stability say - in some circumstances, while there is no blame due - say for the USA sub-prime wobbliness - in others.
It is just a fact that it isn't as bad. It is not a judgement on anyone's pain or gain. Other gamblers are currently making fortunes on the supposedly tragic markets.
Depends what you define as "bad" really. Personal unsecured debt is through the roof in Britain and the bankruptcy rate is too thanks to Labour making it all too easy to get into shit loads of debt then wipe your slate clean.
Even now the Yorkshire Building Society are offering 115% mortgages!
And are the emperor’s new clothes starting to fade? Create the illusion that voters can consume more this year than last and they’ll keep you in power. How to do it? Pretend that money grows on trees and everyone can join the party. After all, the ordinary taxpayer seldom gets a real increase in after-tax disposable income (fiscal creep et al) but they will FEEL better off as their dear, safe, old house increases their “wealth”. When the ability of the productive (i.e. non-government) sector to absorb additional taxes ends, the house of cards tumbles down. And that’s when the Tories will be asked to take over, in spite of nulabour trying to blame the policies of the former tory govt for causing the current predicament…
And of course, the medicine dished out by the Tories will fall disproportionately on certain sectors: marginal government activities, plus the lower paid. And the memories of these people and those who know them will mean that, once the mess is on the path to recovery, the voters will swing back to nulabour who will mess it all up again, ensuring that the same people will be impacted AGAIN when its time for the next dose of medicine.
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