Recession

stumuz · Post by **stumuz** » 17 Dec 2007, 13:16

clv101 wrote: One of my biggest concerns is that people with massive debts ? who have been spending money they don?t have to live a ?better? life than me this last 5 years or so are somehow going to get away with it.

I should think that there is a better than even chance that this will happen.
Just think about it logically what are the 22 million working people going to do with 4 plus million people (who are now working) who will be homeless, unemployed and in need of benefits if you make them responsible for their debt?

stumuz · Post by **stumuz** » 17 Dec 2007, 13:31

And to labour the point!

http://news.bbc.co.uk/1/hi/business/7147609.stm

Post by **clv101** » 17 Dec 2007, 13:58

stumuz wrote:And to labour the point!

http://news.bbc.co.uk/1/hi/business/7147609.stm

He said direct government help would be a better political solution than fixing house prices or cutting interest rates.

Homeowners facing repossession might be helped directly through tax breaks or cash grants similar to those given to disaster victims, he said.

WTF! So this is the thanks those of us choosing to save their money rather than buy into and further inflate an already inflated asset class get?

It's been clear for the last few years that house prices were going to collapse. We how have Nationwide reporting 3 months of consecutive falls, The Royal Institute of Chartered Surveyors reporting 4 months of consecutive falls, mortgage approvals are at a three-year low down 12% on last year and today we hear from Rightmove that asking prices have fallen 3.2% (when asking prices fall selling prices fall further as in a falling market the proportion of asking price got falls).

So those who made the ?wrong? decision in the last couple of years are to be bailed out, the resulting inflation eroding the value of the savings of those who see the obvious and avoided.

MisterE · Post by **MisterE** » 17 Dec 2007, 14:48

True but and this is a big but. Before help is handed out, there will be those that get repossed and kicked out to start the so called call for help. Then those that are helped could be still put on a pay it back and even have it passed onto their children. I think we are in the best position. I never worry about what others get, but yep its annoying and the sheeple dont deserve the help

stumuz · Post by **stumuz** » 17 Dec 2007, 15:49

In giving these cash grants to the feckless, how much will thet get? If you have been completly stupid, do you get more?

The problem with skewed logic it produces skewed remedies.

3.5 x your salary= no help
5 x salary = ?5k
10 x salary = ?25k
15 x salary = ?50k

RenewableCandy · Post by **RenewableCandy** » 17 Dec 2007, 16:08

stumuz wrote:
clv101 wrote: One of my biggest concerns is that people with massive debts ? who have been spending money they don?t have to live a ?better? life than me this last 5 years or so are somehow going to get away with it.
I should think that there is a better than even chance that this will happen.
Just think about it logically what are the 22 million working people going to do with 4 plus million people (who are now working) who will be homeless, unemployed and in need of benefits if you make them responsible for their debt?

This is all true but there's also an argument that these feckless buyers have been (indirectly) keeping the rest of us in gainful employment, enabling us to buy our stoves and make our savings.

SunnyJim · Post by **SunnyJim** » 17 Dec 2007, 16:21

Bloody good point RC.

Clv101, shame on you! It's people like you refusing to borrow 6 x salary that's prevented this global growth from continuing. If we just all kept borrwing more and more ad-infinitum then everything would be just hunky dory.

Of course those that have borrowed irresponsibly will pay. They may get to keep their houses (no doubt via means tested measures i.e. no single, unmarried Mums keeping 5 bed mansions on the dole etc), but they will also pay in worry, trauma and by being basically in debt to the system. They will have visits from the Balifs, county court judgements and all manor of people poking and prodding them and demanding their pound of flesh.

However in the long term, the loosers as always will be those that can afford it. The write downs and losses will find their way into pension funds and the hard saving middle classes.

I will never trust a financial institutions again. What they have done with CDO's and SIV's is nothing more than an organised scam.

MisterE · Post by **MisterE** » 17 Dec 2007, 19:23

I'd bet money that the tories who will be in power for all of this, ie the ole one party labcon doing the tag team - tag your in, that what will happen is the debt will be paid or written off you keep your house BUT in now belongs to the state as council housing and your offspring have first right to rent when you die. They havent thought of it yet, but they will.

Also yes, very good point RC. That aside it still bugs me all these anti squirrel and nuts people.

stumuz · Post by **stumuz** » 18 Dec 2007, 08:00

Yet another intervention on the side of the feckless. It's almost daily!

http://news.bbc.co.uk/1/hi/business/7149153.stm

SunnyJim · Post by **SunnyJim** » 18 Dec 2007, 08:30

Yeah, it's unbelievable isn't it?

I suppose what is at stake here is the future of the economic system. If people loose savings in a bank run then the whole industrys fecked. I mean who has any trust in the financial industry after this debarcle?

What annoys me is that it is still being called the 'American Sub Prime' problem, when actually the problems are all about de-regulation of the banking industry. This has allowed them to basically ignore fractional reserve banking, and package up their loans and sell them on. They can then take them off the books, sell them on and loan out more. This has basically meant unlimited loans availiable, with no deposits to back them up. There are no credit checks done and no reserves required of those to who the CDO's are sold onto, and so no balances or checks in place.

And why? Why have they done this? Why erode faith in the banking system? For short term profit?

No. Because GDP growth in this country has finished. GDP growth is strongly linked to the raw energy used by a country. The UK slowly reducing its oil usage year on year......

This means the only growth this country has seen has been due to increases in gas usage, efficiency gains and growing workforce (immigration). The banking sector has been requiring bigger and bigger booms and busts to keep up the illusion of continued growth, but actually the game is nearly over. No growth of the economy, means no money availiable for interest repayments. So in a zero sum game, which bank wins? Why the bank that manages to sell all of its bad debts onto another bank of course. This may work for the time being, but when GDP takes up its permanant negative trend for the descent path then even the biggest banks cannot survive.

The government may at this point have to run a nationalised system or something if it doesn't want us to descend into batering or local (and hence untaxable) economies. I know why Blair aged so much now..... pity the fool

Andy Hunt · Post by **Andy Hunt** » 18 Dec 2007, 08:36

Good analysis SunnyJim . . . your description reminds me of an old joke about the fastest game in the world being "Pass the Parcel" - in Belfast.

Seems to me to be the same situation with banks and bad debts - they are all being passed around from pillar to post, but nobody wants to be stuck with them when the music stops.

Post by **clv101** » 18 Dec 2007, 09:42

SunnyJim wrote:This means the only growth this country has seen has been due to increases in gas usage, efficiency gains and growing workforce (immigration).

You forgot the biggest change, the restructuring of our economy away from energy intensive industries. This fact makes national energy accounting like this almost meaningless. No country is an island. It is perfectly possible to grow the UK economy without growing energy consumption, in fact that?s pretty much what?s happened over the last decade.

SunnyJim · Post by **SunnyJim** » 18 Dec 2007, 10:04

Ah yes. I forgot all the illegal stuff. Yes, there is banking, drug running and arms dealing.

It's true that by managing many of the worlds transactions we have skimmed some cash from other economies. I suppose that is why the current financial crisis is so worrying to those in the city. If people stop trusting the UK banks then a huge amount of revenue goes overnight.

However, I see that a nothing more than a short term scam industry. Really, GDP or actually 'stuff done' is based on energy used (i.e. energy supplied * efficiency), labour & capital surely?

I suppose to some degree there is a basis to this 'knowledge industry', but knowledge doesn't stay private very long in a global economy does it? It shifts around mecurially. I feel that much of the bluff and posture about the knowledge economy has been really there to protect the banking industry while it rapes the future by selling debt into pension funds in order to maintain BAU, aka continued economic growth. I expect the banking industry has hoped to increase money supply here (via house price inflation) while selling at least some of the bad debt off to other countries. Assuming that the bad debt is fairly evenly spread around then those that will come off worst will be those that have exposure to the debt but had none of the joys of money supply growth. I may just be that those countries that allowed its people access to unrestricted and 'irresponsible' loans, and managed to package them up and sell them offshore will come out best. I guess this actually means the US and the UK? I wonder who will bear the brunt? Austrailia so far, but surely many other countries will feel the CDO losses.

Post by **clv101** » 18 Dec 2007, 10:22

SunnyJim wrote:However, I see that a nothing more than a short term scam industry. Really, GDP or actually 'stuff done' is based on energy used (i.e. energy supplied * efficiency), labour & capital surely?

Yeah, but that little "efficiency" term covers orders of magnitude. Look at GDP/BTU and you'll see massive differences. Globally I'd generally agree with you, but not nationally. There are dramatic differences between what goes on in different countries. To do this properly we need a way to account for the countries total energy use - that not only includes the primary fuels used here (oil, coal, gas, nuclear etc) but also the energy that went into providing all the imported produces and services. If you found a way of truly adding up all the energy the UK uses then I'm with you. But only looking at primary fuels is only looking at part of the picture. Primary fuel use could fall whilst total energy use increases through imported products and services.

SunnyJim · Post by **SunnyJim** » 18 Dec 2007, 11:01

Yes, that's true. I'm venting spleen I suppose, because it angers me that the banking industry is being bailed out after such a huge scam. And it angers me that it will likely be those that had nothing to do with it that has to foot the bill.

If our GDP growth relies on a) banking (looking shakey) and b) foriegn made goods (relies on strong pound) then the current crisis looks set to harm both of those. If the pound and dollar collapse then the profit from goods made overseas will be reduced, and the current credit crisis will harm banking revenue. What will the goverment/BoE do to keep GDP going? I would love to see some of the real issues being tackled by the godhead of banks/goverment/central banks. Issues like sustainability and how money and the financial industry fits into a sustainable economy.

I mean all of this GDP growth is really reliant on turning more resource into crap like this;

It's just not right! I mean, I'm not religious per se, but I do have a deeply spiritual side, and a growing connection with the earth, and this is not the right way to go about things. In terms of the planet this is really unholy.