Monday, Mar 12, 2007
How will Brown's legacy be judged?
Guardian: In 1997 he was applauded in - but will Gordon now be cheered out?
When Brown came to power in 1997, his first act was to delegate decisions on interest rate changes to the Bank of England. Did this set the foundations for 10 years of sustained growth? Or will the next chancellor inherit a treasury rife with debt and overspending? Well, it looks like both are true. But how will history judge the economics of Gordon Brown?
Posted by jellycaster @ 08:51 AM (149 views) Add Comment
14 Comments
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1. tyrellcorporation said...
A quick glimpse at the 'surplus' balance sheet in the dying days of John Major's Governmnet compared to todays debt-ridden excuse of an economy will give you all the infromation you need about Crash Gordon's 'poisoned-chalice' legacy.
2. Taffee said...
bearing in mind 20% of the working population is employed by the government,we don't make much and our debts are historically humungous(gov and personal) it looks like a house of cards.
mail said 1.7 million in serious financial problems and 4 million on the edge....its surely a potential nightmare
3. denzil said...
The day the media wake up to Brown's and Labour's economic mismanagement and well and truly bloody his nose will be the day I crack open a fine bottle of bubbly.
Same old Labour, the party of high taxation and inefficient public services whilst kidding everyone that they are wealthly under Labour by ramping up HPI whilst completely ignoring future generations. The chancellor could have controlled HPI but it has suited him to completely ignore it.
4. p. o. o. r said...
Quite simply if there had not been rampant HPI, then the government would have a far bigger crisis on their hands - Just think of all the extra Billions they have gained through stamp duty, and inheritance tax - The labour government cannot afford for there to be a crash - as it would have to then find vast amounts of money from elsewhere which would mean either increasing tax, or find yes new ways to tax us. Whilst I am not a supporter of Labour, I think the next government whoever it is has got a terrible job on thier hands - everything is underfunded, Health, Schools, Military etc the only way this can be improved is by increasing tax significantly - If house prices crash, then taxes will have to go higher - so whoever is in charge next is going to have a lot of problems all started by GB and the labour government. As everyone is already up to debt to their eyeballs - any increases in tax are not going to be received well. So in the interest of the other parties, they need this crash to start before the next election.... So it will be my guess that should GB be put in the top job, he will call for a very early election before the crash starts to ensure that he gets some time to make things even worst, which is a frighteneing thought.
5. holding out said...
Once prices plateau and no one moves because they can't afford to and the hurry to do so has been removed then presumably Stamp duty (and EA fees) will dry up. Then the government (and EAs) will be in a position where they need a crash to get things going again. I just wish it would hurry up!
6. Cwelsh said...
Holding out well put, I wish they would too, all this waiting you feel like it will never happen!
7. talking rot said...
Holdingout
Given the terribly lax lending criteria and the level of competition in the mortgage/lending market, can you foresee when no one can afford to move? How about those with lots of equity within a property releasing some to purchase a second home etc etc?
8. Dugmug said...
Talking Rot...
The reality is that, even when property prices were lower in comparison to wages, there was only a relatively small proportion of of the population realisitically able to afford to buy and then maintain, insure, pay council tax for, etc, a second home. With prices now that much higher, second home purchases will certainly not form a significant enough number of transactions to help make an effective "housing market."
Buy-to-let has to start looking less attractive too, as rent increases simply haven't keept pace with HPI, and therefore with the mortgage repayments (even without interest rates increasing as they have done). First time buyers are already a smaller proportion of the market than they have ever been. And even those who already own a home and just want to move somewhere bigger/better, are finding the difference in value between their current home and the better home they want is becoming larger and so less and less achieveable. If things continue as they are, therefore, there will be fewer and fewer people who can afford to take part in the housing market, which will inevitably lead to at least some stagnation.
The only way to bridge the gap is to get even "slacker" in lending practices, but I have to believe (surely!) that even the greedy mortgage lenders won't consider 6, 7 or 8 times income (although if they do, that will only create more defaulters and so actually bring the market down) - only a handful of them have even gone to the current silliness of 5 times multiples. Therefore, even someone who doesn't believe in a House Price Crash would have to admit that prices can't go up 10% a year forever, at least not unless wages start doing the same; the sums simply don't add up. I personally don't believe in this "soft landing" business, but the maths tells even a bull that this is the least that will happen, even if they're right about no HPC.
9. holding out said...
TR - I take the point about lax lending, second homes etc. What I mean is that because the perception is that prices keep going up then people will keep buying before prices get even more out of reach thus keeping prices going up. But once the perception is that prices have stabilised then the rush to buy will be stalled, that in itself won't precipitate a crash but it removes the incentive of VIs to keep prices at these high levels. If there is significantly reduced activity (as I believe is starting to happen) then from a Government and an EAs point of view it would be better to have a crash and start the whole process over again!
10. C'mon Correction said...
Very true Holding out. Most home-owners won't want to believe it but everyone would benefit from a house price crash. Our economy is completely un-balanced and if housing affordibility goes the way of Japan in the 90's (and it is at the moment) then we all know the result. We need a lot of air let out of the balloon at a quick but controlled rate over the next few years before all we're left with is little pieces of scattered rubber everywhere !
We have the most over-valued property in the world, partly due to the boom-bust cycle. Anyone think that property would be worth more in 20 years time if we had a bust and then another boom, rather than just stagnation, once affordbility has been surpassed?
11. talking rot said...
Holding Out ... Yep. See what you mean. Stagnation reduces the urgency of many of those on the demand side. Those who have access to large funds (through pay or equity withdrawl) will still be able to buy but such people will be few relative to a few years ago.With very few properties exchanging hands, tax revenues falls and Estate Agents do not make money.
I remain convinced, however, that a crash will only occur when a large number of people are forced to sell and, because of the forced sale, have to accept a lower market price then they would otherwise accept.
Dugmug
Thanks.
12. C'mon Correction said...
TR - If we get to the point of forced sales then yes a crash would occur. However, I don't think it is the main reason that we'll see a crash. I still believe it is credit supply that will be the number one reason we'll see prices crash. If the banks tighten say back to 3.5 times salary ratio then buyers (whether they are first-time buyers, second/third/etc time or BTLers) simply wouldn't be able to pay current prices and prices would fall within months. This is regardless of forced sales or not.
13. Hp Its Gotta Crash? said...
My mate has just bought a BTL and earns 25K (140k property) - she said the renting market is there and will not change....
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