Monday, Aug 20, 2007
Don't worry about debt - we're all wealthier!
BBC News: Does a trillion pounds of debt matter?
"This wealth is held in houses, pensions, shares, bank and building society accounts, and it is held very unequally, with the rich holding most of the wealth, as well as most of the debt."
Posted by nearly30 @ 02:25 PM (892 views) Add Comment
8 Comments
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1. ontheotherhand said...
"So we hear that the British owe more on their mortgages than anywhere else in Europe. But we seldom hear the obvious corollary - that the British also own more housing wealth than anywhere else in Europe."
I own lots of dot com shares which have gone up in value, so can I borrow more money to buy more dot com shares. Don't worry, the ratio of my assets and liabilities is still fine.
How do the author's explain negative equity in '89? Everything was fine according to their formula in '88...
2. Bobsto said...
The person writing this article does not understand what has been going on. Lax lending has created a massive potential problem for lots of FTBs and BTLs.
The persons at the bottom of the house chain I have just used to sell my house borrowed 105% of the 200k value because they couldn't even save enough for legal fees before buying. I imagine they are typical and they are horribly exposed to interest rate rises and house price falls that would ruin them. They should not have been lent the money on any rational basis. Also what about BTLs with multiple properties on interest only mortgages that are not even covered by the rental? These people are very common and they have the potential to cause economic chaos for everyone if things go wrong.
The author is also makes idiotic comments about Enron. Enron moved assets as well as liablilities off its balance sheet into affiliated companies. If they had only moved the liabliites off the balance sheet, as the author states they did, it wouldn't have balanced (even Arthur Anderson wouldn't have let them publish it!)Why does the BBC publish garbage like this?
3. mrmickey said...
Of course debt doesn't matter if it did we'd have hedge funds and banks going bust and central banks having to bail out the banking system and that obviously could not happen in this day and age.
4. sovietuk said...
"So we hear that the British owe more on their mortgages than anywhere else in Europe. But we seldom hear the obvious corollary - that the British also own more housing wealth than anywhere else in Europe."
Yes and was recently mentioned by Merv - Debt is real, houseprices are a matter of opinion.
There really is no hope when we read the daft logic in articles like this.
5. uncle tom said...
What an odious little article!!
6. deepak said...
Oh! I'm getting old. Does any body remember people saying
Live within your means.
With Debt you don't get a good night sleep.
Borrowed money means the taxi meter is running even though you might be going no where.
(Sorry I'm translating from other languages as well) But is that not true.
Sometimes when we talk of mordern times we should not forget that there was a reason why older people used to say things.
There was a lesson in these things which makes them turn into phrases. It is an experience of centuraries not months.
7. C'mon Correction said...
Correction - official figure is approx £1.5 TRILLION. We surpassed the 1 Trillion mark over a year ago? Not sure why they state it so low. If ONLY we were £1 TRILLION in debt!!
8. tony marshall said...
The comments at the end demonstrate how eager the public are to swallow this stuff. Mind you they are filtered - I wonder how representative they are. My comment goes as follows, but I'd be surprised if it passes the censors:-
"This is straight from the Enron school of reporting." I couldn't have put it better myself! You are making the fundamental error of equating paper value of assets with real debt. Debt is real and must be repaid - assets, particularly homes, cannot be used to repay debt. People have to find the money to fund and to repay debt – this comes from earnings and giving up current income that would otherwise be spent on meeting living costs. Your analysis suggests that if both house prices and debt levels double, all is still well - this is clearly not the case. But well done for consoling those who, by their comments, seem to have fallen for it!