Tuesday, Aug 26, 2008
Some good stats in this one.
MSN Money: How did we get into this debt black hole and how do we get out?
The British people now owe more money than our entire country generates in a year. Accountants Grant Thornton report that, at the end of June, consumers owed a total of £1.444 trillion through mortgages, loans and credit cards.
Posted by inbreda @ 09:55 AM (1298 views) Add Comment
20 Comments
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1. malct said...
Total UK personal debt at the end of June 2008 stood at £1,444bn. The growth rate increased to 7.4% for the previous 12 months which equates to an increase of ~ £98bn.
Total secured lending on homes at the end of June 2008 stood at £1,212bn. This has increased 7.5% in the last 12 months.
Total consumer credit lending to individuals in June 2008 was £232bn. This has increased 6.8% in the last 12 months.
Total lending in June 2008 grew by £4.0bn. Secured lending grew by £3.1bn in the month. Consumer credit lending grew by £0.9bn.
Average household debt in the UK is ~ £9,309 (excluding mortgages). This figure increases to £21,650 if the average is based on the number of households who actually have some form of unsecured loan.
http://www.creditaction.org.uk/debt-statistics.html
2. mark wadsworth said...
You are only looking at one half of the equation.
It is also true that UK households have bank deposits and corporate or government bonds worth £1,400 billion. Banks are just middlemen between depositors and borrowers. So while there quite probably has been a huge transfer of money from people buying houses to people selling houses, the total debt figure (and the total deposit figure) is in itself meaningless.
This notion that The Banks are somehow going to take over the world is nonsense - you can see how the banks themselves (and shareholders) are struggling, it's only the wide boys (and girls) who have taken huge bonuses who are laughing all the way to the ... er ... bank.
3. str 2007 said...
Quite an interesting article from a self confessed doom monger.
Malct - do you happen to know if a car on lease would be included in household debt.
The reason I ask is that firstly it would represent a large figure and secondly alot of people entitled to a company car have switched over to personal leasing as a better option financially (when taking company car tax into consideration).
Roughly speaking 1/2 of all houses have unsecured loans averaging £21.65k. That seems incredibly high (and I can only assumes includes cars as listed above). If an average car is say £15-18k all of a sudden this figure looks an awful lot smaller.
The other thing I'd like to know is does the unsecured figure include credit card spending that is cleared each month. If it does then once again alot of families will use their cards to spend £1500 per month but then clear it each month. So once again this brings the £21.65k figure down another couple of thousand.
So it could be that the average actual loan per family (that have unsecured loans) isn't 21.65k but more like 21.65 - 17.5k car - 1.5k monthly credit card bill = 2.65k. This wouldn't seem too excessive to me.
Clearly if they loose their job the car has to go back and if it was purchased in the last year there would likely be a shortfall on the lease.
But I do wonder if the unsecured debt mountain is as bad as is projected.
Good to hear your views Malct if you know the answers to the above.
4. mountain goat said...
I wish statistics would be presented as the median, middle value. Since there is a minority of people with huge wealth this skews the statistic a lot and doesn't represent the average person at all. The average person is better described by the median. In a way the only conclusion we can reach from these numbers is from the total versus GDP. We are more in debt than ever before and it is clearly unsustainable, even after the credit crunch. Clearly for most people the credit crunch is still just a temporary irritation causing banks to be more tight. The fact that this is a turning point in our economic way of life hasn't really sunk in yet.
5. str 2007 said...
''Clearly for most people the credit crunch is still just a temporary irritation causing banks to be more tight. The fact that this is a turning point in our economic way of life hasn't really sunk in yet''
Very true Mountain Goat, but to be fair to the people knowone has come out and told them this.
IMO this was/is Gordon Browns job. If he had done this or did it very promptly we could get to the bottom of the falls in house prices more quickly. If he can put a measure in place to make up shortfalls for those who purchased in the last 3-4 years that they become unable to borrow from the banks (instead of giving money to the banks) then this will help keep repossessions to a minimum.
People might even warm to him and re-elect him.
I think half his problem is he has just smiled badly and talked b*//*cks so far and not actually done anything about the problem.
6. mountain goat said...
str 2007 don't you think increased repossessions are inevitable and necessary in a lot of cases if the hpc continues? Handouts, whether to banks or individuals, try to prop up an unsustainable and unaffordable situation.
7. malct said...
str 2007 @ 10.33am
appreciate your comments, but to be fair this is inbreda's post.
My earlier comment was to draw attention to how these figures are reported by a 'charity' Credit Action UK.
I found CAUK several years ago looking for answers to questions as to why things seemed to be falling apart.
I agree questioning the integrity of information that is presented as 'news' is one of the main reasons for us being here and wonder where the stats originate from!
I wouldn't have thought CAUK would have any motivation to misrepresent or distort figures, but perhaps someone knows different.
My own view is that everyone seems to agree (?) that over 97% of our money supply is debt, economies (rightly or wrongly) must grow, growth is financed by debt.
Therefore debt must constantly grow. And guess who carries the burden?
When they create money out of nothing, the do not create the interest.
Like many people, I'm here to share what I think I know, learn from others and ask questions or provoke discussion which allows everyone to air their views. Does anyone have a figure for a) the interest on the national debt this year and b) the total interest we have paid since 1694?
8. str 2007 said...
Mountain Goat
I think handouts to irresponsible borrowers and investors would not be prudent.
However alot of families who have borrowed over the last 3-4 years will be made homeless due to the effects of the credit crunch. I don't know the exact cost to the tax payer of re-housing a repossessed family but I doubt it's any less than balancing their mortgage shortfall.
Now by this I mean for example :-
If a family had bought a 300k house, put down a 30% deposit and borrowed say upto 5 times their income then this, assuming they didn't have other debts wouldn't be outrageous. Now if prices fall 20% this family will struggle to re-mortgage. Banks who originally lent them 200k ish may now only want to lend them 150k ish. This family may be able to afford the repayments on 200k at a squeeze (with the increased cost of mortgages and cost of living in general) but I feel it would be better for the economy as a whole for tax payers to temporarily make up the £50k shortfall on which they'd have to pay interest etc. In 10 years or so when prices recover and they'd payed down some capital this loan could be transferred back to the banks.
There must be strict conditions applied to these loans.
Applicants would have to show they hadn't been reckless with borrowings ie credit cards etc up the limits.
Other assets would need to be sold (new cars etc.)
And no further borrowings of any sort allowable until such time as the loan has been transferred away from the tax payer.
This measure shouldn't be seen as a bailout, rather a last resort before repossession.
Don't forget there are families and children behind this mess and not all have been irresponsible.
I am currently making my own sacrifices (renting instead of owning) on the basis life will be better for the family in the long run. Others will have to make big sacrifices aswell.
Further I believe an end to interest only mortgages should be put in place. Repayment only is the way forward.
9. str 2007 said...
Malct
I'm with you on the national debt, why on earth this figure isn't cleared down in the good times is beyond me. Again I don't know the exact figure but I'm sure it's several hundred pounds per household per annum which could be going to alot better use.
It's always very hard to get out of a loan situation because as it comes to an end the car or whatever needs replacing again and another loan required. However getting out of the loop would make for a better way of life for most (even if it didn't feel like it for most). I don't see te National Debt being any different.
I accept that business may well want to borrow money to invest in new/better machinery etc. But this is different as it tends to be a loan for something that will help increase profitability.
10. mountain goat said...
str 2007 #8 thanks for your example. I think you have made the intelligent choice by renting. Personally I think helping people follow your renting solution is better than trying to help them stay in a house they can't afford, with the assumption that house prices will recover.
11. str 2007 said...
Mountain Goat
I think the renting model as a long term solution is basically flawed as we struggle to put enough away to cover basic pension requirements never mind rent aswell. Houses should be paid off by retirement - it's the only way.
Further I don't like the idea of supporting Private Landlords with Tax payers money.
Also I don't feel rented accomodation is good for community spirit and general feel good factor.
If people own their own home and the value of it also depends on the surrounding houses and area then that is a strong incentive.
You don't tend to get ferrell kids and mattresses in the front garden in owner occupied properties/areas.
12. str 2007 said...
mountain goat
Although I'm not enjoying it I'm renting out of choice as I chose not to purchase an overpriced asset I felt was due to fall in value.
I'd hate you to think I couldn't afford my mortgage and that's why I'm renting.
Oh and BTW renting is no cheaper than purchasing (unless we're in a time like this) as all things being equal rents will tend to rise and mortgage repayments should fall in real terms. Plus if mortgages are operated on a repayment basis the payments come to an end - rents don't.
13. mountain goat said...
str 2007
I agree with most of what you wrote wrt renting and buying. My views apply to right now, i.e. housing bubble about to collapse and the worst recession in decades about to hit. Right now I think one is best off having no debts or mortgage since banks are going into a dangerous struggle for survival. As they fight for their own survival in the next few years best not owe them anything.
14. malct said...
9. str 2007 said...
" I'm with you on the national debt, why on earth this figure isn't cleared down in the good times is beyond me."
str 2007, I don't think we're meant to have good times - unless they are financed by debt of course, which sort of takes the good out of the experience.
try this :-
http://www.bbc.co.uk/dna/h2g2/alabaster/A707285
The UK National Debt in 2001 stood at around £400 billion and the annual interest on that is around £25-30 billion! So how did it all start?
The national debt all started back in 1694 when King William needed money to fight a war against France and he borrowed £1.2 million at an interest rate of 8% per annum from a group of London bankers and goldsmiths. In return for this lean, they were incorporated by royal charter as the 'Bank of England', which became the government's banker. To pay back the loan, taxes were imposed on a whole range of goods. And so the national debt was born.
http://www.guardian.co.uk/business/2007/jan/19/14
The national debt has broken through the £500bn level for the first time ever as a result of several years of big government deficits and in spite of record stamp duty receipts last month.
Government figures showed that at the end of 2006, government net debt stood at £504.1bn, up from £467bn at the end of 2005.
http://www.statistics.gov.uk/cci/nugget.asp?ID=277
At the end of December 2007 general government debt was £618.8 billion, equivalent to 43.8 per cent of GDP.
15. str 2007 said...
Yes Malct that kind of debt at 5% interest is equivalent to about £500 for every man woman and child in the country.
I believe some recent posts on HPC on another link a couple of weeks ago showing countries debts indicated several (including Germany) have a Surplus.
A little prudence would see us alot better off.
Just imagine if house prices were kept under control and we didn't run a deficit.
And heaven forbid let's say we were investing that £500 p/a for every man woman and child in our own industry.
I suppose we should be grateful they haven't put a satallite dish on the side of Big Ben yet.
16. renting2 said...
Some good thoughts on this thread. But if governments save in the good times, to whom does the money go in the bad and who makes the decisions. Also, as soon as a surplus was identified (freedom of info etc) you'd have everybody insisting it was spent there and then on a good cause (NHS/child poverty/state pensions etc etc). Basically then all tax taken in a year generally gets spent that year. After all can you imagine passing on a surplus to the next (opposition) government and what they would do with the money?
17. str 2007 said...
renting2
A huge Surplus doesn't need to be run but I don't think the electorate would object to having a bit of a slush fund much as alot of them do themselves.
It would be sensible and prudent for a family to have cash reserves of say 6 months out goings - why not the country.
If we ran a Surplus then there would be alot more money available for NHS/child poverty/state pensions because we wouldn't be spending £500 per man woman & child out in interest payments.
And if you ran a surplus would you ever need to hand over to the opposition. I wager with careful management of funds that the electorate could be fed a gentle feel good factor in the year running upto an election to be recouped over the following 4 years. If a government was clever with it's teaser it may even make a profit allowing a larger teaser before the next election.
18. malct said...
UH OH!
Rank Country Current account balance Date of Information
1 China $ 360,700,000,000 2007 est.
2 Japan $ 212,800,000,000 2007 est.
3 Germany $ 185,000,000,000 2007 est.
4 Saudi Arabia $ 100,800,000,000 2007 est.
5 Russia $ 76,600,000,000 2007 est.
6 Switzerland $ 72,840,000,000 2007 est.
7 Norway $ 63,660,000,000 2007 est.
8 Kuwait $ 52,730,000,000 2007 est.
9 Netherlands $ 50,930,000,000 2007 est.
10 United Arab Emirates $ 41,670,000,000 2007 est.
11 Singapore $ 39,160,000,000 2007 est.
12 Sweden $ 37,990,000,000 2007 est.
13 Taiwan $ 31,700,000,000 2007
14 Algeria $ 30,580,000,000 2007 est.
15 Iran $ 30,470,000,000 2007 est.
16 Malaysia $ 26,050,000,000 2007 est.
17 Hong Kong $ 25,460,000,000 2007 est.
18 Libya $ 24,280,000,000 2007 est.
19 Qatar $ 23,440,000,000 2007 est.
20 Venezuela $ 23,230,000,000 2007 est.
21 Thailand $ 14,920,000,000 2007 est.
22 Belgium $ 14,640,000,000 2007 est.
23 Canada $ 13,260,000,000 2007 est.
24 Finland $ 11,270,000,000 2007
25 Indonesia $ 11,010,000,000 2007 est.
26 Austria $ 10,040,000,000 2007 est.
27 Azerbaijan $ 9,010,000,000 2007 est.
28 Iraq $ 7,802,000,000 2007 est.
29 Argentina $ 7,438,000,000 2007 est.
30 Brunei $ 7,101,000,000 2007 est.
31 Angola $ 6,747,000,000 2007 est.
32 Philippines $ 6,351,000,000 2007 est.
33 Chile $ 6,050,000,000 2007 est.
34 Korea, South $ 5,954,000,000 2007 est.
35 Uzbekistan $ 5,298,000,000 2007 est.
36 Israel $ 4,993,000,000 2007 est.
37 Luxembourg $ 4,746,000,000 2007 est.
38 Turkmenistan $ 4,525,000,000 2007 est.
39 Trinidad and Tobago $ 4,171,000,000 2007 est.
40 Oman $ 3,996,000,000 2007 est.
41 Bahrain $ 3,913,000,000 2007 est.
42 Brazil $ 3,555,000,000 2007 est.
43 Denmark $ 3,454,000,000 2007 est.
44 Botswana $ 2,074,000,000 2007 est.
45 Egypt $ 1,862,000,000 2007 est.
46 Bolivia $ 1,758,000,000 2007 est.
47 Peru $ 1,750,000,000 2007 est.
48 Ecuador $ 1,464,000,000 2007 est.
49 Gabon $ 1,450,000,000 2007 est.
50 Namibia $ 1,360,000,000 2007 est.
51 Nigeria $ 1,205,000,000 2007 est.
52 Timor-Leste $ 1,161,000,000 2007 est.
53 Burma $ 541,000,000 2007 est.
54 Bangladesh $ 334,000,000 2007 est.
55 Cote d'Ivoire $ 265,000,000 2007 est.
56 Papua New Guinea $ 259,000,000 2007 est.
57 Equatorial Guinea $ 188,000,000 2007 est.
58 Paraguay $ 162,000,000 2007 est.
59 British Virgin Islands $ 134,300,000 1999
60 Bhutan $ 116,000,000 2007 est.
61 Cameroon $ 85,000,000 2007 est.
62 Lesotho $ 77,000,000 2007 est.
63 Nepal $ 58,000,000 2007
64 Swaziland $ 36,000,000 2007 est.
65 Cook Islands $ 26,670,000 2005
66 Suriname $ 24,000,000 2007 est.
67 Palau $ 15,090,000 FY03/04
68 Haiti $ 11,000,000 2007 est.
69 Comoros $ 8,000,000 2007 est.
70 Guinea-Bissau $ -6,000,000 2007 est.
71 Tuvalu $ -11,680,000 2003
72 Kiribati $ -21,000,000 2007 est.
73 Mongolia $ -23,000,000 2007 est.
74 Tonga $ -23,000,000 2007 est.
75 Samoa $ -24,000,000 2007 est.
76 Micronesia, Federated States of $ -34,300,000 FY05 est.
77 Anguilla $ -42,870,000 2003 est.
78 Belize $ -51,000,000 2007 est.
79 Sao Tome and Principe $ -51,000,000 2007 est.
80 Kosovo $ -58,300,000 2007
81 Vanuatu $ -60,000,000 2007 est.
82 Eritrea $ -62,000,000 2007 est.
83 Sierra Leone $ -63,000,000 2007 est.
84 Gambia, The $ -70,000,000 2007 est.
85 Morocco $ -71,000,000 2007 est.
86 Dominica $ -72,000,000 2007 est.
87 Cambodia $ -77,000,000 2007 est.
88 Central African Republic $ -77,000,000 2007 est.
89 Malawi $ -113,000,000 2007 est.
90 Zimbabwe $ -116,000,000 2007 est.
91 Burundi $ -124,000,000 2007 est.
92 Grenada $ -138,000,000 2007 est.
93 Solomon Islands $ -143,000,000 2007 est.
94 Cape Verde $ -144,000,000 2007 est.
95 Saint Vincent and the Grenadines $ -149,000,000 2007 est.
96 Togo $ -160,000,000 2007 est.
97 Rwanda $ -161,000,000 2007 est.
98 Saint Kitts and Nevis $ -163,000,000 2007 est.
99 Mauritania $ -184,000,000 2007 est.
100 Uruguay $ -184,000,000 2007 est.
101 Guyana $ -189,000,000 2007 est.
102 Saint Lucia $ -199,000,000 2007 est.
103 Macedonia $ -202,000,000 2007 est.
104 Antigua and Barbuda $ -211,000,000 2007 est.
105 Djibouti $ -212,000,000 2007 est.
106 Liberia $ -224,000,000 2007
107 Uganda $ -224,000,000 2007 est.
108 Kyrgyzstan $ -244,000,000 2007 est.
109 Barbados $ -254,000,000 2007 est.
110 Seychelles $ -275,000,000 2007 est.
111 Chad $ -302,000,000 2007 est.
112 Benin $ -310,000,000 2007 est.
113 Niger $ -321,000,000 2007 est.
114 Tajikistan $ -351,000,000 2007 est.
115 Congo, Democratic Republic of the $ -402,000,000 2007 est.
116 Moldova $ -410,000,000 2007 est.
117 Guinea $ -433,000,000 2007 est.
118 Mali $ -446,000,000 2007 est.
119 Malta $ -459,000,000 2007 est.
120 Maldives $ -472,000,000 2007
121 Fiji $ -507,000,000 2007 est.
122 Armenia $ -518,000,000 2007 est.
123 Mauritius $ -549,000,000 2007 est.
124 Burkina Faso $ -688,000,000 2007 est.
125 Mozambique $ -713,000,000 2007 est.
126 Zambia $ -743,000,000 2007 est.
127 Cuba $ -750,000,000 2007 est.
128 Tunisia $ -860,000,000 2007 est.
129 Albania $ -877,000,000 2007 est.
130 Ethiopia $ -881,000,000 2007 est.
131 Senegal $ -906,000,000 2007 est.
132 Yemen $ -924,000,000 2007 est.
133 Laos $ -930,000,000 2007 est.
134 El Salvador $ -985,000,000 2007 est.
135 Nicaragua $ -989,000,000 2007 est.
136 Kenya $ -1,014,000,000 2007 est.
137 Madagascar $ -1,106,000,000 2007 est.
138 Honduras $ -1,225,000,000 2007 est.
139 Sri Lanka $ -1,369,000,000 2007 est.
140 Bahamas, The $ -1,442,000,000 2007 est.
141 Congo, Republic of the $ -1,490,000,000 2007 est.
142 Tanzania $ -1,495,000,000 2007 est.
143 Cyprus $ -1,514,000,000 2007 est.
144 Costa Rica $ -1,519,000,000 2007 est.
145 Panama $ -1,579,000,000 2007 est.
146 Jamaica $ -1,623,000,000 2007 est.
147 Guatemala $ -1,685,000,000 2007 est.
148 Ghana $ -1,896,000,000 2007 est.
149 Bosnia and Herzegovina $ -1,920,000,000 2007 est.
150 Georgia $ -2,028,000,000 2007 est.
151 Dominican Republic $ -2,041,000,000 2007 est.
152 Syria $ -2,181,000,000 2007 est.
153 Slovenia $ -2,222,000,000 2007 est.
154 Lebanon $ -2,634,000,000 2007 est.
155 Jordan $ -2,769,000,000 2007 est.
156 Belarus $ -2,944,000,000 2007 est.
157 Iceland $ -3,125,000,000 2007 est.
158 Estonia $ -3,402,000,000 2007 est.
159 Slovakia $ -3,998,000,000 2007 est.
160 Czech Republic $ -4,384,000,000 2007 est.
161 Croatia $ -4,385,000,000 2007 est.
162 Lithuania $ -4,988,000,000 2007 est.
163 Sudan $ -5,432,000,000 2007 est.
164 Ukraine $ -5,918,000,000 2007 est.
165 Latvia $ -6,381,000,000 2007 est.
166 Colombia $ -6,465,000,000 2007 est.
167 Vietnam $ -6,722,000,000 2007 est.
168 Kazakhstan $ -6,851,000,000 2007 est.
169 Serbia $ -6,889,000,000 2007 est.
170 Pakistan $ -7,105,000,000 2007 est.
171 Mexico $ -7,370,000,000 2007 est.
172 Hungary $ -7,750,000,000 2007 est.
173 Bulgaria $ -8,464,000,000 2007 est.
174 New Zealand $ -10,380,000,000 2007 est.
175 Ireland $ -11,690,000,000 2007 est.
176 Poland $ -15,480,000,000 2007 est.
177 India $ -19,350,000,000 2007 est.
178 South Africa $ -20,560,000,000 2007 est.
179 Portugal $ -20,890,000,000 2007 est.
180 Romania $ -23,130,000,000 2007
181 France $ -33,390,000,000 2007 est.
182 Turkey $ -38,030,000,000 2007 est.
183 Greece $ -43,700,000,000 2007 est.
184 Italy $ -47,250,000,000 2007 est.
185 Australia $ -56,200,000,000 2007 est.
186 United Kingdom $ -136,200,000,000 2007 est.
187 Spain $ -145,600,000,000 2007 est.
188 United States $ -738,600,000,000 2007 est.
how many times it takes
is how many times it takes
wake up stand up
stand up for your rights
google bob marley
google his story of bank of 'england'
19. mountain goat said...
Phew at least we are better than Spain
20. str 2007 said...
You're a fountain of knowledge and information Malct - yes that was the list I was referring to earlier. Thanks.
And Gordon Brown spouts thet we're economically well positioned to face a downturn. I guess he's working on the basis that if you owe that much it's the people you owe that have the problem not you !
What a mess.