The British Are Spending Lemmings... And The World Knows It

[francis]

I've been searching my brains for ages trying to understand how house prices can stablise (or rise) when unemployment is heading towards three million. I've been confused about why sterling is so resiliant in the face of warnings from the IMF about our ability to repay national debt and the threat of losing our AAA rating. There seems to be so much fundamentally wrong with our economy yet the recession, broadly speaking, seems to have been a fairly mild so far.

Tonight I had a break through. Curious to know what everyone else will think.

1. Spending and debt are like heart disease or lung cancer.

There is a human tendancy to worry less about things that are a long way off in the future. Heart disease and lung cancer kill significantly more people than terrorism. Terrorism is in the present, and therefore is somehow much scarier and horrific. It commands far more resources and hype. Our debt fuelled economy allows people to live for the here and now. And the reality is that most people in this country want that. They don't care about saving for their retirement, or pay for their future family needs. They don't care how or when they will repay their debts. As long as they can make the minimum payments each month they are happy. Saving and budgeting are largely extinct nowadays. Individual responsibility has gone and has been replaced with the attitude that if the bank lends them the money then they are entitled to spend it. It's the bank's problem if at some point in the future they can't repay the debt.

The British are spending lemmings. If they are given the spending power (credit or cash) they will spend it. The British won't budget, they won't exercise restraint, they won't think about the future they will just spend. The rest of the world knows this. Politicians know this. Because our wreckless approach to spending the government can borrow safe in the knowlege that as long as they put spending power in peoples' pockets they will burn it and generate taxes. The desire to spend will always be there.

2. Too many people believe property is a great investment.

Even after two years of falling house prices Brits still believe the property is a great (long term) investment. This belief is hardcoded into people now. Sufficient numbers of the population believe this such that it becomes a self-fulfilling prophecy. Even though high house prices do nobody in society any good whatsoever, as soon as the mortgage tap is turned back on house prices will go up. They will go up because there are more people who believe prices 'always go up' than there are house price crash subscribers and people with sufficient grasp of the economy to understand properly what has gone on and why we are where we are.

We need to face the facts. The Labour government gave us high house prices and a 'live for the here and now' attitude to money and responsibility. We are outnumbered. Brits will borrow and spend like lemmings. That wreckless borrowing and spending, and the self-fullfilling beliefs about housing is the new paradigm. High house prices are here, and here to stay. We will pay for it terms of anemic growth and erosion of the values that helped to build our country.

[CokeSnortingTory]

You're just being impatient. House prices will fall because:

1.) There's no real money left to spend, and

2.) There's no fake money left to spend either.

[yellerkat]

...as soon as the mortgage tap is turned back on...

I think I've spotted a flaw in your logic.

You're just being impatient. House prices will fall because:

1.) There's no real money left to spend, and

2.) There's no fake money left to spend either.

Quite.

[Chest Rockwell]

Amazed that no fvcker see's rising unemployment as an issue.

[montesquieu]

I've been searching my brains for ages trying to understand how house prices can stablise (or rise) when unemployment is heading towards three million. I've been confused about why sterling is so resiliant in the face of warnings from the IMF about our ability to repay national debt and the threat of losing our AAA rating. There seems to be so much fundamentally wrong with our economy yet the recession, broadly speaking, seems to have been a fairly mild so far.

Tonight I had a break through. Curious to know what everyone else will think.

1. Spending and debt are like heart disease or lung cancer.

There is a human tendancy to worry less about things that are a long way off in the future. Heart disease and lung cancer kill significantly more people than terrorism. Terrorism is in the present, and therefore is somehow much scarier and horrific. It commands far more resources and hype. Our debt fuelled economy allows people to live for the here and now. And the reality is that most people in this country want that. They don't care about saving for their retirement, or pay for their future family needs. They don't care how or when they will repay their debts. As long as they can make the minimum payments each month they are happy. Saving and budgeting are largely extinct nowadays. Individual responsibility has gone and has been replaced with the attitude that if the bank lends them the money then they are entitled to spend it. It's the bank's problem if at some point in the future they can't repay the debt.

The British are spending lemmings. If they are given the spending power (credit or cash) they will spend it. The British won't budget, they won't exercise restraint, they won't think about the future they will just spend. The rest of the world knows this. Politicians know this. Because our wreckless approach to spending the government can borrow safe in the knowlege that as long as they put spending power in peoples' pockets they will burn it and generate taxes. The desire to spend will always be there.

2. Too many people believe property is a great investment.

Even after two years of falling house prices Brits still believe the property is a great (long term) investment. This belief is hardcoded into people now. Sufficient numbers of the population believe this such that it becomes a self-fulfilling prophecy. Even though high house prices do nobody in society any good whatsoever, as soon as the mortgage tap is turned back on house prices will go up. They will go up because there are more people who believe prices 'always go up' than there are house price crash subscribers and people with sufficient grasp of the economy to understand properly what has gone on and why we are where we are.

We need to face the facts. The Labour government gave us high house prices and a 'live for the here and now' attitude to money and responsibility. We are outnumbered. Brits will borrow and spend like lemmings. That wreckless borrowing and spending, and the self-fullfilling beliefs about housing is the new paradigm. High house prices are here, and here to stay. We will pay for it terms of anemic growth and erosion of the values that helped to build our country.

Reckless indeed. From the Old English word for careless (pre-Norman, no less).

Wreckless comes from a later middle English root 'wreck', a seafaring term whose pronunciation was once different (roughly 'wraek') but has converged in recent centuries to sound the same.

[MOP]

You're just being impatient. House prices will fall because:

1.) There's no real money left to spend, and

2.) There's no fake money left to spend either.

That's it in a nutshell folks. The second leg is about to start.

[mattydread]

I've been searching my brains for ages trying to understand how house prices can stablise (or rise) when unemployment is heading towards three million. I've been confused about why sterling is so resiliant in the face of warnings from the IMF about our ability to repay national debt and the threat of losing our AAA rating. There seems to be so much fundamentally wrong with our economy yet the recession, broadly speaking, seems to have been a fairly mild so far.

Tonight I had a break through. Curious to know what everyone else will think.

1. Spending and debt are like heart disease or lung cancer.

There is a human tendancy to worry less about things that are a long way off in the future. Heart disease and lung cancer kill significantly more people than terrorism. Terrorism is in the present, and therefore is somehow much scarier and horrific. It commands far more resources and hype. Our debt fuelled economy allows people to live for the here and now. And the reality is that most people in this country want that. They don't care about saving for their retirement, or pay for their future family needs. They don't care how or when they will repay their debts. As long as they can make the minimum payments each month they are happy. Saving and budgeting are largely extinct nowadays. Individual responsibility has gone and has been replaced with the attitude that if the bank lends them the money then they are entitled to spend it. It's the bank's problem if at some point in the future they can't repay the debt.

The British are spending lemmings. If they are given the spending power (credit or cash) they will spend it. The British won't budget, they won't exercise restraint, they won't think about the future they will just spend. The rest of the world knows this. Politicians know this. Because our wreckless approach to spending the government can borrow safe in the knowlege that as long as they put spending power in peoples' pockets they will burn it and generate taxes. The desire to spend will always be there.

2. Too many people believe property is a great investment.

Even after two years of falling house prices Brits still believe the property is a great (long term) investment. This belief is hardcoded into people now. Sufficient numbers of the population believe this such that it becomes a self-fulfilling prophecy. Even though high house prices do nobody in society any good whatsoever, as soon as the mortgage tap is turned back on house prices will go up. They will go up because there are more people who believe prices 'always go up' than there are house price crash subscribers and people with sufficient grasp of the economy to understand properly what has gone on and why we are where we are.

We need to face the facts. The Labour government gave us high house prices and a 'live for the here and now' attitude to money and responsibility. We are outnumbered. Brits will borrow and spend like lemmings. That wreckless borrowing and spending, and the self-fullfilling beliefs about housing is the new paradigm. High house prices are here, and here to stay. We will pay for it terms of anemic growth and erosion of the values that helped to build our country.

Hate that abbreviation - good post.

[okaycuckoo]

Who will lend to Britain?

We are in the process of Californication - except we have our own currency.

[cashinmattress]

High house prices are here, and here to stay.

House prices were only high because of an excess in credit and lacklustre financial regulation in the market.

You would be more correct to say that high personal debt levels are here to stay for all those who bought at the peak, or who have used their house as a bank machine.

British industry, banking, manufacturing, energy, these are all on the critical list. Nothing is going to bring back the 2007 bubble within our lifetimes, and probably not ever again. We had our big boom which stemmed from the North Sea, and that is sadly on the wane.

[non frog]

....

We need to face the facts. The Labour government gave us high house prices and a 'live for the here and now' attitude to money and responsibility. ...

That is not a fact.

Booming property prices and short-termism really took place in the 80 under Thatcher and ended in the 90s price crash. The current government learnt its lessons then and realised that people vote for parties that promise personal wealth increases without any effort/skill input. Mostly people in the middle 5 income deciles achieve this by buying a property that gains in capital value. The (current) government has given people what they wanted, right up to the point that the underlying fundamental economic reality blew the model out the water. Now the government have become the scapegoat allowing people to overlook their greed and lack of foresight.

If you want to predict the future you need to guess what the new government will do. I doubt very much Brown has even a remote chance of re-election so we will either have a Conservative government or a radically changed "New-new Labour" one.

Either will need to slash spending or risk massive inflation. Unlike the Labour party of the 70s the current bunch are scared of inflation. Unemployment (Mrs T's "price worth paying") will therefore probably rise and welfare (both for the bottom decile and the middle classes) fall. Targets like 50% university attendance will be abandoned. Child poverty will not be a priority. These changes will be easier for the Tories to achieve as they do not pretend to care about social justice.

Both parties are pro home ownership as it is political wisdom that this is a good way to bribe (and pacify) the electorate. Mrs Thatcher even oversaw the single biggest act of left-wing wealth redistribution in UK history - the selling off at discount of council houses to the sitting tenants. She was not, as best I recall, given to much left wing thinking

The economic conditions are a strong negative predictor of real estate prices. Everyone can see that.

The next government is, IMO, a harder one to forecast.

[Greg Bowman]

Amazed that no fvcker see's rising unemployment as an issue.

This F***** does

[Ash4781]

Prices have stabilised because supply has now fallen with demand.

[Giordano Bruno]

I've been searching my brains for ages trying to understand how house prices can stablise (or rise) when unemployment is heading towards three million.

House prices have not stabilized. A short term rise is of little significance. It happened in the previous 2 bubbles when the graph hit the trend line. See the graph on the hpc home page.

High house prices are here, and here to stay.

I'm sure that is not true at all.

[silver panda]

You can only spend what you can earn or borrow.

We cannot earn or borrow enough any more to match our spending.

Spending will thus fall to the level we can earn and borrow to.

[Mammon]

Spending will thus fall to the level we can earn and borrow to.

Believe me there are enough lemmings out there.

There are enough couples earning minimum wage who will happily borrow 150K if the monthly interest payments look low enough.

And the banks will be more than happy to lend to them again in a few years.

[Joey Buttafueco Jr]

Also falling earnings!

not yet.

[Guest spp]

The U.K has maxed out it's credit card!

Just counting down the days until it all blows up IMO!

Be patient, buy Gold/Silver!

[yellerkat]

And the banks will be more than happy to lend to them again in a few years.

Define few.

[Bloo Loo]

Amazed that no fvcker see's rising unemployment as an issue.

cos it always happens to someone else.

[cashinmattress]

Amazed that no fvcker see's rising unemployment as an issue.

It wasn't a problem when we were fannying about and creating money out of thin air for liar loans...

No so any more, of course.

[Take Me Back To London!]

The only way house prices are going to go up, in pound note terms, is because the currency has been devalued/high or hyperinflation.

Edited July 19, 2009 by Take Me Back To London!

[Guest spp]

All you need to know here really

http://www.youtube.com/watch?v=DzdErkRrkP0

A quick 2 min video from Faber.

[ccc]

I do agree that the British population - as a whole- has been so brainwashed that if they could make it happen, house prices would stay high forever. However I don't think it will happen. There simply isn't the credit there to support it.

I have an anecdote for the stupidity/brainwashing of many of the UK when it comes to house prices.

Bird had a house with here man. Split up. Tried to sell. Got offered a good price, pre bust, but refused it because they wanted more. Basically ended up chasing the marlet down and got about 10k when she could have got about 30-40 if the greed had not kicked in.

Now renting. Was discussing house prices with a friend. Apparently she wants the market to get moving again anf the banks to start lending again. She wants prices to start rising again.

True, but staggering.

High house prices = good.

This has actually been chiselled into the heads of many in this country. The basic facts in front of them do not seem to have an effect. High house prices = good. End of story. Nothing else matters.

[Fudge]

The Capitalist system is based around consumerism.

That is peoples main role in the system to spend, to buy products and services, to shop to consume.

It should come as no suprise even when peoples ability to afford to buy due to low wages and lack of credit they

will still go and buy stuff, its what they are meant to do within the system we have.

Its worse in the most liasse faire Capitalist countries like the USA and UK.

[Take Me Back To London!]

All you need to know here really

http://www.youtube.com/watch?v=DzdErkRrkP0

A quick 2 min video from Faber.

Marc Faber is correct to say that the system has still not be purged, the situation has only got worse and a total collapse will ensue.

I personally have always had 100% faith in the ability of the politicians and bankers, who got us into this disaster in the first place, to completely mess up in trying to sort it out.