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munro

Credit Action Debt Statistics

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Not sure if this has been posted recently - stats for December. Full report here:

http://www.creditaction.org.uk/helpful-resources/debt-statistics.html

Highlights:

Total UK personal debt at the end of October 2010 stood at £1,452bn. The twelve-month growth rate increased 0.1% to 0.8%. Individuals owe more than what the whole country produces in a year.

Also:

Britain's interest repayments on personal debt were £65.0bn in the last 12 months. The average interest paid by each household on their total debt is approximately £2,580 each year. According to PwC the average household will need to spend approximately 15% of net income purely to service the interest payments arising from this debt.

So outright levels of debt are still increasing as the vampire squid needs to be fed. And if we're spending 15% of net income already then even a very small rise in interest rates will push people right over the edge and tip the economy into deep recession. So much for 5% rates - that's all talk to try and show people the BoE are in control. They're not. There's no link between UK interest rates and inflation as the vast majority of that inflation is imported via higher commodity prices and sterling devaluation. Higher interest rates would support sterling at the cost of trashing the economy through increases in debt payments, not least by the govt itself, as the rates paid to service the deficit would go up. Between a rock and a hard place.

Looks like 2011 will be another long dull dreary grind as zombie banks and households are propped up by low interest rates. This will also allow the govt to continue to service the deficit. CPI inflation will stay stubbornly high with Merv writing the same letter every time and Osbourne sending the same reply that the govt is on the case etc etc. House prices will drop 2 to 5 % in nominal terms. Credit will remain tight. Transactions volumes will remain low. Rents will stagnate. LLs will quietly cut as needed so LHA tenants will stay put. Govt support to banks will be quietly rolled over as "permanent market adjustment drawdown mechanisms". In short it will be the continuing long dark tea-time of the soul. Welcome to the Japanese-style lost decade.

Move along there, nothing to see.

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So outright levels of debt are still increasing as the vampire squid needs to be fed. And if we're spending 15% of net income already then even a very small rise in interest rates will push people right over the edge and tip the economy into deep recession. So much for 5% rates - that's all talk to try and show people the BoE are in control.

Your assumption that they can't/won't raise rates assumes that a significant proportion of the indebted would default. Do you have any numbers for how many people are comfortably repaying their debts? How many are still in jobs that are not under threat? How many could easily tighten their belts?

Edited by athom

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Your assumption that they can't/won't raise rates assumes that a significant proportion of the indebted would default. Do you have any numbers for how many people are comfortably repaying their debts? How many are still in jobs that are not under threat? How many could easily tighten their belts?

How about flat nominal wages and above target inflation

Google 'Minsky moment'

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Google 'Minsky moment'

asset sell off. good point - how many can still ebay their assets to pay their loans

I'll buy them for 10th of new :lol:

So any numbers for people who are not in trouble and could be squeezed more than they are already by inflation? Just look at what was considered normal frugality in the 70s/80s for the majority and compare to today, we can, in fact should, relearn how to live on much less. I'm expecting the banksters will be teaching us the hard way when they start cranking up the interest rates.

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So outright levels of debt are still increasing as the vampire squid needs to be fed. And if we're spending 15% of net income already then even a very small rise in interest rates will push people right over the edge and tip the economy into deep recession. So much for 5% rates - that's all talk to try and show people the BoE are in control. They're not. There's no link between UK interest rates and inflation as the vast majority of that inflation is imported via higher commodity prices and sterling devaluation. Higher interest rates would support sterling at the cost of trashing the economy through increases in debt payments, not least by the govt itself, as the rates paid to service the deficit would go up. Between a rock and a hard place.

I don't think the highlighted bit is true.

Also, contrary to MSM opinion, the real economy won't get trashed if interests rates rise. Higher sterling would mean lower import costs and lower inflation. Britiain is never going to export its way out of this mess - that's just nonsense BoE justification for recklessly low rates to depress the £ and protect nominal asset prices for the rich and individuals with too much debt (and the banks). The rates that companies pay to service debt are already disconnected from base rates - they are at more risk of going up due to high inflation than base rate rises.

IMHO the UK will not recover until it becomes a more competitive place to do business - that cannot happen until asset prices are allowed to reset and the economy is slowly restructured.

Edited by Constable

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I don't think the highlighted bit is true.

Also, contrary to MSM opinion, the real economy won't get trashed if interests rates rise. Higher sterling would mean lower import costs and lower inflation. Britiain is never going to export its way out of this mess - that's just nonsense BoE justification for recklessly low rates to depress the £ and protect nominal asset prices for the rich and individuals with too much debt (and the banks). The rates that companies pay to service debt are already disconnected from base rates - they are at more risk of going up due to high inflation than base rate rises.

IMHO the UK will not recover until it becomes a more competitive place to do business - that cannot happen until asset prices are allowed to reset and the economy is slowly restructured.

"Recover" - from what? There seems to be a view around that there is a better way of doing things - ie running the economy - and that we just need to work out what it is and get on with it. This is just wishful thinking. Time passes inexorably and life just goes on; there is no recovery just as there is no restructuring. There's just more of, more or less, the same. And that's what we are seeing with the Coalition govt. No radical change, just more or less more of the same. As with hindsight we can see happened after 1997 - no great progressive revolution, just more or less the same again.

It is arguable that what happened after 1979 was just a variant on the programmes already instituted by the Labour govt - it was Healey as Labour chancellor who said that spending your way out of a recession was no longer an option. Although clearly this govt and the one before it think differently.

Sure, Labour did a dreadful job. But there was no coherent alternative on offer from the Conservatives during the period 1997-2010. They were every bit as keen on deregulation, promoting the City, immigration, and keeping the proles happy with recycled tax money from the City. There was no sustained outcry over a debt-fuelled binge from the opposition benches. And when it came down to it in the 2010 election there was no great enthusiasm for a Conservative alternative vision of Britain, because there is no obvious vision when you are a small island with little by way of natural resources or "competitive advantage".

The point is that this is how it is and there is no magic bullet. There is no set of policies that is going to make a substantial difference. There is zero likelihood of this govt doing anything that will "reset" anything. As far as the UK economy goes this is the long dark tea-time of the soul.

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Have to say your scenario for the year sounds like the best prediction I have read for Britain's economy in 2011. Its a very mature thinking you have on the economy and debt.

I believe we won't see 1% base interest rates for the foreseeable future. The western nations are becoming just like Japan and for the same reasons. And we are finding out it is a lot harder than it looks to get out of. And really only Britain has really pushed the printing, and our inflation is all the way up at 3.2%.. which is basically the same as the 30 year average inflation of 3%.

America is down at 0.8% inflation, even with all the printing, and Europe is well under the 2% target I believe.. although I havent' seen Euro inflation numbers for a few months.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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