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The Crashedoutandburned Scenario

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Seems when you turn on the TV or read a paper various vested interests are demanding interest rate cuts to sure up the flagging housing market and help the retailers. Most people here agree the debt mountain this creates is not just subject to eventual collapse but is socially destructive (people not having kids, suicides due to debt, reposessions, strains on relationships, etc.)

So, anyway, here is the alternative CrashedOutAndBurned model. I've deliberately reigned in my extremist tendency to make it a model as un-political as possible - just plain common sense.

If house prices had only risen in line with official inflation, me and Mrs Crashed would be hoping to put down perhaps 40% deposit on our target 3 bed terraced house. Being avid savers we'd hope to start overpaying the mortgage to get it whittled down. That said, our mortgage would be so small, so comfortable, that we'd have far more to spend in the economy. We could buy more of that nice organic food we wish we could afford more of, more clothes that aren't sweatshop imports, go on nice trips to the green parts of England and maybe buy the odd consumer bit of electronic wizzardry like a new laptop. On our below-average wages, we'd still have enough disposable income to have a fairly s-w-a-n-k-y little life without getting suckered into any debt at all.

With our small, overpayment-whittled mortgage we could also do all that crap about saving for a pension as well, just like everyone say we are supposed to. Living within our means, we could hopefully look after ourselves and even if one of us lost our jobs, hey, there'd be plenty of slack in reserve.

So who is this model good for?

1. Well, it's good for the individual. Less debt-stress. More choice about the job you want to do - no climbing the soulcrushing greasy pole in some pointless company because your mortgage and debt has grown to the size of a mountain. Less family breakdown due to 'money troubles'. A parent can decide to stay at home for longer if they want and have a choice between money vs. more time with their kids. Presently it's two-incomes blazing away all the time, no real choice at all.

2. So called 'Business leaders' may not agree but it's good for business. Isn't it better to get the population to spend their pre-earned money than hoodwink them into huge debt via credit cards, buy now pay later, etc? Aren't you killing the golden goose through greed? Many businesses have massively overexpanded due to the credit boom, assuming the spend-fests of the last few years could go on growing and growing. Wouldn't you prefer customers that can be a steady regular customer over the years, rather than a 'splurge-once, cut back' customer? This is stuff of big boom and big bust.

3. Good for society. Less bankrupcy. More people looking after themselves. Saving pays. Genuinely useful work pays. Investing in real business pays, rather than surfing credit-fuelled asset price inflation. Less rapid growth putting big-box retail parks everywhere and MEW SUVs on every little street. Better quality of life all round.

Who is this model bad for?

1. the governement. Under Maggie and later Blair the UK has become more authoritarian than ever. Debt is a good way to keep people's noses to the grindstone, too browbeaten to worry about challenging the impoverished McWorld globalised neo-liberalism creates .

2. The banks. The more people suffer with debt, the richer they get. They are able to single-handedly inflate the money supply on a whim, now almost completely without regulation. They decide what business start and fail. When your house can be repossessed. Whether you can borrow far more than you can comfortably pay back, or whether you can borrow a cent.

Does anyone care about the government or the banks? I don't. They can both take a hike.

Shouldn't the clock go back on credit deregulation so the model could be more of a reality? Shouldn't BTL/second home ownership be made more difficult, not ever easier and evermore tax efficient?

Edited by CrashedOutAndBurned

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Guest Charlie The Tramp

Nice post Crash

If house prices had only risen in line with official inflation

My first property was purchased for £3,950 in 1970.

If we take real inflation into account and did we suffer with general high inflation for twenty plus years that property today in equivalent money would be £42,660.

I saw it on the market six months ago for 120k.

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Crashed, you post was a pleasure to read. I have often been bewildered at how the general public get sucked into housing economics as they exist. Your model, although, an ideal, is surely not an impossibility, if only a greater percentage of us could drop the greed and profit motive. I know many property owners who are fed up with the illogic of it all, nobody in their right mind feels they are quarter millionaires just because their house is worth 250000. Many would rather have at general inflation rate so their children could afford, or not have to borrow thousands for an extra bedroom.

Like you I am not a materialist, but carrying a heavy handicap in the rat race through reasons not of my own making, which boils down to: I just want somewhere to live.

Not a palace, not in a posh area. Just somewhere I can afford in return for doing an honest days work, and have a choice in whether I can have pets or drill holes in my walls

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It is also a symptom of monetary wealth against quality of life. When people get richer & richer what do they spend it on - Some end up buying 10 houses, 100 cars all adding hardly anything to their quality of life but depriving others of these same assets. For instance some stupidly rich people will spend 15m travelling to space, how they can justify that against the other good things they could do with the money I will never know.

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I like the Ipod MP3 example!

I always wanted one, but just couldn't part with the money for one for the very reason you stated!

Ten year service award in my current employment, what did I get? Mp3 Player! Everyone's a winner! :D

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  • 301 Brexit, House prices and Summer 2020

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