Take Responsibility

[jaspers]

http://blogs.independent.co.uk/2012/05/04/did-british-borrowers-crash-the-economy/

His arguments seems to be that as Britains personal indebtedness appears to be related to mortgages, and that that this is unlikely to 'go bad' as we have a shortage of houses then it's all going to be OK?

We can all put up arguments against that, and it really isn't worth our time to go through them again and again (!) but one post from the past comes to mind. It was from a one time only poster who calculated the expansion of mortgage debt required to maintain prices at current levels assuming low wage inflation, and an historical average turnover of house sales. Sufficed to say that isn't sustainable,as over time, every debt free seller requires a highly indebted buyer, just to maintain prices. No one sells without lending becoming looser than 2007, and that's just to maintain prices, even with a small housing stock.

[Democorruptcy]

His arguments seems to be that as Britains personal indebtedness appears to be related to mortgages, and that that this is unlikely to 'go bad' as we have a shortage of houses then it's all going to be OK?

We can all put up arguments against that, and it really isn't worth our time to go through them again and again (!) but one post from the past comes to mind. It was from a one time only poster who calculated the expansion of mortgage debt required to maintain prices at current levels assuming low wage inflation, and an historical average turnover of house sales. Sufficed to say that isn't sustainable,as over time, every debt free seller requires a highly indebted buyer, just to maintain prices. No one sells without lending becoming looser than 2007, and that's just to maintain prices, even with a small housing stock.

The people who believe it works would all have bought tulips.

[scepticus]

I've long been saving up towards buying the debtors' good stuff, bought high with debt, off them all at liquidation prices.

and all the while the buggers have been lending those savings to those same delinquents. rolleyes:

[Tired of Waiting]

http://blogs.independent.co.uk/2012/05/04/did-british-borrowers-crash-the-economy/

The quote continues:

Secured lending here is mainly mortgage borrowing.

And when one considers mortgage debt one also needs to consider the other side of the balance sheet: housing values, which exploded over the decade.

When one factors in rising house values, the net financial position of UK households during the last decade looks much less alarming:

As Broadbent points out, UK households’ net financial wealth was no lower in 2008 than it was in 1992.

Ah, but didn’t we have a massive housing bubble? Haven’t much of the value of those “assets” been wiped out, proving that we did borrow too much after all? The answer to that is that we don’t know yet.

House prices have fallen from the pre-crisis peak by around 15%. But that is nothing like the collapse witnessed in bust housing markets such as the US and Spain, where values are down by something close to 50%:

House prices may be on their way down again here in the UK, and this will cause further problems for the banks, but this is by no means certain. In the past I’ve argued that the only way is down for the market, with prices still well above historic income to value ratios. But now I’m beginning to think that there’s such a shortage of housing supply in this country that values could well remain elevated, despite the weak economy.

Reasonable people can take different views on this subject.

IMO,

1) UK average house prices will fall, but not as much as in countries with less planning restrictions.

2) "UK average" will continue to mask a wide Noth-South divide. The planning blockage is much stronger here in the South/SE of England than in other parts of the UK. Here prices will fall less, sadly. Here in the South the NIMBY b@astards are wining, unfortunately.

[wonderpup]

Banks are supposed to be professionals in assessing and pricing credit risk (stop laughing at the back!)

Hairdressers, milk men, care workers etc are not.

Exactly. Since credit is extended by the lender- who is of course a highly skilled and highly paid expert- the only way that irresponsible loans could occur would be if that lender chose to make them.

To bleat now about being somehow hoodwinked by Mrs Miggins the hairdresser who somehow cunningly extracted more credit than she ought to have had from innocent unsuspecting bankers reads like a sketch from Monty Python.

It seems the banksters and their chums are only now waking up to the real danger of being correctly identified as corrupt fat cats- as the mood amongst the peasants turns ugly and they start looking for someone to blame for their woes.

[Venger]

It seems the banksters and their chums are only now waking up to the real danger of being correctly identified as corrupt fat cats- as the mood amongst the peasants turns ugly and they start looking for someone to blame for their woes.

You mean for them to scapegoat entirely and conveniently set aside their own choice in putting themselves into difficulty. There has been recession after recession and people nearly always forget it's a good idea to save and stay within your means. 'It can't happen to me, it's different this time.'

The forgiveness of the stupid borrowers/MEWers won't come to anything. Too many younger people coming through want their stuff, including their homes, at prices they can afford. Not everything given to some special interest group who think they exist to spend and borrow.

[gadget]

You mean for them to scapegoat entirely and conveniently set aside their own choice in putting themselves into difficulty.

Noone is saying people aren't (mostly) repsonsible for getting themsleves into too much debt.

But the question is who is to blame for the financial crisis. There has always been more than enough irresponsible people to lend to, what decides the amount of debt in an economy is the lenders not the borrowers. When the banks ran out of responsible people to lend to they just moved onto the irresponsible (hence the subprime boom). Once everyone realised they'd get their bonsues whether the debts were repaid or not the party really kicked off...

As deep throught said "Follow the Money.." Who's pockets are still stuffed with loot?

[Democorruptcy]

Their policy since day one has been negative real interest rates.

They are planning to increase household debt from £1.6trn to £2.1trn during this parliament.

Every policy Grant Shapps does is to increase mortgage debt. Newbuy and Firstbuy are government backed liar loans enabling people to buy what they cannot really afford.

Why do they pretend they think too much debt is bad?

[Venger]

Noone is saying people aren't (mostly) repsonsible for getting themsleves into too much debt.

But the question is who is to blame for the financial crisis. There has always been more than enough irresponsible people to lend to, what decides the amount of debt in an economy is the lenders not the borrowers. When the banks ran out of responsible people to lend to they just moved onto the irresponsible (hence the subprime boom). Once everyone realised they'd get their bonsues whether the debts were repaid or not the party really kicked off...

As deep throught said "Follow the Money.." Who's pockets are still stuffed with loot?

Loads of AIB bank workers are stuffed with debt and in negative equity from 'taking advantage' of preferential mortgages for staff. Loads of bank workers are human beings with the same lack of intelligence, understanding, carefree attitude, 'can't be another recession', as the general public. Too busy spending and trying to get portfolios and rushing to debt. Gimme gimme.

The top bankers, yes, but there number is immaterial to the overall picture. They're also being gradually replaced by more sensible bankers trying to bring about normal conditions towards lending and denying BraveNewWorld from taking his desire to take a car loan at 19% over 6 years.

Who still has all the £trillions of equity in their homes? That's where the loot is. The general public who loved the credit expansion and who now don't want to see their homes fall in value. Many who rushed to debt in the long wave boom. Who were happy to see the bankers lending more. Homeowners and others with big mortgages, because the latest buyers paying more helped push up the values of their own homes, giving them more equity. Too busy spending to think about how house prices could keep going up, or how competition from other countries in industry/manufacturing/investment could see jobs and income her come under pressure. Too busy saying we're a small island with little land so house prices always go up.

[Game_Over]

Can't be bothered to read pages and pages of the usual garbage so apologies if someone has already said this.

Banks were blamed for causing this crisis by over lending

They are now being blamed for prolonging the crisis by not lending to the same people for the same purposes.

This crisis is nothing to do with banks being insolvent

banks are insolvent because private individuals and governments are insolvent.

And private individuals and governments are insolvent because they have been living way beyond their means for decades.

The endgame is - private individuals and governments will have to live well within their means for decades.

No one likes the idea of this - but one way or another it is going to happen.

If the truth was recognised we could perhaps avoid a decade of civil war within Europe

but given that most of the population, including most politicians are utter Feckwits

The trip to Hell in a handcart piled high with Euros is inevitable - sadly

[Game_Over]

Noone is saying people aren't (mostly) repsonsible for getting themsleves into too much debt.

But the question is who is to blame for the financial crisis. There has always been more than enough irresponsible people to lend to, what decides the amount of debt in an economy is the lenders not the borrowers. When the banks ran out of responsible people to lend to they just moved onto the irresponsible (hence the subprime boom). Once everyone realised they'd get their bonsues whether the debts were repaid or not the party really kicked off...

As deep throught said "Follow the Money.." Who's pockets are still stuffed with loot?

Banks create credit and lend it to people- they don't create wealth.

So banks don't have wealth they have debt

and if the people they have extended the credit to never pay them back

then the bank is insolvent.

When this happens who has the money?

Certainly not the bank, otherwise it would not be insolvent.

So the answer to your question is - no one has the money because it never existed in the first place.

[Executive Sadman]

The only way to 'take responsiblity is to get out of fiat, and disable their printing BS, pay as little tax as possible, and accelerate the collapse of the Ponzi economy ASAP to ensure no more fresh meat gets sucked into the meat grinder.

Of course, govts 'take responsibility' is quite the opposite. Keep the thing going as long as possible.

[Britney's Piers]

Banks are supposed to be professionals in assessing and pricing credit risk (stop laughing at the back!)

Hairdressers, milk men, care workers etc are not.

Hammond seems to be arguing that banks are completely devoid of any skills to do their job of financial intermediation. Logically then he must be arguing for them to be stripped of their govt. licences and shut down for operating fraudulently.

In other news I dare say he blames Milly Dowler for allowing her phone to be hacked by Murdoch and Harold Shipman's victims for being injected with too much morphine.

#dissemblingidiotlookingforabankjobwhenkickedoutofgovt

I thought they did assess the risk of debtors but then for some reason bundled up the low risk and high risk together into one instrument therefore defeating the purpose.

[Game_Over]

Just one more question for the mentally impared.

There are 20 houses in a street which were all bought new for 200k each.

A year later someone sells one of these houses for 400k

The other 19 owners have now 'made' 200k each in 1 year, or a total of 3.8 million.

A year later another one of the houses in the street sells for 200k.

The other 19 owners have now 'lost' 200k each in 1 year, or a total of 3.8 million.

WHO HAS NOW GOT THIS MONEY??????????????????????????????????????????

The evil banksters presumably

[Venger]

Just one more question for the mentally impared.

There are 20 houses in a street which were all bought new for 200k each.

A year later someone sells one of these houses for 400k

The other 19 owners have now 'made' 200k each in 1 year, or a total of 3.8 million.

A year later another one of the houses in the street sells for 200k.

The other 19 owners have now 'lost' 200k each in 1 year, or a total of 3.8 million.

WHO HAS NOW GOT THIS MONEY??????????????????????????????????????????

The evil banksters presumably

The 20 houses on the other side of the street were bought in the 1950s and 60s for £1,000. And the other houses will have been MEWed over that £400,000 year.

The money did exist. It was willed into reality by the markets, bankers and the debtors. It was used by the borrowers to whatever advantage they chose to put it to. It also lifted house prices for existing owners when new debtors paid ever higher prices. Now it's time to learn prices can fall. Enjoy your debts and no savings.

A similar dynamic holds in the creation and destruction of credit. Let's suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, "a million dollars," and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one.

[Game_Over]

The 20 houses on the other side of the street were bought in the 1950s and 60s for £1,000. And the other houses will have been MEWed over that £400,000 year.

The money did exist. It was willed into reality by the markets, bankers and the debtors. It was used by the borrowers to whatever advantage they chose to put it to. It also lifted house prices for existing owners when new debtors paid ever higher prices. Now it's time to learn prices can fall. Enjoy your debts and no savings.

Money and wealth are two entirely separate things.

Printing money does not create wealth it causes inflation.

If you think about my example it is clear that the 3.8 million 'made' by the homeowners was due to inflation not wealth creation

This wealth never actually existed and therefore could not be 'stolen' or 'lost' by anyone.

[KingBingo]

So basically this guy says something that is entirely received wisdom on this board, something that is so core to the DNA of this board that literally any of us can/would/have said exactly the same thing and it pass without comment, or maybe a +1.

But because it was said by an Eeeevill Toooooorrreezzz the usual leftie drones are out in force to pour scorn over it.

Pathetic.

[mfs1959]

So basically this guy says something that is entirely received wisdom on this board, something that is so core to the DNA of this board that literally any of us can/would/have said exactly the same thing and it pass without comment, or maybe a +1.

But because it was said by an Eeeevill Toooooorrreezzz the usual leftie drones are out in force to pour scorn over it.

Pathetic.

+1

However, having raised a similar point on a different thread I was not surprised that with the comments that it's all the fault of evil bankers.

[Venger]

Money and wealth are two entirely separate things.

Money and wealth are two entirely separate things yes.

Although I'd like the scenario for an immediate 50% crash, it's a slower process than seeing RBS shares fall from £8 to 10p leaving pensioner small shareholders aghast and wishing they had grasped the opportunity to sell at £6 when they'd stuffily only looked at the little they'd lost, refused to sell and wanted it to go back up.

With housing wealth there is and has been lots of time opportunity for many to cash out with real money gains from other's borrowing. Where the loot is. The borrowing which pushed wealth/house prices up at the margin year on year on year.

I'm not wrong about the 'banksters' loot being in people's homes, including the borrowers who now say they have no blame, and older homeowners who had little reason to raise the alarm on bankers bonuses during the boom. They were too busy telling their kids and grandkids they can't go wrong with property. You've got debt you deserve the pain. Make way for those who can afford things at cheaper prices.

Mortgages debt tops £1 trillion

29th June 2006

http://news.bbc.co.uk/1/hi/business/5128220.stm

[dances with sheeple]

The people who borrowed beyond their means are being punished with low mortgage rates, some still fixed for the next few years, and forbearance from lenders.

I don't think you need to be a masochist to wish for that particular punishment.

They will never sell their house for anything like the amount they borrowed, they are in effect holding a large liability and paying rent to the bank at the same time? Much easier to default, let the bank take the hit, and move on with their lives?

[mfs1959]

They will never sell their house for anything like the amount they borrowed, they are in effect holding a large liability and paying rent to the bank at the same time? Much easier to default, let the bank take the hit, and move on with their lives?

If they default then the bank will seek to recover the loss. They would have to pay rent anyway, whether as interest to the bank, or as a payment to a loandlord. They bought the house at whatever price the then market supported and, presumably, were happy with the price they paid.

[dances with sheeple]

No, they're being punished by having to pay for an asset that (against their ingrained beliefs) is declining in (real) value, and is going to continue declining in value for the foreseeable future.

A few of them are going bankrupt / having their house taken by the bank and losing face among their peers and employers.

Now, what punishment is being metered out to the banks?... Ok, I see, so reform is being postponed and delayed and then apologists like Hammond are arriving to tell us that the cuddly little men in suits aren't really to blame and we should just leave them be. Right, the really tough stuff.

Incidentally the low interest rates are there as much to save the banks (who would topple if the property "adjustment" was sudden) as it is to save the borrowers.

When enough people realise the first point, the banks will be punished by a wave of defaults, and the losses won`t be passed on this time as voters are starting to turn against big banks, big business and big intrusive government. Europe will hopefully show the way?

[dances with sheeple]

If they default then the bank will seek to recover the loss. They would have to pay rent anyway, whether as interest to the bank, or as a payment to a loandlord. They bought the house at whatever price the then market supported and, presumably, were happy with the price they paid.

Renting privately gives them more flexibility in how much they pay each month, rather than being at the mercy of interest rates? By defaulting they can be chased for what, 6 years? and the bank must make proper efforts to dispose of the house at auction? If they go bankrupt they won`t be pursued for anything? All preferable to a lifetime of debt servitude IMO. The crucial thing for the banks is - Will the sheeple stop wanting to be debt slaves?- if so it really is game over.

[winkie]

When enough people realise the first point, the banks will be punished by a wave of defaults, and the losses won`t be passed on this time as voters are starting to turn against big banks, big business and big intrusive government. Europe will hopefully show the way?

I agree people are beginning to see the unfairness in the system....how hard you work and try to pay your way does not mean you necessarily receive a fair share of the available pot, the powerful guilty are getting away with their disingenuous selfish actions the innocent that stick to the rules are taken advantage of and fleeced.

If people default I doubt they will get an opportunity to borrow money like they did again.....defaulting does not mean you get off scott free, everything has a consequence.

Edited May 5, 2012 by winkie

[ska_mna]

banks are insolvent because private individuals and governments are insolvent.

To paraphrase this: you are saying banks are insolvent because those nice people they trustingly lent to aren't going to pay the money back.

If I give a handgun to a bunch of kids and leave them to play with it, whose fault is it if one of them ends up getting shot through the neck? Mine or theirs?

Like it or not, the "average joe" is childlike in their understanding of money and risk. If a bank lends to anyone that has a heartbeat and then acts surprised when a number of those loans go bad, they don't deserve to be in business. They are the equivalent of the guy who invented the chocolate teapot ("What? It melts when you put hot water in it? Who knew!")

The banks committed fraud by packaging up loans that they knew to be dodgy and selling them on like hotcakes to circumvent capital requirements.

Yes, the people who took out loans for more than they could repay should lose their houses and learn their lesson from this.

But the people who perpetrated the fraud should be put in front of a public enquiry and made to tell all under oath. Criminal proceedings should then follow where appropriate.

And yes, it would probably mean most of our business and political elite will end up in jail, so it will never happen.

Ho hum.