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Has The Credit Bubble Gone Beyond The Point Of No-return

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The more i think about it the more i see some limbo situation.

A crash would be a disaster for the banks, but at the same time to continue handing out the money gets riskier by the day.Eventually i can see a lot of consolidating going on in the banking/credit sector, something has to give.

Fact is if the credit splurge continues, at some point the population will be working for the banks alone, if it dont continue then were gonna have nothing left to spend, and thus bad debts will bring down a lot of people and snowball into un-employment.

Everyone and there dog at the moment in the uk is dependent on a continuation, this seems the reason the housing market has gone beyond what would be considered value.A real carch 22 situation that i believe will be played to the bitter end with the smart money already looking to get out, with banks first in the queue.

Loans are often sold on and on, passing on the risk and trading in debt, i think the point of no return will be reached not once everyone cant afford anymore credit but when there are more sellers than buyers in the risky debt market.

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Why would a crash in HPs be a disaster for the banks?

Firstly, although many high street banks are heavily into mortgage lending most of the investment banks are not.

Secondly, how do the banks lose anyhow. If HPs tank then they simply have loads of people owing huge debts on houses no longer worth what they paid for them. It is only when people can no longer pay their mortgages that the banks... well, they don't worry then as they simply repossess the property, put it up for auction and get a realistic market price for it. The mortgagee, on the other hand, is declared bankrupt and ends up paying the bank for many years to come.

Banks are in a no lose situation when HPs crash. At worst, the economy slows and they simply rope in lending until the economy turns up again. If inflation rises then IRs rise and they make more money on what they are loaning.

As to whether the credit bubble has gone past the point of no return - yes, I think so. It is, after all, a giant pyramid selling scheme only propped up by people spending more and more. People now, either they cannot afford to or are not willing to or both, refusing to buy into VASTLY over-inflated house prices whilst, at the same time, people are reigning in big time on spending due to the enormous credit burden.

No matter how much people try to twist things the cold reality is that people cannot keep on borrowing for ever. At some point the borrowed money has to be paid back. That time is now.

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Why would a crash in HPs be a disaster for the banks?

Firstly, although many high street banks are heavily into mortgage lending most of the investment banks are not.

Egg are TV advertising at the moment. IMO they are one of the most vunerable banks in existence, I read 80% of its loan portfolio is unsecured. If things go wrong they will go 1st.

Secondly, how do the banks lose anyhow. If HPs tank then they simply have loads of people owing huge debts on houses no longer worth what they paid for them. It is only when people can no longer pay their mortgages that the banks... well, they don't worry then as they simply repossess the property, put it up for auction and get a realistic market price for it. The mortgagee, on the other hand, is declared bankrupt and ends up paying the bank for many years to come.

Repossess and sell to who, the reality is, and it has been recognised in the US, is that the state would need to bail out its own people and the physical assets of the country would be passed into the ownership of the banks, absolute nightmare that they see it that way. Much better to let the banks go under and let the people own the assets.

Banks are in a no lose situation when HPs crash. At worst, the economy slows and they simply rope in lending until the economy turns up again. If inflation rises then IRs rise and they make more money on what they are loaning.

The economy would be painfully slow to recover, it would require debt free individuals to enter the labour market in order to create increased liquidity. Who would we be waiting for, ex students, we've done them before they start. Others will not work for no benefit to themselves. Think debt slavery!

As to whether the credit bubble has gone past the point of no return - yes, I think so. It is, after all, a giant pyramid selling scheme only propped up by people spending more and more. People now, either they cannot afford to or are not willing to or both, refusing to buy into VASTLY over-inflated house prices whilst, at the same time, people are reigning in big time on spending due to the enormous credit burden.

No matter how much people try to twist things the cold reality is that people cannot keep on borrowing for ever. At some point the borrowed money has to be paid back. That time is now.

Its this pyramid system that bothers me, the whole thing has that feature about it. Eventually someone rings the alarm bell and everyone tries to get out at once, desaster; I think we are closing in on that day!

Does the borrowed money have to be payed back. The fact is it may be impossible if the economy carries more debt than liquidity to pay it back with. Such a situation could exist in a recession.

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Guest consa

This article is about America, but the same applies to the UK as we are in Americas pocket so to speak.

In literary theory, the opposite of a Utopia is a Dystopia — a place where everything is nasty and Murphy is proved an optimist. Actually “Utopia” itself was a dystopic novel because Thomas More wrote it as a satire.

Anyhow, without getting into literary tangles, let me tell a dystopic fairy-tale. Somewhere there’s a consumer boom driven by high income growth and a big middle-class. Lenders offer easy credit to retail customers.

The retail credit translates into a housing boom driven by EMI financing. That causes a bubble where real estate prices inflate over several years. At some stage, rental yields drop way below the cost of servicing loans on property of equivalent cost.

Nevertheless, credit is cheap and everybody wants to own the roof over their heads; people continue buying on the “never-never”. Builders continue building; banks and FIs continue lending. Real estate prices keep rising, people speculate on them rising further.

Inflation jumps due to a huge spike in global energy prices. This hits prospective home-buyers and demand plummets, leaving real-estate developers in a highly-leveraged mess.

http://www.business-standard.com/common/st...N&autono=206007

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  • 301 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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