One For The Conspiracy Folk

[Bemused]

I am beginning to wonder if there is a "new paradigm" after all. Think about it. Nearly everybody is in debt. In many cases, shocking debts that would have caused the previous generation palpitations and leper like public standing. Yet interest rates remain low and the debt bubble just keeps expanding.

HPI has gone ballistic. I nearly laughed out loud at the drug lord’s house on the news last night. A 1 million pound mansion. He was compared to the Godfather. I was expecting something sumptuous, surrounded by high gates and a private drive, yet saw a suburban detached house. FFS you need to be a drug baron these days to get a modest house in the suburbs.

Most of my mates that are able to work abroad do. As an architect friend discovered on his return to the UK (having been involved in some very ambitious building projects in the Far East) he could afford only modest housing. He went to look at a 3 bed semi - only to discover that the owner of the house next door was the class clown at school who buggered about, got no education and a crap semi-skilled job. Yet bought a house rather than invest in 7 years of education.

Result straight on the plane to work abroad. Many have since followed.

And the rest of us - well if you work in manufacturing your screwed - better get a job in a call centre - oh hang on they are relocating, try IT or back office - oops yet sorry that’s going to.

The point of this? Well as the cost of living is spiralling we should be pushing for higher wages, striking to save our jobs but were not. There is a new paradigm. Were all cash strapped and unable to protest because if you’re in work, you’re pretty fortunate and are not going to rock the boat?

At the bottom end of the scale - unskilled manual workers well your really in the shite. Even if you are willing to work 2 jobs, it’s unlikely to cover your rent and there are plenty of others arriving daily who are willing to work harder and more efficiently that you. Well if you could move to France work 2 jobs, live in a shared house with 10 mates and 3 years later return to the UK and buy a house outright how much harder would you work?

In the absence of wage inflation pressures, I can just see this bubble being pumped bigger and bigger until there is an economic shock that literally causes the whole economy to implode. The question is will the shock happen in time for the fall out to be manageable?

[Mushroom]

Yes, that's the question.

The answer?

For some it's, oh it'll all be ok, things will carry on 'cos, in the main they always have.

For others, it's along the lines of, we're in the midst of vast changes the outcomes of which are hard to predict.

All those differing views are available for your consideration here and elsewhere on 'net.

Sometime hence you'll have your answer.

[SarahBell]

We won't have to employ nurses etc anymore

http://news.bbc.co.uk/1/hi/health/4985190.stm

just send people abroad for the ops.

[smiley]

You're right about the comparison between abroad and the UK - it's like Gulliver's travels for your wallet!

[mosstrooper]

its really quite simple

in order for the globalised corporations to make ever-increasing profits each year, someone has to buy more and more of their goods. that someone is you.

in order for you to afford ever increasing amounts of their goods, you have to borrow more money to do so. this is where the housing machine comes in. the house is used as the vector for you to borrow ever increasing amounts of money, to buy the goods to provide the profits. simple. so the system has to ensure that your borrowing vehicle (house) keeps supporting your ever-increasing borrowing requirements.

the whole economic system is designed to ensure that your borrowing is maximised to almost breaking point in order for the globalised corporations to maximise their profits. The western politicians are simply supporting their corporate friends in this whole affair, in exchange for "donations" to their political funds to get them re-elected.

its all very neat and simple.

its not a conspiracy. its in-your-face obvious.

you, the consumer, is being enslaved to the new capitalist borrowing machine.

welcome to the 21st century.

ps anyone not conforming to this cycle or interfering will become the enemy. thats us. we will be increasingly labelled as dangerous outcasts / extremists.

its really quite simple

in order for the globalised corporations to make ever-increasing profits each year, someone has to buy more and more of their goods. that someone is you.

in order for you to afford ever increasing amounts of their goods, you have to borrow more money to do so. this is where the housing machine comes in. the house is used as the vector for you to borrow ever increasing amounts of money, to buy the goods to provide the profits. simple. so the system has to ensure that your borrowing vehicle (house) keeps supporting your ever-increasing borrowing requirements.

the whole economic system is designed to ensure that your borrowing is maximised to almost breaking point in order for the globalised corporations to maximise their profits. The western politicians are simply supporting their corporate friends in this whole affair, in exchange for "donations" to their political funds to get them re-elected.

its all very neat and simple.

its not a conspiracy. its in-your-face obvious.

you, the consumer, is being enslaved to the new capitalist borrowing machine.

welcome to the 21st century.

ps anyone not conforming to this cycle or interfering will become the enemy. thats us. we will be increasingly labelled as dangerous outcasts / extremists.

[non-FTBer]

In the absence of wage inflation pressures, I can just see this bubble being pumped bigger and bigger until there is an economic shock that literally causes the whole economy to implode. The question is will the shock happen in time for the fall out to be manageable?

I disagree.

How can the bubble continue without wage inflation?

I think the bubble has reached a natural limit, and is now on a knife edge. It can only go one way, but when?

If IRs are set to rise, then without wage inflation paying the mortgage will become ever more difficult.

The bubble will burst with lots of little pin pricks, not a big almighty bang. As each repossesion and bankruptcy occurs (and each BTL gets out or goes under) sentiment will gradually turn.

Its taken longer than many expected, but its started. Reposessions, Bankruptcies and IVAs are increasing at a very quick pace (admittedly from a low point), if this trend continues sentiment will turn very quickly.

Add on unemployment increasing, 10000 jobs lost last week IIRC.... that is now 10000 people who will struggle to pay their mortgage or rent unless they can find a similar income... many won't.

[BuyingBear]

its really quite simple

in order for the globalised corporations to make ever-increasing profits each year, someone has to buy more and more of their goods. that someone is you.

in order for you to afford ever increasing amounts of their goods, you have to borrow more money to do so. this is where the housing machine comes in. the house is used as the vector for you to borrow ever increasing amounts of money, to buy the goods to provide the profits. simple. so the system has to ensure that your borrowing vehicle (house) keeps supporting your ever-increasing borrowing requirements.

Quite so, since the turn of the century housing has become the method of choice for injecting liquidity into the system, before that we had the stock market bubble... which was arguably more benign, 'investing' in companies encourages development and innovation even if some of it is burned up in a speculative frenzy, and the social consequences of being priced out of BP stock is rather more reasonable than pricing an entire generation of people out of a basic necessity. Also, generally ordinary people don't buying equities on a margin.

Like the previous bubble it's all about maintaining positive sentiment and creating the illusion of wealth, making people "feel" rich despite them taking on record amounts of debt, with repayments consuming ever larger chunks of their disposable income. Housing has taken on an almost mystical status, the mechanics behind this are rather absurd, especially in light of an abundance of land, materials, and seemingly cheap labour, however these constrictions must remain as not to explode the myth... better not grow too many tulip bulbs!

Of course our system is great at shooting itself in the foot, the consequent demographic decline resulting from the fallout of this 'wealth creation' will be more than obvious within the coming decade, especially when millions of newly minted boomers will find there are increasingly less working people to pay their pensions or buy their homes. A child not born today cannot printed or created out of thin air in 2024, hence nicking the populace of Eastern Europe and exacerbating their well ingrained demographic decline, "developing markets" indeed. Let us pray that these folk are like Peter Pan, we cannot afford them rest or pensions.

The malaise from all this will be felt for decades. Once people realise, the present government may well be hated by a whole generation on a level not seen since Thatcher.

Edited May 16, 2006 by BuyingBear

[Bemused]

its not a conspiracy. its in-your-face obvious.

you, the consumer, is being enslaved to the new capitalist borrowing machine.

welcome to the 21st century.

ps anyone not conforming to this cycle or interfering will become the enemy. thats us. we will be increasingly labelled as dangerous outcasts / extremists.

Its not a modern phenomenon though - I believe George Orwell hinted at this in Keep the Aspidistra Flying if my memory serves me correctly. I was aluding more to the brainclamp school of thought

[Bingley Bloke]

In the absence of wage inflation pressures, I can just see this bubble being pumped bigger and bigger until there is an economic shock that literally causes the whole economy to implode. The question is will the shock happen in time for the fall out to be manageable?

Good observation. I liken the current situation to that of a bath into which a tap is dripping. Every drip is virtually nothing on its own, but after a long time the bath will fill and then, when the surface tension of the water breaks, overflow and cause a flood of catastrophic proportions. This is what's happening with debt. Instead of turning the tap off it is being allowed to dip, drip, drip, because noone can see how small drips will become a flood. I suspect a part of what has kept interest rates low is the fear of what will happen if they go up, but the longer it is left the bigger the problem will be by the time it happens. It's all a bit like someone who has made a mistake and instead of telling someone straight away because they fear looking stupid, they hide it until it becomes so big that the whole world ends up knowing about it and the consequences are much greater. The longer credit tightening is left the less manageable it will be when the inevitable happens.

[BuyingBear]

I disagree.

How can the bubble continue without wage inflation?

It has gotten this far thanks to extreme marginal borrowing, interest-only has been normalised, as has self-cert fraud (wanna buy? just lie!) and we're seeing what are essentially 125% mortgages thanks to secured loans being tacked on. Of course even this is starting to wane so we're seeing yet more ramping, we have low introductionary rate sweetners and other conditioning like "buy with a friend, or a stranger, yes buy with a stanger!".

We may well see negative-amortisation in the UK, roll all that nasty interest into the principle of the loan (IO loan!). And let us not forget part ownership, truly the best "heads I win, tails you lose" creation ever, if prices rise you cannot afford the other half of your own home and if prices fall your own half is in negative equity, such tail chasing takes a saw to the property ladder.

Why not do a "shared equity" with a "friend" and a "stranger" on a one bed "executive apartment" using an "IO mortgage" that is "self-cert", you could also get a "secured loan" (neg eq) to pay for those little things... such as your mortgage interest repayments.

Basically it will go as far as people will allow their standards to fall.

Edited May 16, 2006 by BuyingBear

[Mushroom]

Its not a modern phenomenon though - I believe George Orwell hinted at this in Keep the Aspidistra Flying if my memory serves me correctly. I was aluding more to the brainclamp school of thought

It depends on how you define conspiracy.

Some might argue that the great, sometimes secretive, meetings of the World's economic and political leaders are the arenas in which the conspiracy is planned.

Others might suggest that the conspiracy is nothing more than interest groups acting to maximise benefits for themselves.

[Justice]

As I see it, sooner or later the financial systems will collapse and this is evidence from across the waters in the USA and it lets the government off from their responsibilities as they won’t need to give you a pension even if you have been paying for one all your life.

Can you afford to save for your own private pension or are you taxed so high that nothing is left. You have 3 options just now

1 Do nothing

2 Cook the books just like government does and save the money for a rainy day or pension.

3 Get the hell out the UK before it becomes too late like it is now in Zimbabwe

[Mushroom]

Why not do a "shared equity" with a "friend" and a "stranger" on a one bed "executive apartment" using an "IO mortgage" that is "self-cert", you could also get a "secured loan" (neg eq) to pay for those little things... such as your mortgage interest repayments.

I just wouldn't be surprised.

This whole situation will be pushed as hard as possible for as long as possible.

[Solvent Celt]

Quite so, since the turn of the century housing has become the method of choice for injecting liquidity into the system, before that we had the stock market bubble... which was arguably more benign, 'investing' in companies encourages development and innovation even if some of it is burned up in a speculative frenzy, and the social consequences of being priced out of BP stock is rather more reasonable than pricing an entire generation of people out of a basic necessity. Also, generally ordinary people don't buying equities on a margin.

Like the previous bubble it's all about maintaining positive sentiment and creating the illusion of wealth, making people "feel" rich despite them taking on record amounts of debt, with repayments consuming ever larger chunks of their disposable income. Housing has taken on an almost mystical status, the mechanics behind this are rather absurd, especially in light of an abundance of land, materials, and seemingly cheap labour, however these constrictions must remain as not to explode the myth... better not grow too many tulip bulbs!

Of course our system is great at shooting itself in the foot, the consequent demographic decline resulting from the fallout of this 'wealth creation' will be more than obvious within the coming decade, especially when millions of newly minted boomers will find there are increasingly less working people to pay their pensions or buy their homes. A child not born today cannot printed or created out of thin air in 2024, hence nicking the populace of Eastern Europe and exacerbating their well ingrained demographic decline, "developing markets" indeed. Let us pray that these folk are like Peter Pan, we cannot afford them rest or pensions.

The malaise from all this will be felt for decades. Once people realise, the present government may well be hated by a whole generation on a level not seen since Thatcher.

Well put. The whole debacle is effectively enslaving a generation, bankruptcy will be the only way out for most.