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Business View: We Must Overcome Our Addiction To Debt As

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http://news.independent.co.uk/business/com...icle2770937.ece

Most county court judgments in the first quarter were for credit-related matters

By Andrew Murray-Watson, Business Editor

Published: 15 July 2007

The Ernst & Young profits warning report makes grim reading. Corporate earnings have been keeping the market bears at bay for a long time, but it looks like they are now coming under pressure as consumer credit dries up and businesses look to borrow less.

Some smart hedge funds are already diverting assets from the UK to the US. Despite the problems across the Atlantic with sub-prime mortgages, the weakness of the dollar makes assets like property and infrastructure companies increasingly attractive. Once the mortgage problems are shaken out of the system, confidence in the US market will grow strongly - or that's the theory.

But in the UK, any bursting of the credit bubble will hurt the economy a great deal. Brits are hooked on debt in the form of mortgages and credit cards - and we are unlikely to rein in our spending in time to avoid an economic downturn. Of 250,000 county court judgments against consumers in the first quarter of this year,70 per cent were for credit-related matters.

Only capital gains on property and shares have driven the belief on the part of the consumer that increased levels of debt simply don't matter. That opinion has to change fast

Not only are we living on borrowed money but also borrowed time as irresponsible muppets, lenders & borrowers, will soon find out. Easy money has a nasty habit of drying up with the most devastating consequences as the last days of the dotcom boom confirm. The judgment day is upon us!

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Its the age old problem/advantage of gearing

property £200k mortgage £150K property rises 10% equity goes from £50K to £70K - 40% gain!!!!!!!!! result confidence and a careless attitude to smalls debts of say £3 to 5K

property £200k mortgage £150K property falls 10% equity goes from £50K to £30K - 40% LOSS!!!!!!!!! panic and for BTL a desire to quickly exit hoping to hold on to some of their profits resulting in a mass panic for all

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property £200k mortgage £150K property rises 10% equity goes from £50K to £70K - 40% gain!!!!!!!!! result confidence and a careless attitude to smalls debts of say £3 to 5K

People forget that small debt of ca. 5K actually needs 1000 hours on minimum pay to settle. That's 25 weeks (=half a year) of slavery.

True, so far everyone and their dog were bailed out by capital gains...

Edited by refusnik

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Its the age old problem/advantage of gearing

property £200k mortgage £150K property rises 10% equity goes from £50K to £70K - 40% gain!!!!!!!!! result confidence and a careless attitude to smalls debts of say £3 to 5K

Personally I'd say it is a very careless attitude towards micro debts of say less than £100 per time that has been and is the real problem because £20 here, £50 there etc over a few years soon mounts up to a few thousand without it being apparent to debtor where it has all come from. Obvious signs of this are not having any cash ever and paying for general grocery shopping via a normal credit card. Asset rich and cash poor.

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