Credit Bubble Bursts: First Snows Of K-winter

[Wol]

2500 on the Dow.

ParticleMan, you've made my day. Can I start drinking yet?

[scepticus]

There is absolutely nothing at all left in any reserve bank's arsenal (because it's already been spooged boxing the ghosts of your grandparent's depression, instead of focussing on what makes this one tick).

there's plenty left. however they are tools for a new era not the old, so they are difficult to deploy without causing a panic while people still think in 20th century metallist terms.

whats been done so far is largely to just burn the expected 20th century cards.

[Injin]

there's plenty left. however they are tools for a new era not the old, so they are difficult to deploy without causing a panic while people still think in 20th century metallist terms.

whats been done so far is largely to just burn the expected 20th century cards.

I do believe he's just said "it's different this time."

[scepticus]

I do believe he's just said "it's different this time."

its always different, to a greater or lesser extent. each century has differed significantly from the previous ones in terms of the economic system. Change is constant.

[Injin]

its always different, to a greater or lesser extent. each century has differed significantly from the previous ones in terms of the economic system. Change is constant.

[Timm]

What we all missed back then (and I could kick myself because it's staring us all right in the face) was that the MMT isn't housing.

It's retirement income.

We've literally borrowed 90% of it into existance on the back of 10% of real capital.

Hmm, I think that makes sense. (I'm questioning my understanding, not yours).

So the credit has acquired assets in the hope those assets will generate future income streams...

But those expected to pay have no capital and insufficient credit?

But:

So we're going to see "unstoppable waves of selling" moving swiftly from fixed income (Treasuries, GSE debt, commercial paper, et al) into currencies (it's essentially one big happy marketplace these days) then into the asset markets (go take a look at the inward investment stats for China and ask yourself what happens when the margin calls happen).

And boy can those markets move quick (I of all people should know).

And we're going to see it soon - once the FI market has its own private Minsky moment.

Sounds messy.

We saw the problems associated with rapid processes of deleverage in 2008.

Can you explain how capital can be quickly separated from credit without systemic failure?

Or are you implying a mad gallop to chartal money?

[scepticus]

what's chartal money?

[Timm]

what's chartal money?

Fiat, but on actual bits of paper.

http://en.wikipedia.org/wiki/Georg_Friedrich_Knapp

Edited December 31, 2009 by Timm

[29929BlackTuesday]

What we all missed back then (and I could kick myself because it's staring us all right in the face) was that the MMT isn't housing.

It's retirement income.

We've literally borrowed 90% of it into existance on the back of 10% of real capital.

So we're going to see "unstoppable waves of selling" moving swiftly from fixed income (Treasuries, GSE debt, commercial paper, et al) into currencies (it's essentially one big happy marketplace these days) then into the asset markets (go take a look at the inward investment stats for China and ask yourself what happens when the margin calls happen).

And boy can those markets move quick (I of all people should know).

And we're going to see it soon - once the FI market has its own private Minsky moment.

You think bailouts will save us this time through?

Think again.

If governments buy their own debt fixed asset and commodity (ie, consumer) prices will rise, and demand will crater.

If governments cease buying their own debt monetary asset prices will fall (yields will spiral) and demand will crater.

There is absolutely nothing at all left in any reserve bank's arsenal (because it's already been spooged boxing the ghosts of your grandparent's depression, instead of focussing on what makes this one tick).

When tax revenue shortfalls evenutally force even governments to choke on their own "risk-free" instruments (ask the Chinese about that, they're talking openly about suffering capital losses on Treasuries now) - we're going to see prices of monetary assets fall, and fall, and fall (and corresponding yields on those instruments spiral, and the attendant slump in demand measures, tailing off in trade volumes, and spikes in disemployment and defaults).

That's not to say we won't see the occasional feeble market rally (such as 2009's, on exceedingly thin volume), though.

But these conditions continue until we're done wiping out the mostly fictional income (the mostly fictional "savings") tomorrow's retirees are expecting to draw.

2500 on the Dow.

Beautiful post Particleman. Love your writing style too.

[djl]

Legendary post - add to hall of fame

[Georgia O'Keeffe]

What we all missed back then (and I could kick myself because it's staring us all right in the face) was that the MMT isn't housing.

It's retirement income.

We've literally borrowed 90% of it into existance on the back of 10% of real capital.

So we're going to see "unstoppable waves of selling" moving swiftly from fixed income (Treasuries, GSE debt, commercial paper, et al) into currencies (it's essentially one big happy marketplace these days) then into the asset markets (go take a look at the inward investment stats for China and ask yourself what happens when the margin calls happen).

And boy can those markets move quick (I of all people should know).

And we're going to see it soon - once the FI market has its own private Minsky moment.

You think bailouts will save us this time through?

Think again.

If governments buy their own debt fixed asset and commodity (ie, consumer) prices will rise, and demand will crater.

If governments cease buying their own debt monetary asset prices will fall (yields will spiral) and demand will crater.

There is absolutely nothing at all left in any reserve bank's arsenal (because it's already been spooged boxing the ghosts of your grandparent's depression, instead of focussing on what makes this one tick).

When tax revenue shortfalls evenutally force even governments to choke on their own "risk-free" instruments (ask the Chinese about that, they're talking openly about suffering capital losses on Treasuries now) - we're going to see prices of monetary assets fall, and fall, and fall (and corresponding yields on those instruments spiral, and the attendant slump in demand measures, tailing off in trade volumes, and spikes in disemployment and defaults).

That's not to say we won't see the occasional feeble market rally (such as 2009's, on exceedingly thin volume), though.

But these conditions continue until we're done wiping out the mostly fictional income (the mostly fictional "savings") tomorrow's retirees are expecting to draw.

2500 on the Dow.

as above, nice post and i'm with you on circa 2500 at least in the short term (3-4 years)

[TwoWolves]

ParticleMan wins the post of the year award and blindingly accurate analysis IMHO.

Good Man.

[SaintJay]

k-winter - ? just normal winter here...

[grumpy-old-man-returns]

Well, it's several years since I said "It ain't a housing bubble it's a credit bubble!" in these hallowed pages and finally, and by Eris it's been a long wait, that credit bubble has burst.

There was the Tulip Bubble, the Wall Street Bubble, the Canal Stocks Bubble, the Railways Bubble, and the grandaddy of all credit bubbles: the South Seas Bubble. You should all feel very privileged that you've lived through the one credit bubble that's been bigger than all of them and this planet's very first global credit bubble.

Better yet: you've reserved a ringside seat for the denoument and already it promises to be spectacular. yes folks, this is a once in three generations event. This is the only time this will happen in your lifetimes. For the Longwaves and Kondratiev fans around you, the first snow of K-Winte ris starting to fall thick and fast.

How's the show so far? Well, entirely as expected, if a little faster than I'd have thought it would be. Naturally the first hole appeared in mortgage credit since mortgage debt is far and away the largest part of the credit pyramid that's been so carelessly put together over the past couple of decades. Sir Printsalot, Alan Greenspan, must be regretting the day he said that derivatives don't need regulation, because part of the fun in this giant game of pass the parcel is that nobody even knows where those trillion-Dollar parcels of bad debt are. Worse, since it's known that there are more credit default swaps insuring corporate debt than there is corporate debt to insure, we can't even put an upper limit on the actual amount of poison there is still floating in the global financial system. Not unnaturally, pretty much everyone is suspected either of holding some bad paper or of having loans out to someone who is.

Meanwhile, remember that little fuss about how the backroom boys of derivatives trading hired to keep records couldn't keep up with the action and were sometimes weeks behind? Well, we'll get to see how they do when the markets get a little excited. My bet is that they'll fall behind and folks will get even more jumpy when they realise that not only don't they know where the bad stuff is, but they don't know either who's trading in it.

Now of course a normal credit bust would take 16-18 years to play out, though history's largest may take a litte longer. We can't expect this sort of mayhem every day for 18 years. There will be days, weeks,months, even years when things seem to be getting back to "normal", only to fall off a cliff again and catch out the unwary. What I'd expect sooner rather than later is for a gigantic fraud or two to be uncovered. Frauds are easy to hide when everything is booming, but not so easy when folks start nervously counting their money. The great Warren Buffet pointed out that it's only when the tide goes out that we find out who's been swimming naked. Needless to say, when these frauds are discovered, there will be a whole lot more nervousness to go around.

Now of course I've been absent from the prediction game (other than that it was a credit bubble and it would bust) because if we could predict when a bubble would bust we would be overnight billionaires. Worse, it gets quite disheartening to keep knowing that it's going to happen and yet see the monster go on and draw yet more people into its maw. I still believe that we would have had a bust and debt deflation in 2003 if it wasn't for Sir Printsalot and Chopper Ben cutting rates to 1% to prevent the coming debt-deflation. Naturally this simply took a mortgage bubble already on a moonshot and gave it a stardrive. Those guys will yet go down in history as the folks who saved a recession at the cost of a depression.

Still, since we have the above bubbles, plus the 1990's Japanese credit bubble to crib from, let's make some predictions about the general structure of what's comng.

The golden rule of credit bubbles seems to be that whatever assets, or Magic Money Tokens, people use credit to bid up in the bubble, are the main areas of price implosion during the bust. I don't think it's any sort of well-kept secret that the main MMT in this one has been housing. The usual margin on a MMT is 90%, that is people put 10% down and borrow 90%. That was certainly true for Wall Street stocks in 1929 and nothing I've read of the other bubbles indicates them as having been grossly different. Housing in his bubble has been unprecedented in garnering 100% loans and even 110% or 120% for pretty much anyone who could fog a mirror. Even the South Seas Bubble, the previous largest, brought in only one third of the UK population. The Millenium Bubble (Hell, someone has to name it eh? Any better suggestions?) has typically involved 70% of the population of those countries affected (and in the advanced westernised countries, I see only Japan and Germany not taking part). The price of the main MMT's will generall fall between 67% and 90% in the aftermath. This fits well with what happened in Japan and it's what I expect to see happening here.

Another firm rule is that the more debt involved, the more people involved and the longer the bubble goes on, the worse the denoument will be. Remember the old saw:

If you owe the bank a million Dollars, you're in trouble, but

I you owe the bank a billion Dollars then your bank is in trouble?

Well, we've just invented a third line:

If you owe the bank a trillion Dollars, we're ALL in trouble.

So there's no escaping that the general economies are going to hit the skids. Pretty clearly the first hits will be in the financial sector. There are going to be swathes of redundancies in banking, stockbroking, estate agencies, builders and petty much anyone else who's been an intermediary in the game. Worse, since everyone is going to need a svapegoat (nobody blames themselves for their financial stupidity and politicians are adept at finding someone else to blame) some of those folks are going to jail. If you're an estate agent, or a buy to let landlord, then keep your nose clean and your head down. I'm serious: some of you are going to the pokey simply because someone has to. All folks need is some sort of chicanery which will suffice as a charge. An unsympathetic jury is already guaranteed.

Next up, people who've been spending borrowed money for a couple of decades are going to have to relearn how to spend only earned money. That's going to guarantee a decline in retail sales. Worse, once the severity of what's happening becomes apparent folks are going to try to pay down debt and save. This will cut retail even further. In western economies, the amount of retail space now is ten times what it was a decade ago. That all got build for the boom and it's all about to be redeployed back to oher uses. A lot of people who got jobs in retail are going to become redndant, and they're going to have trouble paying their debts. Inevitably this will lead to reposessions and more property on the markets.

Since two-thirds of US and UK economies depend on retail and related (and it's close enough for government work elsewhere too) these economies are going to go into recession. In the UK this is going to produce an immediate and interesting result. A whole bunch of people from outside the Uk are here to earn money to send to their families back home to buy or build a house there. When the recession comes and they can't earn money, they're going to take the plane out to wherever they can. This is going to hit retail again. It's going to hit the tax take and it's going to hit the property rental markets. A great many properties are very suddenly going to find themseves missing tenants. This will drive rents down adn it will produce a large number of landlords racing each other to sell first while there are still any buyers. This will be the point that Charles Mackay called"Devil take the hindmost".

Needless to say, by this point housing prices will be falling. This will ratchet them down further.

In the US, 40% of loans in the past 2 years were subprime, 12% were Alt-A, and 8% were Jumbos. None of those markets are making loans now because the bond investors won't buy 'em. Even if someone can find a creditor ready to take a risk, they're asking 3% per annum on top to compensate them for it. There's a great deal of difference in the affordability of a mortgage at 8% and one at 11%. I figure that based on that, more than half the US mortgage market has been shut down. It's time to ask what price properties will sell at if nobody gets credit and everyonme pays in their own cash. The Japanese found this ou the hard way, and we're now headed implacably to the same question.

In the ratcheting up of property price to income ratios as the mortgage interest rates have been falling, properties have been behaving like a bond where the price acts inversely to the yeild. No doubt at some point the central banks would like to cut the mortgage rate to try to head off the carnage. However what the last fortnight showed is that it's not the central banks who decide mortgage rates, and it's not the "lenders" either. Nope, tha pass was sold as long ago as 1998, it's just taken folks this long to notice. Last week US Treasury rates fell as folks sought security. Those are the rates the central banks can affect. However mortgage rates actually rose while Treasury rateswere falling. The bondholders discovered that they control the mortgage rate by setting the price at which they'll buy mortgage-backed bonds and the CDOs based on them, if hey'll buy any at all, which is becoming a less academic question by the day. If property acts like a bond, then as the bondholders raise the interest rate on mortgages, properties must fall in price in response. I estimate that for every percentage point on the rate, prices will fall around ten percent. If the risk premium is to be three percent, we're loking at a 30% fall from the getgo, though due to erosion of availability of credit, I expect things to eventually go much furthe than that. This is the only time in history that credit has been available to everyone, and by the time we're through, I don't think anyone on the planet will be looking to repeat the experiment. Not lender, and certainly not buyer.

Another lesson from credit bubbles past is that they end in "revulsion" (Kindleberger's term I think). Those whose financial lives have been destroyed by debt will refuse ever to countenance taking it again in their lives, which is fine because there essentially won't be any offered anyway - revulsion happens to those creditors who lost their all too. Also, they'll teach their kids not to take on debt. Those kids will grow up and teach their kids the same thing but with the bust becoming history, they'll probably take it out for serious purposes. Their kids will see it as ridiculously old and fogey to be scared of debt and sooner or later they'll find their Magic Money Token. It could be a flower bulb (I know of six flower bulb bubbles in history) or maybe flying cars or AI chips, but there will be one, and the credit cycle will be complete. The only real certainty is that it won't be housing. The token always changes.

So what will the central banks do? Well, they'll try to stop a deflation. That's the reverse of inflation. Cash under the bed becomes more valuable over time. The effective value of debt rises because the money it takes to pay it back becomes more valuable. If enough deflation happens, then wages start to fall. f they don't, as in the 1930's in the uS, then mass redundancies happen and that has even worse implications for turnng the financial screw tighter. As folks wages fall, it gets harder for them to pay their oustanding debts and more defaults happen. That affects debt paper. Lather, rinse, repeat.

The central banks will try more of what they're doing now: printing money and showering it liberally upon the economy. Chopper Ben got his name for a 2003 paper on how to stop a deflation by throwing cash out of helicopters.

There are a couple of problems with the idea though. First, you have to shower ever more money out of the helicopters to keep things going and keeping them going will make any eventual burst worse. Eventually the amount of cash needing rained down is going to be enough that you don't have enough helicopters. Remember those pictures of wheelbarrows in post WWI Germany? That's the end of that story. Eventually people repudiate the currency, as they did in the Mississippi Bubble in France, and run to gold. Needless to say, that's even worse than a deflation. The Japanese tried this. It failed because folks took their cheques from the central bank and duly put them in the bank or paid down debt with them. Paying down debt doesn't cause as much extra deflation as defaulting on debt, but it does cause some.

The second problem is that the more usual way for central banks to shower people with money is to let them borrow it at ultra cheap rates. The Japanese cut heir base rates to zero for a decade (they've only just raised them to half a percent in the last month and some folks think that's too much). Japanese house prices still fell 50% to 90% and the deflation still went gaily on. You can offer people cheap loans, but if the last thing they ever want to see again in their lives is a loan, then it just ain't gonna help.

What might happen with all this money printing is that inflation will rise. Then the bondholders will simply raise their interest rates to compensate them for the inflation risk and property prices will take another large step down.

I expect the central bankers to try it though, so we'll get an inflation, then a deflation, which will almost certainly destroy mre people's wealth than if we cut out the middleman and go straight for the deflation. The great thing about deflation is that it's self-curing. Once the price of money and assets returns to a sustainable level then it stops. Sure, that's likely to see property. art, vintage cars, collectibles etc drop 90% or so in value, but in fact it will be a good thin g that people don't have to go into hock their whole lives to get a roof over their heads. Sure, some people with current mortgages will be in debt for the rest of their natural, but more and more they'll find that their neighbours won't. It will be a far healthier society.

Remember the end of the 1989 housing bubble (interesting that housing bubbes are 18 years in length in the UK, we now have a housing bubble and credit bubble peaking, and busting, at the same time - exciting or what?) where prices fell 50% in real terms but only 25% in nominal terms? That was because we got 25% inflation over the 4-5 years of the bust and that sheltered nominal prices from a larger fall. In a deflation though, nominal prices fall further than real prices because the effect is reversed. Thus a 50% fall in real prices again, plus a 40% deflation (say over 18 years that's not a huge amount per year) and you get a 90% all in nominal values for houses only going down 3% per annum in a 2% deflation.

So enough of the economics. What else will change? There's the famous Hemline Indicator where hemlines go up in good times and down in bad. We can safely assume that they'll be going down and sadly we'll see the demise of the bare midriff and other forms of fleshly exposure. Modesty will make a comeback. People will be more worried about keeping their jobs and social conservatism and conformity will return. People will have less money and so will move from expensive to cheaper pursuits. They'll move away from reality TV to escapism and fantasy (the Potter mania may be an early indication). Romance, Westerns, SF and Fantasy and so on will be back in vogue. People don't like reality when it's grim and want to get away from it in their leisure time. People will mend and make do rather than junk stuff when it's broken. They'll also speak to their neighbours again. People need to know there are other people to help when they're in trouble and so individualism will wane.

In short, times will change, but not all the changes will be bad ones.

Certainly the future just got a lot more interesting and as I said, you have a ringside seat for the most spectacular financial event in this planet's history.

I suggest people read this again (or for the first time if you haven't see it), as this is a BRILLIANT post from the poster 'fofp' from August 2007.

fofp, if you still read these boards it would be great for you to post again & get the kudos you so richly deserve.

[Kyoto]

Bumping a classic post for the new guys. Would love it if the OP, fofp stopped by to give his take on current situation.

What do you guys make of it after a re-read. What is to come next?

Edited September 13, 2010 by Kyoto

[exiges]

Bumping a classic post for the new guys. Would love it if the OP, fofp stopped by to give his take on current situation.

What do you guys make of it after a re-read. What is to come next?

I still agree in principle with everything he said.. but we're 2yrs along and not much has happened..

[Confounded]

I still agree in principle with everything he said.. but we're 2yrs along and not much has happened..

Now of course a normal credit bust would take 16-18 years to play out, though history's largest may take a litte longer. We can't expect this sort of mayhem every day for 18 years. There will be days, weeks,months, even years when things seem to be getting back to "normal", only to fall off a cliff again and catch out the unwary.

We have had institutions that have been around for 130 years being wiped out with their peers on a life support system and the financial system hours from completely failing. House prices in the UK fell at the fastest rate in history but have bounced back strongly in the return to "normal phase". I would say an awful lot has happened in the last 3 years.

[lets get it right]

Just by way of a bit of perspective ...

In 1974 (I think) we had an 'energy crisis' - oil prices quadrupled when the Arab states decided to get together and jack up the oil price. In the UK, already a land of strikes and power cuts and such like, we found ourself working a 3 day week with street lights turned off etc. I seem to recall an emergency law forcing shops and offices to turn off the lights. I remember looking across to the Uxbridge road, one of the main arteries into London - and observing darkness. It was weird and surreal, it felt like everything had changed overnight, the world was upside down - petrol ration books were issued - it felt like armageddon. That came and went.

Then we had the late 70s - more strikes - high inflation - culminating in the winter of discontent - with rubbish piled up to the first floor windows on London streets and a sense that everything was falling apart. That came and went.

In the early 80s we had a recession and, from out of nowhere, a summer of riots (1981 if I remember correctly). That too was surreal. Suddenly riots were breaking out in London, Bristol, Manchester, Liverpool, Leeds - all over the place. No-one knew why or who was behind them - we used to listen to the radio in the afternoons planning our way home from work in central London to avoid the riots. That came and went.

The Falklands War - that came and went.

Late 80s / to mid 90s - a house price crash and recession. A new type of recession - lots of people who had enjoyed steady jobs all their lives, who never thought they would be out of work found themselves out of work and, potentially, on the scrapheap. The idea that you would have 2 or 3 career changes gained currency. Globalization became the new buzzword and everyone was terrified we'd all lose our jobs. That came and went.

Then we had 13 years of New Labour - massive credit boom and house price inflation. That came and went.

Now? Who knows? History suggests it will 'come and go' too. I think there is a real sense that we are all in this together - in that the banking crisis and house price inflation has been a global phenomenon. I have always argued against inflation as the way out. But, maybe, if everyone inflates - the debt can be inflated away. It's been done before.

The worrying thing from your point of view (the young people on here) is that this might take 20 more years to play out - 20 years of renting from one shorthold tenancy to the next. It's not a great way to live your one, short life.

Edit: Just noticed the OP was posted in August 2007 - already 3 years ago! Was 'interest rates moved to 300 year lows for a decade or more to allow the debt to be paid off cheaply' part of the envisaged scenario?

Edited September 14, 2010 by Let's get it right

[babesagainstmachines]

The worrying thing from your point of view (the young people on here) is that this might take 20 more years to play out - 20 years of renting from one shorthold tenancy to the next. It's not a great way to live your one, short life.

Think of the mortgaged homeowners in negative equity, trapped on one property for 20 or more years. 20 years of sitting gazing at the same 4 walls, unable to move regardless of employment circumstances, regardless of divorce or new mouths to house and feed. A far worse way to live your one short life than the freedom to walk away from a house with your financial future secure.

[Dorkins]

Was 'interest rates moved to 300 year lows for a decade or more to allow the debt to be paid off cheaply' part of the envisaged scenario?

The total debt (individual+corporate+government) is around 450% of GDP, and that GDP is itself falling. Even if interest rates were zero, it would take at least 4.5 years of everybody in Britain consuming absolutely nothing or 9 years of half pay to pay that off. Interest rates are fast approaching irrelevance in the insolvency equation.

[lets get it right]

Think of the mortgaged homeowners in negative equity, trapped on one property for 20 or more years. 20 years of sitting gazing at the same 4 walls, unable to move regardless of employment circumstances, regardless of divorce or new mouths to house and feed. A far worse way to live your one short life than the freedom to walk away from a house with your financial future secure.

But we've had all this 'stuck in negative equity' stuff before. It doesn't affect everyone, in fact it doesn't affect a very high proportion of homeowners at all.

So what if 10% of people are stuck and can't move? It doesn't stop the market fuctioning. It didn't in the early 90s and it didn't during the fleeting dip in prices in 2008.

And people sometimes found a way out in the past. A pay rise accompanied by an innovative mortgage deal - don't forget the banks have a massive investment in the housing market and they still seem to be able to magic the money out of thin air to maintain prices.

Edited September 14, 2010 by Let's get it right

[lets get it right]

Interest rates are fast approaching irrelevance in the insolvency equation.

Why? Are you saying that the majority of people with housing debt AREN'T gradually repaying the capital?

Are you saying the government will never get the economy back into surplus and start paying down the debt? They managed it after World War II - even though it took 60 years or so.

And during that time lots of other crises came and went.

Is this site, in general terms, a bit hysterical?

[symo]

Why? Are you saying that the majority of people with housing debt AREN'T gradually repaying the capital?

Of course they are if they remain employed, and with half the country employed by Nu-Labors bloated state machine, I can't see that lasting.

Are you saying the government will never get the economy back into surplus and start paying down the debt? They managed it after World War II - even though it took 60 years or so.

Errr yes, but now we have a society that "expects" a high standard of living, is 100% (almost) dependent on the supermarket and elects governments not on long term measures but on the treating the symptoms of the general British malaise.

And during that time lots of other crises came and went.

Yes and during those crises we had things here that the world wanted, its fairly different now.

Is this site, in general terms, a bit hysterical?

You are aware this is housepricecrash.co.uk aren't you?

[SMAC67]

Why? Are you saying that the majority of people with housing debt AREN'T gradually repaying the capital?

Are you saying the government will never get the economy back into surplus and start paying down the debt? They managed it after World War II - even though it took 60 years or so.

And during that time lots of other crises came and went.

Is this site, in general terms, a bit hysterical?

No it's not, but it may apprear that way to someone in denial. I don't know anyone who has a repayment mortgage, every single person I know (or at least have spoken to) is on an interest only mortgage. Everyone is relying on inflation at the same time that they are getting less money and working longer hours. Any surplus will be taken by those at the top, everyone else will be getting a smaller slice of a rapidly diminishing pie.

We sold the Empire and then we sold the country, North Sea oil and gas being the only thing stopping us descending into third world status. When the last of that goes, approx 2020 for gas, 2030 for oil we will have nothing except expensive property.

As long as you have natural resources you will be able to navigate your way out of a crisis. On this occasion we are out of luck. It's now systemic failure, the only solution is to let it fail, attempts to spin it out a bit longer will only result in a bigger collapse.

The only remedy as in 1939 is WAR. Hope we are all old enough to avoid conscription!!

[Agentimmo]

The only remedy as in 1939 is WAR. Hope we are all old enough to avoid conscription!!

And I'd expect the govt of the day to exclude mortgage-payers and BTL "entrepreneurs" from any call up.