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Debt-gorged British Start To Worry That The Party Is Ending

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Who would have thunk it, economic growth fueled by, debt. Looks like were on a fast track to becomin the sick man of Europe again. Nationalisation and labour strikes FTW!

LINKY

At one point, Alexis Hall had more than 50 pairs of designer shoes and handbags. It never occurred to the 39-year-old media relations executive from Glasgow that her £31,500 in debt ($63,000) would be a problem.

Jason Butler of Bloomsbury Financial Planning says loans were too easy to take out.

“It was so easy to get the loans and the credit that you almost think the goods are a gift from the shop,” she said. “You don’t fully realize that it’s real money you are spending until you actually sit down and consolidate your bills and then it’s a shock.”

As the United States economy weakens, many Americans are being overwhelmed by personal debt, but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record £1.4 trillion in debt ($2.8 trillion) — more than the country’s gross domestic product.

By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the country’s $14 trillion G.D.P.

And while the Federal Reserve in Washington has cut interest rates, in an effort to loosen lenders’ grip on credit, the Bank of England’s interest rate increases last year are trickling through to mortgages at the very time home values are dropping and banks are becoming more reluctant to lend.

Until now, debt has mostly been a good thing for Britain. In the hands of free-spending consumers, it fueled economic growth. The government borrowed heavily in recent years to invest in infrastructure, health and education, creating a virtuous cycle: government spending led to job creation, which led to greater consumer confidence and more spending, which, in turn, stimulated growth.

Economists say Britain’s relationship to debt is complex, but at its core is a phenomenon more akin to recent American history than European trends. As in the United States, a decade-long housing boom and strong economic growth bolstered consumer confidence, creating a perception of wealth almost unknown in countries like Germany and Italy.

“Culturally, maybe also because of the defeat in the war, Germans remain reluctant to borrow and banks are often state-owned, pushing less for profits from lending,” said Alistair Milne, a professor at Cass Business School in London.

Since many younger Britons have never lived through a period of slow growth, few now see the need to hold back on borrowing, not to mention saving.

“The general mantra is spend now, think later,” said Jason Butler, an adviser at Bloomsbury Financial Planning. “It’s easier to get a loan or a credit card these days than to get a savings product.”

The average British adult has 2.8 credit or debit cards, more than any other country in Europe. A growing number are borrowing to pay for vacations, furniture, even plastic surgery. As a result, Britons are spending more than they earn, racking up a household debt-to-income ratio of 1.62 compared with 1.42 in the United States and 1.09 in Germany.

To her parent’s generation, Ms. Hall said, owing money beyond a mortgage was “shameful,” an admission of living beyond one’s means. Debt was also more difficult to get.

That changed in the late 1990s when American lenders, including Citigroup and CapitalOne, pushed into the British market with a panoply of new lending products. Fierce competition among banks meant potential borrowers were suddenly bombarded with advertising and offers for low- or no-interest loans and credit cards.

While Britain’s financial regulators watched the explosion of retail lending from the sidelines, their counterparts in Germany and France were more restrictive. As a result, the British market became the largest and most sophisticated in Europe.

The growth was also fueled by soaring demand for debt on the back of rising real estate prices and relatively low interest rates in the late 1990s and early 2000s. Those who did not own a house rushed to join the homeowners watching their property triple in value.

The trend on the Continent was the opposite. Home prices in most European countries barely moved, mainly because markets were more regulated, there was more housing stock and renting was more popular

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"but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record £1.4 trillion in debt ($2.8 trillion) — more than the country’s gross domestic product.

By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the country’s $14 trillion G.D.P."

We is Fooked. :blink:

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"but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record £1.4 trillion in debt ($2.8 trillion) — more than the country’s gross domestic product.

By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the country’s $14 trillion G.D.P."

We is Fooked. :blink:

...yeah ..but look on the bright side ...it helped Gordo's 'miracle'..... :P:lol::lol:

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According to a survey for the Office of National Statistics, less than half the population saves regularly, and more than 39 percent said they would rather enjoy a good standard of living today than save for retirement. Ms. Hall said she was among that 39 percent. She recently took out new loans, planning to repay her existing debt. But she ended up spending the money on more luxury goods instead..

If we are surprising the Americans with our profligacy, how can the fallout not be worse here?

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“Culturally, maybe also because of the defeat in the war, Germans remain reluctant to borrow and banks are often state-owned, pushing less for profits from lending,” said Alistair Milne, a professor at Cass Business School in London.

That 60 years ago FFS.

It couldn`t possibly be that it`s because they`ve got more sense :angry:

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That 60 years ago FFS.

It couldn`t possibly be that it`s because they`ve got more sense :angry:

I`m surprised that did`nt get a quote from Dick Van Dyke..... " Gawd Blimey Mary Poppins"

" We forever creating BUBBLEs, 5hitty BUBBLES everwhere "

When the old septic tanks start telling us how wrong we have got it, you have just got to be concerned :lol:

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Guest Bart of Darkness
If we are surprising the Americans with our profligacy, how can the fallout not be worse here?

We've got Gordon Brown looking after us.

Erm.... oh dear..... :(

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While Britain's financial regulators watched the explosion of retail lending from the sidelines, their counterparts in Germany and France were more restrictive. As a result, the British market became the largest and most sophisticated in Europe.
Now theres a new word for fraudulent .

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Well we can thank the Yanks for introducing credit cards to the UK.

As for housing booms and busts we have been doing them regularly since the reform of Schedule A Income Tax in the UK in the 1960's. Unlike the US a 20-30% haircut in house prices is hardly a novelty. You only have to go back 15 years to the last time it happened. In fact I think our current housing boom would have self destructed rather more harmlessly 5 years ago if that twit Greenspan had not encouraged all the worlds central banks to lower interest rates to prevent a recession. While I agree that Blair and Brown have been complicit in this debt boom its genesis was in Washington.

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Who would have thunk it, economic growth fueled by, debt. Looks like were on a fast track to becomin the sick man of Europe again. Nationalisation and labour strikes FTW!

LINKY

Excellent article, thanks for posting. It's nice to read what the rest of the world thinks about the mess we are in.

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I have 3 debit or credit cards, so I'm pushing the average up, and I've even paid for a "vacation" on one of them. Yet my household debt to income ratio is 0.005. I wish people would stop counting credit cards in circulation as a measure of the impending disaster. The stats on debt-income ratios are interesting though: I would have thought Germany's would be less than 1.

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QUOTE

While Britain's financial regulators watched the explosion of retail lending from the sidelines, their counterparts in Germany and France were more restrictive. As a result, the British market became the largest and most sophisticated in Europe.

Now theres a new word for fraudulent .

:lol::lol::P

Edited by eric pebble

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  • 293 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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