Jump to content
House Price Crash Forum
Sign in to follow this  
eric pebble

Daily Mail - Tom Utley: Even An Economic Dunce Like Me

Recommended Posts

Even an economic dunce like me foresaw the credit crunch

"...........16 months ago, when I said it was utter madness for banks and building societies to go on lending housebuyers as much as seven times their annual salaries.

With personal debt in Britain then estimated at £1.3 trillion, I mused: "Can we really go on living like this, without risking the most catastrophic fall when the economy turns downwards, the creditors start calling in their money - and the never-never becomes the now-now?"

If even an economic ignoramus like me could grasp such an obvious truth, then why did it escape the board of Northern Rock, the Financial Services Authority and the chief economists of just about every big financial institution involved in the American housing market?"

http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

Share this post


Link to post
Share on other sites
Even an economic dunce like me foresaw the credit crunch

"...........16 months ago, when I said it was utter madness for banks and building societies to go on lending housebuyers as much as seven times their annual salaries.

With personal debt in Britain then estimated at £1.3 trillion, I mused: "Can we really go on living like this, without risking the most catastrophic fall when the economy turns downwards, the creditors start calling in their money - and the never-never becomes the now-now?"

If even an economic ignoramus like me could grasp such an obvious truth, then why did it escape the board of Northern Rock, the Financial Services Authority and the chief economists of just about every big financial institution involved in the American housing market?"

http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

Hmm, so he foresaw the credit crunch did he? I just checked through his 521 articles for a major UK newspaper and once did he refer to the credit crunch or the lax lending standards that have underpinned the credit bubble, though in his defense I did not see any property ramping articles. This seems a case of a rat leaving the sinking ship and then saying 'I told you so' I wonder how many other Monday morning quarter backs will surface in the months ahead.

Edited by enrieb

Share this post


Link to post
Share on other sites
Hmm, so he foresaw the credit crunch did he? I just checked through his 521 articles for a major UK newspaper and once did he refer to the credit crunch or the lax lending standards that have underpinned the credit bubble, though in his defense I did not see any property ramping articles. This seems a case of a rat leaving the sinking ship and then saying 'I told you so' I wonder how many other Monday morning quarter backs will surface in the months ahead.

Christ, you must be bored out of your head....

Edited by Dubai

Share this post


Link to post
Share on other sites
Hmm, so he foresaw the credit crunch did he? I just checked through his 521 articles for a major UK newspaper and once did he refer to the credit crunch or the lax lending standards that have underpinned the credit bubble, though in his defense I did not see any property ramping articles. This seems a case of a rat leaving the sinking ship and then saying 'I told you so' I wonder how many other Monday morning quarter backs will surface in the months ahead.

Harsh. You might care to review this excellent article from 2005...

Our economy is a confidence trick and I haven't got a clue how it works

By Tom Utley

Telegraph, 10/06/2005

Quote:

"The second news item that made me despair of coming to grips with economics was the one in yesterday's paper, reporting that the average British household now spends £128 a week more than its disposable income. That adds up to more than £6,600 a year per family. If there is even a grain of truth in this - and a survey of 7,000 households by the Office for National Statistics is a pretty reliable source - then how on earth can we go on living like this?

I was fully aware that I myself had been overspending my income, by a terrifying amount, since I received my first paltry pay-cheque from the Tavistock Times in 1977. But if everybody else has been doing the same - if the average family is now overspending its disposable income by as much as £6,600 a year - what hope is there for the future of Britain? Why didn't the economy collapse years ago?"

Share this post


Link to post
Share on other sites

Quite a good article, methinks. However, the Daily Mail in general has been one of the worst offenders for property "investment" ramping, IMHO. I don't know a single person that rates the DM with any credibility whatsoever. No doubt they'll blame illegal immigrants and single parents for being at the root of this financial meltdown...

Share this post


Link to post
Share on other sites
Harsh. You might care to review this excellent article from 2005...

Our economy is a confidence trick and I haven't got a clue how it works

By Tom Utley

Telegraph, 10/06/2005

Quote:

"The second news item that made me despair of coming to grips with economics was the one in yesterday's paper, reporting that the average British household now spends £128 a week more than its disposable income. That adds up to more than £6,600 a year per family. If there is even a grain of truth in this - and a survey of 7,000 households by the Office for National Statistics is a pretty reliable source - then how on earth can we go on living like this?

I was fully aware that I myself had been overspending my income, by a terrifying amount, since I received my first paltry pay-cheque from the Tavistock Times in 1977. But if everybody else has been doing the same - if the average family is now overspending its disposable income by as much as £6,600 a year - what hope is there for the future of Britain? Why didn't the economy collapse years ago?"

This is what we have ALL been thinking - is it not? I have been wondering about this for ages!! And - when I saw that BBC Money Programme [way back in 2003!! - details below] - It was THEN that I understood -- it was a EUREKA!! Moment..... I had been just about tearing my hair out trying to work out WHERE people were getting the "money" from to "buy" property at ever-increasing and evermore insane prices........... Saw that programme -- and it was all sorted. I said to my family and my friends..... We are heading for a disaster. Only thing I didn't realize then was, how incredibly long it would take.....

Edited by eric pebble

Share this post


Link to post
Share on other sites
Quite a good article, methinks. However, the Daily Mail in general has been one of the worst offenders for property "investment" ramping, IMHO. I don't know a single person that rates the DM with any credibility whatsoever. No doubt they'll blame illegal immigrants and single parents for being at the root of this financial meltdown...

They've all been at it -- The meedja in general - PARTICULARLY the BBC - ramping property with 24/7 tv Property "Porn" at LICENSE PAYER'S EXPENSE -- TOTAL SCANDAL...

Edited by eric pebble

Share this post


Link to post
Share on other sites
Hmm, so he foresaw the credit crunch did he? I just checked through his 521 articles for a major UK newspaper and once did he refer to the credit crunch or the lax lending standards that have underpinned the credit bubble, though in his defense I did not see any property ramping articles. This seems a case of a rat leaving the sinking ship and then saying 'I told you so' I wonder how many other Monday morning quarter backs will surface in the months ahead.

Haven't you noticed the current blame game merry-go-round. Mervin King has slated the Banks. The Banks are groveling to the BoE. Gordon Brown claims the fun da mental's are sound. The Govenrment negotiates with the Banks the Banks do as they fuc KING like, as usual. Our fundamentals are sound, what a load of tosh.

Share this post


Link to post
Share on other sites
They've all been at it -- The meedja in general - PARTICULARLY the BBC - ramping property with 24/7 tv Property "Porn" at LICENSE PAYER'S EXPENSE -- TOTAL SCANDAL...

No arguments here (although I've found the commercial stations to be far more offensive in their "me-too" property porn programming for peons).

To be honest I couldn't give two hoots about all the two-bit property speculators about to lose their shirts; what really angers me is that regular people on regular incomes, with spouses and families, have been unfairly priced out of the market by these bozos. To add insult to injury, the value of the savings accrued by the more sensible people are going to be badly damaged by new labour's inflationary incompetence.

At least estate agents, property speculators, financial service providers and their asspciated glut of "consultants", "advisers" and "experts" have been ruthlessly exposed for what they truly are: A bunch of incompetent, dishonest, self-serving hooray-Henries who should be first up against the wall... I'm ashamed to admit that it gives me a warm, fuzzy glow of smug self-satisfaction to know that an inordinate number of these ar$eholes are geared up to the eyeballs (despite their obscenely extravagant bonuses) and will end up as bankrupt casualties (hopefully unemployable) as this mess unwinds...

Share this post


Link to post
Share on other sites
This is what we have ALL been thinking - is it not? I have been wondering about this for ages!! And - when I saw that BBC Money Programme [way back in 2003!! - details below] - It was THEN that I understood -- it was a EUREKA!! Moment..... I had been just about tearing my hair out trying to work out WHERE people were getting the "money" from to "buy" property at ever-increasing and evermore insane prices........... Saw that programme -- and it was all sorted. I said to my family and my friends..... We are heading for a disaster. Only thing I didn't realize then was, how incredibly long it would take.....

Well if there is going to be a 'who saw it coming first' award, I'd like to throw my hat in the ring. I saw it coming early in 2003. I kept talking to my wife about it. In particular I couldn't see, at that time, how we were going to repay our interest only mortgage in 2012 as we were being told our endowment policy was likely to pay out about a third of what we had been depending on. My logic at the time was 'house prices are absurdly over-valued compared to wages, we have post 9/11 50 year interest rate lows and begger all wage inflation'. It felt to me remarkably reminiscent of the late 1980s - in that it felt like an asset bubble. I said to my wife ... 'I can see things getting bad in the next few years, house prices must fall back in line with affordability, interest rates must rise sooner or later and, one day, probably not long after 2010, there will be a glut of people looking to sell their houses to downsize to pay the mortgage off. We might find ourselves in the middle of a housing slump like the early 1990s and either be unable to sell or only able to sell for a very low price. We ought to sell up and rent.'

So we put the house on the market late summer 2003 and moved in December 2003.

At first things went swimmingly. Five base rate rises during 2004/5 brought the local housing market to a standstill and prices began to fall nicely. But, of course, Brown saw his debt fuelled economic growth coming to an end and ordered the BOE to drop rates in August 2004. Again, I clearly underestimated the mass stupidity of people as that one interest rate cut set fire to the market again. But, as many on here said, it only delayed the inevitable. By now it had become clear that the equation was simple.

economy = property

property = economy

I knew one day the borrowing would have to stop. It always has in the past and always will. Now it seems to be that instead of a gradual and managed correction in house prices - one where perhaps wage growth caught up with prices over say 10 years - we now stand on the edge of a precipice.

My only hope is that out of all this comes the recognition that the credit markets must be regulated. They were de-regulated in the 80s to stimulate growth. Lending to businesses to create growth is one thing - and to be encouraged. Lending to consumers so they can spend to keep the economy afloat is another. This should never have been allowed to happen.

And for the inevitable smart alec who says I have lost out on huge price growth by selling in 2003 - actually I haven't. Early in 2007 I was probably 10% down. Now, prices are about the same as they were 5 years ago. Everyone is reluctant to accept this - people are brainwashed. I know someone who has just put their property back on the market. They tried to sell in 2007 and couldn't so took it off. They've just put it back on for 50k more! It's now on for 675k. I asked them why they had put it on for more than last year and they said 'because prices have gone up'. I said 'actually they've gone down'. I think they felt sorry for my naivety and general stupidity.

In the meantime the STR fund has accumulated nicely, the interest covers the rent and a good bit more besides and I've paid no mortgage for 5 years.

Edited by Lets' get it right

Share this post


Link to post
Share on other sites
My only hope is that out of all this comes the recognition that the credit markets must be regulated. They were de-regulated in the 80s to stimulate growth. Lending to businesses to create growth is one thing - and to be encouraged. Lending to consumers so they can spend to keep the economy afloat is another. This should never have been allowed to happen.

The trouble is, regulation has a long and ignoble history of utter failure. Railtrack? The FSA? OFCOM? Regulators are ALWAYS toothless tigers in the grip of the government's vested interests.

I think Mervyn King was absolutely correct about "encouraging moral hazard": If this government had the balls to allow banks to fail rather than rewarding them by propping them up at the taxpayers expense then they'd sort out their lending practices to be more responsible overnight. This is 100% correct, guaranteed!

Share this post


Link to post
Share on other sites
Haven't you noticed the current blame game merry-go-round. Mervin King has slated the Banks. The Banks are groveling to the BoE. Gordon Brown claims the fun da mental's are sound. The Govenrment negotiates with the Banks the Banks do as they fuc KING like, as usual. Our fundamentals are sound, what a load of tosh.

Yes i have noticed the government and BoE truing to blame the banks. Looks like its pass the parcel, but we all know the music will stop with Gordon holding the time bomb.

Share this post


Link to post
Share on other sites
The trouble is, regulation has a long and ignoble history of utter failure. Railtrack? The FSA? OFCOM? Regulators are ALWAYS toothless tigers in the grip of the government's vested interests.

I think Mervyn King was absolutely correct about "encouraging moral hazard": If this government had the balls to allow banks to fail rather than rewarding them by propping them up at the taxpayers expense then they'd sort out their lending practices to be more responsible overnight. This is 100% correct, guaranteed!

You're right. But regulation provides a sort of starting point. If you say to lenders - you will not lend more than 2.5 times someone's salary and 1 times their partners and you will not lend more than 90% of the price of a property ... we all know some lenders will bend the rules, include overtime and bonus payments etc. accept dodgy valuations etc ... but it gives you some sort of base point and would definitely mean that Northern Rock could not (at least publicly) offer 125% mortgages at 7 times salary multiples.

Take regulation away from Railtrack and the next thing you know the rails will be 4' 9" apart.

Share this post


Link to post
Share on other sites
:P Could you send the links to those 521 articles, please, enrieb? :P

http://www.dailymail.co.uk/pages/dmsearch/...=relevance+date

The link was next his name in the original article you posted, blue hyperlink called 'more by this author' I have not read any of these articles fully, but I did quickly scan through the titles and opening sentences and I did not find any articles about the credit crunch, It is possible that I missed the article as I hastily and I will happily retract my criticism of Tom Utley If anyone can be bothered to find an article in which he predicted the credit crunch. Its a pity he did not link to his previous predictions in the article, which leads me to suspect that he did not predict it or at least he did not write any articles about it, a bit of a missed opportunity what with him being a journalist and all.

You would think that if he truly foresaw this credit crunch as many of us here at this site have done, then he could have used his position as a reporter to at least mention it. Most people who have been talking about the credit bubble and coming housing crash have been marginalized and dismissed as doom mongers by the main stream press over the past five years.

It just seems like the people who didn't understand or warn about the future economic problems that were being created are now turning around and telling us how they knew all along that it was a road to economic ruin. If they did know then surely they had a duty to report about it and if they did not report it then they are as guilty as those who took our country down this path.

Edited by enrieb

Share this post


Link to post
Share on other sites

I was just listening to a midday market update.

Persimmon Homes is the largest faller today, down 5.8%

Enterprise Inns is the largest gainer on the FTSE-100 up 9% because it has converted itself into a REIT.

And the owner of the Slug & Lettuce chain of pubs has placed itself into administration.

Economic death throws anybody?

Share this post


Link to post
Share on other sites
I was just listening to a midday market update.

Persimmon Homes is the largest faller today, down 5.8%

Enterprise Inns is the largest gainer on the FTSE-100 up 9% because it has converted itself into a REIT.

And the owner of the Slug & Lettuce chain of pubs has placed itself into administration.

Economic death throws anybody?

Bit early for death throes.

Share this post


Link to post
Share on other sites
Bang on the nail. The UK "economy" has, for the 10+ years of Nu Labour, been nothing but a Pyramid Selling Scam where everyone tries to sell their property to someone else: It has been financed by Liar Loans handed out like confetti by the utterly clueless and irresponsible lenders. We are now paying the price.

- Pete, Okehampton, Devon

OK, which one of you is Pete? :lol:

Share this post


Link to post
Share on other sites
This is what we have ALL been thinking - is it not? I have been wondering about this for ages!! And - when I saw that BBC Money Programme [way back in 2003!! - details below] - It was THEN that I understood -- it was a EUREKA!! Moment..... I had been just about tearing my hair out trying to work out WHERE people were getting the "money" from to "buy" property at ever-increasing and evermore insane prices........... Saw that programme -- and it was all sorted. I said to my family and my friends..... We are heading for a disaster. Only thing I didn't realize then was, how incredibly long it would take.....

''How long it would take !'' I wore everyone out with this 3 or 4 years ago, the then 'bears' in my sphere of influence have long converted to bulls and indeed an accomplice of mine on the bear front of many years has just moved up a house peg or two with a big mortgage and is now talking about me being stupid ''by missing out on future capital gains'', his reasoning being that his new 300K house will be worth 500K within 5 years. This is why we are now at the turning point, when every last bear is on board, then the train will crash and never in history have the tossers in charge been able to nab so many bears before blowing the whole lot off the tracks. But I am determined to have the last laugh and have a dozen 'told you so's'' lined up aimed at people who have taken offence to my apparent dig at their aspirational ego's (even though my attempts to educate them was subtle and inoffensive)

Share this post


Link to post
Share on other sites

people didnt see it coming because its not something they were looking for.

in 2003, people looked at their prospective purchase, took a note of the price, did the calcs and found they needed x for amortgage.

They rang the broker and asked how much x would cost.

They would be surprised at how little the monthly costs would be.

Theyd adda bit to the mortgage and go ahead.

Little thought about interest rates, length of time to repay, risign rates. They were told that because we were in Europe and they ALWAYS had low rates, that raising rates was highly unlikely.

They went ahead. They were oblivious and happy in their world.

They said the banks HAD to lend money otherwise people couldnt afford the houses. VIs were encouraging them all the way.

The Biggest VI was the guvement, who had a delighted public asking for more.

Warnings fell on ears that didnt want to know, or told to remain deaf.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 297 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.