Saturday, September 6, 2008

What SOS ???

SOS has gone unanswered

In the unlikely event that I am ever on a sinking ship with Gordon Brown, I will remember not to rely on him to throw me a life jacket. The Prime Minister's much-heralded “rescue package” for the housing market announced this week was the equivalent of sending a canoe to save the Titanic. Yet much of the debate focused not on the inadequacy of the plans, but whether the Government should do anything at all. There are people who believe that Mr Brown should simply allow house prices to fall to a more affordable level. While this is superficially appealing, it ignores the relationship between the housing market and the wider economy and the awful spectre of negative equity.

Posted by housebear @ 03:25 PM (1093 views)
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11 thoughts on “What SOS ???

  • One has to question how competent a personal finance editor is that can take such a short term view and get the sums so badly wrong. I cringed when I read this.
    Estate agents and solicitors going out of business? No big deal for the economy. As for the rest, they should have had a business plan that saw this coming.
    An economy that depends solely on continually expanding consumption and high house prices is completely f*cked in the long term.
    We desperately need our economy to decouple from this situation. If a recession has to happen to achieve it, so be it.
    In fact, it is ONLY affordable housing that will ensure that people feel ‘well off’ in the future.

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  • This cringeworthy article is designed to appeal to all those ‘middle-class’ people out there who are now wondering how they will finance their next 4WD, Exotic holiday or BTL Investment. It is specifically targeted at the weekend Times purchaser and has little to do with everyday reality in this debt dependent country.

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  • And there is the “awful spectre” of more rotten articles like this. It is saying that all those foolish enough to indebt themselves beyond a point they can afford to service it should be subsidised by everyone else. But what else can you expect from the Times but school gates and down the pub arguments.

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  • What absolute rubbish. The current situation should be allowed to play out without Govt intervention of any kind. The pain has to be taken, Interest rates should rise etc etc.

    Only then will we have affordable housing and a more stable economy.

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  • In fact the only thing one can do is not doing anything at all. There are weirdos out there who tell us falling house prices are an illness that needs to be cured. They couldn’t possibly get it more wrong. Falling house prices are the cure. The illness is called debt addiction. There is one good news here: There is NOTHING the government can do to bring the bubble back and there won’t be any new bubble anytime soon. The dealers of your drug will not do business with you again. Learn to live without it and to work!

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  • An awful article. Ellson appears to believe that ‘normal’ lending involves people borrowing 6x income with no deposit down. The truth is that we have normal traditional lending right now, 3x income and 10% deposit. He’d better get used to it because it won’t be changing anytime soon.

    I’ve always thought his column smacked of ignorance. Today’s effort is no exception.

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  • crash bandicoot says:

    If our government is going to support the economy, would they not be better off investing our money in schemes to support our industries rather than the bank accounts of failed property speculators.

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  • So basically if we make rich people richer, they will eventually feed their fortune generously back to the society and save all of us?

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  • stillthinking says:

    The point is that the money borrowed for housing is the money used for general transactions, and should that shrink, then companies will go bust and we will have unemployment. Just call it deflation is easier.
    Image 3 people with 100 mortgage, working for a 100 a week. The money needed for that is 300 and there is 300 floating around in the economy.
    If they only get a mortgage for 50, then 2 of them lose their jobs as there is only sufficient money for one, unless they adjust their pay.

    Housing collapses shrink the money supply. This affects mainly the wealth producing private sector not the public sector, with a government capable of borrowing. Which is why the recession will be worse than people think.

    The whole system relies on debt increasing by 2% (or some fixed value) a year. Simply, it doesn’t work in reverse which is why the government -will- be borrowing to maintain the current level of borrowing. Unfortunately gov. borrowing will restrict private borrowing in the future. The key leading indicator now is going to be unemployment.

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  • The stance taken by the Times editor is in marked contrast to that taken by “The Economist”.

    The Economist advice is to “Take it on the chin!” If you reel back to Friday’s HPC blogs, you will find it posted with a link.

    I reckon the Times is worried by loss of it’s property income. Any thoughts?

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  • Alan, you are dead right, the VI spin is everywhere, but then again the majority of people own a house so we have to expect that we on this site will be in the minority.

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