Tuesday, February 24, 2009

Apparently the whole country is confused not just me

Labour's contradictory advice has evoked a sense of panic - and fuelled the very instability it is trying to remove

Does anyone know what sensible means anymore. At last someone confirming that I am not the only one that is confused. The past week the Bank of England / Gordon Brown /FSA have all said there must be a cap on mortgages and no more 6 x's income. Yet at the same time Gordon Brown has threatened lenders who need financial help saying that the government will not help unless they return to irresponsible lending, 90% mortgages to first time buyers. So if not 6 x's income what does the BOE /Mr Brown / FSA consider sensible lending? At what level will Northern Rock give these 90% mortgages to first time buyers? The median I believe is 3.35, so what are sensible lenders lending currently does anyone know?

Posted by kathryn layard @ 09:42 AM (1637 views)
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15 thoughts on “Apparently the whole country is confused not just me

  • Gordon Brown out smarting himself.

    That’s what happens when you try to please everyone before an election or ejection.

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  • The key to handling ANY management situation is “DON’T PLAY YOUR CARDS FIRST, AND DON’T PLAY THEM ALL AT ONCE.” This is because management is about the psychology of those who you are managing. You want to create the idea that you really are powerful, in fact so powerful that you act only really when you have to because you’re so sure of your power.

    The problem is that, with his frenzy of statist intervention, Brown has played a whole load of cards before the down-turn even got going, and none of them have proven to have any value at all. Thus, demonstrating that, despite the hubris and fine words, he has no power at all.

    Net result: we, the people, have no faith that any more cards he will play will work.

    We should have known that, anyway, because it is axiomatic that the government is smaller than the economy and thus can never control it. Counter-cyclicality is the best that governments can hope for, but when one believes one has personally eliminated boom and bust, everything one does becomes pro-cyclical, leaving the young vulnerable and totally unprepared for a nasty recession.

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  • Excellent points very well made sneaker – essence of the tale Brown cant buck the market and neither can Obama.

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  • I’m not confused anymore. I know full well that this shower in charge are nothing but fecking retards. Gambling it all in the belief that their actions will save their sorry souls. How will they sleep at night in the years to come… spin that wheel again… and again..
    Action we need to oust this feckwit and his band of self serving parasites…. Action I say.

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  • mark wadsworth says:

    Sneaker, good summary.

    What depresses me is that The Tories quibble a lot about the way in which the government has been handling all this, but it appears that the Tories would merely have played the same ineffectual cards slightly more astutely – the Tories do not at any stage question the madness of the idea that everybody can bail out everybody else, or the fundamental insane assumption that high and ever rising house prices are a good thing.

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  • Back in the late 60’s, when I worked for the old Co-operative Permanent Building Society, (changed its name to the Nationwide), savings rate was about 4%, mortgage rate 6%, the Society would lend 3 times annual income and take half of the wifes into account. 95% max mortgage and that was only on newish house. 90% on the older stuff over 25 years. You could buy a terraced house in Pompey for two and a half grand and that was 3 times a fairly modest income. This shows how out of kilter it has all got.

    In my opinion, house prices need to fall a way yet to get back to sensible proportions. Trouble is, if prices drop back, the speculators snap up 1st time buyers house for investment purposes. A future government needs to address this problem I believe with a punitive taxation system to severely discourage investors from buying multiple houses and thereby distorting the market.

    A house is a place to live.

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  • You can see where this is going, the main stream political parties appear more & more ineffectual, this leaves the door open for more extreme political views, the people who vote for the BNP do so because they feel no other political party really cares. I’m sure in the end the German people felt they had no choice but to vote for Hitler as he promised to bring order out of the chaos. These are worrying times.

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  • Deciphermonkey says:

    I noticed these apparently contradictory statements from Brown too. It seems to that either Brown is an idiot or the government is now openly using doublethink.

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  • @mrmickey – correct the 3 main parties more or less all sing from the same hymn sheet and if the majority of voters wake up to this then the crosses will start to creep into other boxes – definitely worrying times with Stalin sorry I mean Gordon at the helm.

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  • greytornado –
    I believe you are totally correct that the market needs to correct and it is doing so, however I think it should be as organic a process as possible, putting yet more skewing taxation or incentives into the mix can only make things worse, and when they get worse it will be for “new” reasons

    “Nothing is so permanent as a temporary government program.”, Friedman
    “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. “, Regan
    “I’m spending a year dead for tax reasons. “, Douglas Adams

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  • I agree with greytornado about the need for a correction.
    Gordon Brown should stop charging in like a bull in a china shop to try and save his political future. No Party in charge at a time of depression will be re-elected.
    Why doesn’t he try to help those in real need? In my opinion these are the people in financial trouble because of difficulty in keeping up with the mortgage repayment on a HOME.
    Investors, BTLetters, families of 4 in 6 bedroom £ 1 millon mansions, idiots living in sin with their credit cards in my opinion do not qualify as genuine cases.
    He’s talking about “thinking outside the box” why then not help the needy by relaxing bankruptcy laws so that they can get on their feet quickly, instead of throwing money at them?
    Am I being naive? I add, though I very much doubt you guys haven’t worked it out yet, that I never earned any money by advising people on Economics matters

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  • 5ick – I agree with you that the process of correction should be organic – i.e. without the type of intervention we are currently seeing, but I also agree with greytornado – Land Value Tax would get my vote. Otherwise the lazy UK population would try to earn a living as a landlord rather than getting out of bed and going to work.

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  • mark wadsworth says:

    @ Greytornado,

    a) why would keeping property prices down via e.g. Land Value Tax encourage landlords to snap up cheap housing?

    b) Is that a bad thing anyway? If it’s cheaper renting than buying, you should rent and vice versa.

    c) If LVT were set as (say) 5% of up to date land values each year, then if prices rose again, the increased LVT would wipe out their profits, so they’d all sell and prices would drop again so that their tenants could afford to buy. It would keep the costs/risks/rewards of renting, being a landlord or being a home-owner very much in line – no more bubbles!

    d) And LVT could and should replace a load of other rubbish taxes like council tax, SDLT, Inheritance tax, Business Rates etc etc.

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  • Tax should be used to raise finance by encouraging the behaviour we want to see, and limiting the effects which negatively impact us all. Why have income tax when that reduces the incentive to earn more (or work more), or have VAT when that reduces the incentive to spend. Why not have LVT which keeps property reasonably priced for everyone. We all need somewhere to live. We don’t all need 2 houses.

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  • Some very good comments.

    The bottom line is that New Labour has always been good at putting out the ‘message’, but fantastically incompetant when it comes to actually doing anything – and what they have have managed to do has always come in at an outrageous expense.

    Now they can’t get the message right either..

    ..trouble is, neither can Cameron’s crew..

    Get ready, William Hague. Prepare David Davis to be Home Secretary, and see if Vince Cable will cross the floor to become Chancellor.

    – cometh the hour, cometh the man..!

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