Tuesday, April 5, 2011

There is only one way for house prices

Mega squeeze and Income squeeze

The first is Pestons Picks, the second Steph Flanders which is here:- http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2011/03/which_will_crack_first_-_wages.html Both writers with almost the same heading.

Posted by growler @ 01:51 PM (1588 views)
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3 thoughts on “There is only one way for house prices

  • general congreve says:

    This comment from the article sums the UK’s situation up nicely:

    [i]24. At 10:25am on 5th Apr 2011, Lets stop imitating ostriches wrote:

    It grieves me to say this but we are bankrupt: both private as well as UK govt debt are beyond what we can afford to pay back and there is no scope for more borrowing to get us out of this mess.

    As a supporter of Keynesian economics, it comes as a very very hard shock to find that we did not do as Keynes expected and that is to save and pay off debt during good times so that the capacity to borrow would be there in bad times and the times are now very bad indeed. During the boom years we broke all rules by massively increasing our debt so that there is now no further scope for increasing debt.

    Whether or not you agree with me, the situation is close to disaster, especially if you consider all the off-balance sheet government debt, the massive rate of increase in government borrowing month on month since the election, the enormous size of bad debt that is being delayed by banks deferriing mortgage defaults and the massive potential bad debt that is in the pipeline as interest rates rise pushing hundreds of thousands of households into default, etc. etc. I could go on but this is already too depressing.

    We are facing a retrenchement in consumer spending that is if anything far less than required by most households. The fact is that the whole of the UK enconomy was working on steroids and speed to pour all its wealth into the massive increase in property values into many more multiples of average salaries. Unless house prices and the debt associated with property is brought back to a more sensible ratio to the salaries and productivity of ordinary households, we are facing a Japanese style period of deflation or stagflation. That means defaulting on existing debts, slashing house prices, making sure that house prices can never again suck all the wealth out of our economy and defaulting on government debt.

    We have no way out. If the politicians were really honest with us it should lead to a total collapse of confidence and default on private as well as government debt.

    We are absolutely in the same position as Portugal Italy Ireland Greece and Spain and preventing a default is probably a worse prospect compared to trying to live with a debt that we cannot afford. The impact on the economy and our standard of living will be much worse for far longer.

    We simply cannot afford the debt we have accumulated and however horrible the prospect it may be that the most responsible response to our irresponsible spending is to default and start from scratch to rebuild an economy based on real activity, people doing things that add value, instead of invented financial froth.

    Our choice is either decades of misery suffering the death of a thousand cuts enduring a stagnating economy and ever more expensive debt servicing costs, or a few years of pain by defaulting and rebuilding our economy and financial services industry.

    Does that mean that the High Street spending should stop? Yes

    Does that mean that our consumer spending habits have to change radically creating a very different type of High Street? Yes

    Can we avoid either private and public default or years of stagnation? No.

    Should we be angry with the banks? Absolutely and if that means letting them debunk somewhere else, then the sooner the better.

    If having the most repugnant gluttonous greedy self serving and venal pigs of bankers in this country has cost us our future for many generations.

    What is unbelievable and unforgivable is that they are trying desperately to ensure that they can continue to create the conditions for another worse crisis. This then is a group of criminals in an industry that we can only wish on our worst enemies. LET THEM GO and leave us in peace to set up banks that we can trust and which serve ordinary people and ordinary businesses which work hard to add value.

    Forgive me for this most dispiriting message, but until and unless we truly grasp the extent of the danger and damage to our economy, we will never restructure and reform so that we can once again make and do things that people want, need and are willing to pay for. The Banks have destroyed more wealth now and in the future than any other single act of human folly in the whole of human history so they should not emerge from this in their current form lead by the same people.

    As for the High Street, frankly the pain there is only going to be the tip of the iceberg and they too have to play their part in bearing this country’s awful burden.

    What we need now is to recognise that this threat to our survival requires us to have the same attitude as we did during the second world war and that is to unite, sacrifice for the sake of the greater good and be prepared to destroy our enemies in order build a better world for our children and their children’s children.[/i]

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  • I completely agree with Robert and Steph. And the observer perhaps writes what the two reporters didn’t.

    There are tough times coming

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  • ‘There is only one way for house prices’
    A friend in Edinburgh finds that when he says this to local people, they look at him all hopeful and say ‘oooh, do you think so?’, ie they assume he means up!

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