Wednesday 4 January 2012

Britain's credit crisis in 2012

This is a very worryisome article in the Telegraph. I have often wondered why of all potential advertisers to this sitte I get the most interest from credit card issuers and payday loans companies.

Yet it seems they have a bountiful supply of desperate customers. Really, if you need a loan because you money has run out before you even pay the rent (surely top of everyone's list of essentials along with food?) then your financial situation is in a very poor state. For a million people to have been estimated to have done this seems incredible; as a YouGov survery this is unlikley to be some sort of statistical anomaly.

This signals 4 things to me:

1 - We are a long way off a housing boom - house prices are going to fall for sometime yet.

2 - The sooner the Government reduces housing benefit and starts putting rental prices under more market pressure the better for everyone.

3 - The populace is ill-prepared for the second recession that is now be ing predicted for the first half of this year.

4 - Maybe I should look into Provident Financial as a useful counter-cyclical share to hold - them being the largest listed doorstep lender.

18 comments:

formertory said...

These are "hard-pressed families" and "hard-pressed working families" and will be bailed out by the taxpayer again and again until politicians succeed in re-convincing everyone that owning property is the only worthwhile and respectable way of making money in this country.

They're already at it with taxpayer-guaranteed mortgages for "hard-pressed first time buyers" and subsidy schemes for "hard-pressed families needing more space" and keeping interest rates low because they know if they rise, there'll be blood in the streets.

If only fewer of the "hard-pressed" had done a Brown and spent all the equity when times were good. Now the wife's LR Discovery sitting in the drive is just a lump of unsaleable tin that does 20 to the gallon and costs £500+ to service, and the bijou French cottage is worth a third of what they paid for it, they're saddled with a mortgage that'll take them to 70 to pay off and in a few years' time some unscrupulous bastards will make killings selling them equity release perpetual mortgages to get them of the retirement income hook.

Happy New Year? Bah Humbug!

CityUnslicker said...

the middle is not getting bailed out former Tory. the very top end get away with squirreling earnings abroad.

the bottmer are getting generous benefits.

I have much more sympthay for the middle, heavily taxed, incentivised as you say to make some bad financial decisions and lumbered with that and ever higher taxes and inflation.

If you read about the history of economic collapse in any country you will see that it is always the middle class who get properly screwed. unable to hold onto assets and with little to hold onto - the poor were poor anyway and the rich hide their capital in swiss banks.

This is part of a movie we have seen elsewhere many times before.

andrew said...


If you read about the history of economic collapse in any country you will see that it is always the middle class who get properly screwed. unable to hold onto assets and with little to hold onto - the poor were poor anyway and the rich hide their capital in swiss banks.


+1

Indeed, relative inequality is reduced by making the middle class poorer. Almost a brownian motion.

Sebastian Weetabix said...

"the poor were poor anyway and the rich hide their capital in swiss banks"

Or, more pertinently, the rich have assets which survive inflation and currency collapse and the poor (used to anyway) have practical skills with which they can barter. Things are much more tricky for architects and mid-level managers and the like. That's what happened in the German hyperinflation - the rich were just fine and even acquired more assets as the middle class were sweated out. Farmers usually did ok as well.

Billy-Bob said...

USA Farmers, & farmers in the west in general are having a good recession. Farm prices have been high since 2009 and the number of people seeking any sort of work at any price has increased.

Anonymous said...

It may suprise quite a few on here, but it is also the middle class or high earning working class who tend to max out their credit cards, store cards (30%), people you would have thought would have had more nouse. The desperate go to the likes of Wonga and Provident or even loan sharks because no one will lend to them to get out of a mess (they just get themselves in deeper). I can remember when credit cards started in the UK Barclay Card and Access (remember them) I was asked if I would get get one, I said no way, we are just following the US in the use of credit cards. If I cannot afford something I save up for it, when I have got the money I either buy it or decide I don't really want it. Borrowing is a state of mind, in one office I worked in, I said that I would not like to get into debt, one guy replied, I cann't wait to get into debt, what more can you say.

Anonymous said...

It will get much, much harder for the middle-class. HMRC seek to recover the ££B forgone after being wined & dined by transnationals. So expect to see draconian audits of the self-employed, zero-tolerance of trust-funds, etc.

However, squeezing the last tax £ from earned income won't be enough. The 'mansion tax' will be imposed, so any capital assets are taxed away within the average lifetime. Or you will be "invited" to swap your assets for 0.5% Perpetuals. Expect denunciation of 'hoarders'.

I remain convinced that the various rounds of QE have only been done to allow the global elite to secure their wealth in bullion, then the whole Ponzi scheme of welfarism and fractional reserve banking will be allowed to collapse.

Anonymous said...

N.B. Re. Trades Description Act, shouldn't C@W be retitled as "Previously on the money!"

Nick Drew said...

oh that hurts

you had better have the traditional full refund

Mark Wadsworth said...

What FT says. The top 1% get a load of goodies, the bottom 20% get a load of goodies and half the other 79% get a load of goodies (subsidies for housing they own - call it artificially low mortgage interest rates, council tax freezes, whatever) so ultimately it's half that 79% (younger people in nequity, tenants not claiming HB, actual productive businesses etc) who are paying for the feather bedding of the rest.

Further, let's assume the one million figure is true, it is nigh meaningless.

It might be one million people who on one single occasion took out a payday loan of a couple of hundred quid for a few days at the end of one particular month, or it might be one million people who have a nigh permanent deficit of a couple of thousand quid which they take out near the start of the month.

Mark Wadsworth said...

Anon: "The 'mansion tax' will be imposed, so any capital assets are taxed away within the average lifetime. "

Oh dear, oh dear, oh dear.

The only people who would be "hit hard" by the mansion tax are people who paid f- all for a house decades ago, which has rocketed in value due to Labour/Tory Home-Owner-ist policies.

If a little bit gets taxed away again, then so what? As Monty Python said, you start with nothing, you end up with nothing.

The truly oppressed 39.5% will not be affected by the Mansion Tax, and would probably even benefit from it.

Philipa said...

It's a mistake to use a reduction in housing benefit as a tool to lower private rents. So many innocent people will suffer. Better to instigate any change through a fair rent (policy/officer).

Philipa said...

@CU - "the bottmer are getting generous benefits"

If you mean all those on JSA then no, they're not.

CityUnslicker said...

Phillipa - I fail to see how rent officers working for the Government can enforce non-market rates. Why bother? Much better to let the market decide, but current Government subsidies are pushing up the rental market. Watch how rents for everyone fall when the Government reduces housing benefit - it will happen, it has happened in many places around the world where this has been tried. On the other hand, making up rental centrally values has succeeded in many countries in utterly destroying the rental market.

As for people not being wealthy on benefits, housing benefit in London of £400 a week is equivalent to a job of £18k a year - alone, before free council tax, JSA and other benefits. You may not feel wealthy on these benefits, but the reality is that taken as a whole they are generous.

Budgie said...

MW, oh dear, oh dear, oh dear.

The only people to benefit from a "mansion tax" will be politicians.

I run a mile from anyone advocating a new tax because it always ends up as an additional tax.

Sebastian Weetabix said...

MW, your monomanic obsession with property taxes as a cure for all ills really is tiresome. Take my old Grandma. Lives in a house bought in 1948 for £2,400. I daresay it's worth £600K today... but - and here is the kicker - only if she sells it! Which is why income tax is a fairer way to proceed. She isn't a buy to let rentseeker, she lives in the damn place and her only income is her modest pension. As it is she can barely manage to pay council tax - if you're going to stick her with an additional "mansion" tax, her only way to pay is to sell it. It's her f***ing home and she owns it - neither you nor anyone else has the right to kick her out.

Mansion taxes aside, all your LVT does is make everyone a tenant of the state. The bastards have enough power as it is. Happily no-one is bonkers enough to vote for it... it's pure electoral poison.

What we need is more houses in this country - not another f***ing tax leaching us.

Philipa said...

@CU - see below answers in bold:

"I fail to see how rent officers working for the Government can enforce non-market rates."
Well that's what used to happen.

"Why bother?"
Because the alternative you're suggesting causes innocent people real and undeserved hardship.


"Much better to let the market decide, but current Government subsidies are pushing up the rental market. Watch how rents for everyone fall when the Government reduces housing benefit - it will happen, it has happened in many places around the world where this has been tried."
Or you could use the much MUCH better solution I've mentioned above that we have tried and tested, we don't have to import it.

"On the other hand, making up rental centrally values has succeeded in many countries in utterly destroying the rental market."
You don't have to do that and I'm not suggesting it.

"As for people not being wealthy on benefits, housing benefit in London of £400 a week is equivalent to a job of £18k a year - alone, before free council tax, JSA and other benefits. You may not feel wealthy on these benefits, but the reality is that taken as a whole they are generous."
No actually they are not generous. If living in Kensington and Chelsea takes most of your income and you're left with £50pw to live on then that's not generous, that's barely sufficient. I really do wish people would get it into their heads that THE ENTIRE WORLD DOES NOT START AND END IN LONDON! And if you are making policy this point is really really important. There is an argument to cap housing benefit but of course the reality is that that means driving the poor out of relatively expensive areas, such as those in London, and I'm sure many readers would see that as a good thing. Lots of people sympathise with the poor but you wouldn't want one of them sat next to your child at school now would you? The other side of the argument is that areas become so expensive that ONLY the very rich and the very poor can afford them! So what's the answer? Build another Milton Keynes to house the poor? Another Farm like in Liverpool? No benefit claimants allowed to live in London?

When you are considering housing benefits and income it's worth remembering two things:

1. Housing benefit in the form of rent goes straight to the Landlord. The benefit claimant doesn't get it. So the government already deals directly with the Landlord and cuts out the middle man.

2. Not all Housing Benefit is paying private rent. But reducing housing benefit to influence the rental market will affect everyone.

The only way for the goverment to influence the rental market is to directly influence the rental market. Starving the poor and hoping is no solution.

Electro-Kevin said...

You talk about shares as investments. None of you ever mention BTL or housing.

Would any of you invest in housing ???