Man in a Shed: Negative memory of negative equity

Monday, December 18, 2006

Negative memory of negative equity

Less we all forget.... our collective negative memory about equity.

Now you might think its an odd point for Tory to be bringing up. And your right it is! But I can't help thinking were in a housing bubble right now and the sooner its punctured the better for everyone.

The reports today that many flats are not even being rented out - just held for the capital rise. That's got to be a sign that the underlying value of property is being over estimated if its not worth working the asset.

1 comment:

Wrinkled Weasel said...: There are more credit cards in the UK than people.

The current boom is being financed on credit cards..average income couples working themselves into early graves to pay increasing mortgage costs and buying the groceries on their Mastercard.

All that needs to happen is a small adverse change in circumstances and the spiral begins - it takes months if not years to adjust to a lower income and by that time you have built up a massive deficit.

Sooner or later the card wont take it any more and the house has to be sold to pay for all the loans and credit limits that they so easily got.

Personal debt is at record levels and is unsustainable.

go here to be appalled:
http://www.creditaction.org.uk/debtstats.htm

This one factor alone is a time bomb. Given all the other possible trigger factors a bust is a certainty.

If there is a Conservative government next time they will, with some legitimacy, be able to blame it on NuLAb.; 11:51 pm

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The pound in your pocket

"We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists." James Callaghan

“The trouble with theoretical economists is that they don't understand that when you have a deficit, you can only finance it by borrowing, and you've got to persuade people that it's worth lending money to you and that they'll get their money back... there's no way of escaping it.” Dennis Healey during the 1976 Stirling Crisis.

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens ... Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." John Maynard Keynes, 1920.

"To preserve [the people's] independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty, or profusion and servitude." Thomas Jefferson, President of the United States of America,1801-1809.

Inflation is taxation without legislation .. Milton Friedman