All that is needed for vested interests to prevail over the public interest is that good men don’t understand what the hell is going on.

CDSThe Tories (including my own MP, John Glen) have been brilliantly successful in selling us the lie that the financial crisis was caused by excessive welfare spending by the Labour party. This enabled them to sell the argument, despite all the contrary evidence, that only the Tories can be trusted with the economy. It also allowed them to get away with their phony ‘long term economic plan’ which was in reality nothing more than a doctrinaire political  programme to drastically reduce the role of democratic government and outsource it to international corporations like G4S, Capita, Virgin, Atos, Serco etc.

The reality of course is that the financial crash of 2007/8 and the resulting UK debt mountain were not caused by ‘immigrants’ or ‘welfare scroungers’ or ‘health tourists’ or ‘Polish plumbers’ or the disabled and they weren’t even caused by Labour Party spending on schools and hospitals.

The crisis (which had its foundation in the deregulation of banking and financial services in the 1980s) was caused by greed and incompetence in the banking industry. It culminated in the US where banks had lent colossal sums of money in worthless, sub prime loans and then repackaged those loans and sold them on to the rest of the global finance industry disguised as respectable investments. This was legalised fraud on a massive scale.

This is all common knowledge to those who have been paying attention so why remind ourselves yet again? Well the success of government double speak means that the underlying problems within the national and international banking and financial sectors have not been addressed and it’s looking as if the next financial crisis is just around the corner (see graph at top of page). Only this time we will be far less well placed to face the consequences.

Is Deutsche Bank the next Lehman Brothers? Who knows? Our governments are in hock to big finance. George Osborne is a politician with an ideological agenda, he is is not an economist and has no economics training. The people who caused the last financial crisis are, with only a very few exceptions, still in place, have they learnt their lesson? The regulators are controlled by the regulated and most of the potential reforms have been shelved or watered down.

The only thing we know for sure is that it is ordinary people who will pay the price for the hubris, incompetence and greed of our financial elites.

Addendum: Adair Turner (head UK regulator at the height of the 2008 crisis) told the Today programme that the idea that the public will never again be called on to bail out the banks is not only untrue but, as he put it, a “dangerous” assertion.

“Deutsche Bank Is ‘Absolutely Rock-Solid,’ Cryan Tells Employees” http://www.bloomberg.com/news/articles/2016-02-08/deutsche-bank-says-it-has-at1-payment-capacity-of-1-1-billion

Banking failure NOT public expenditure created the financial crash and UK Debt mountain: http://www.reasonandreality.org/?p=4137

Conservatives are the party of high UK borrowing and low debt repayment, contrary to media misinformation:

All that is needed for vested interests to prevail over the public interest is that good men don’t understand what the hell is going on.

Update: 26th March 2016.  After engineering the slowest recovery in 150 years George Osborne has suddenly spotted that the economy is going pear-shaped again.  His solution – more austerity. No rationale, no logic, no evidence, just the ‘right thing to do’.   Very reminiscent of Albert Einstein’s definition of insanity – “doing the same thing over and over again and expecting different results.

 

Banking failure NOT public expenditure created the financial crash and UK Debt

Do you want “Long Term Economic Plan” or do you want the Truth? Here’s the Truth!:  Quarterly growth was 1% when George Osborne took over from Labour. Today, over five years later, it’s just 0.5%.

It’s tiresome to have to keep pointing out that the financial crash of 2007/8 and the resulting UK debt mountain were not caused by ‘immigrants’ or ‘welfare scroungers’ or ‘health tourists’ or ‘Polish plumbers’ or the disabled and they weren’t even caused by the Labour Party.

We have short memories if we fail to remember that the crisis (which had its foundation in the deregulation of banking and financial services in the 1980s) was caused by greed and incompetence in the banking industry. It culminated in the US where banks had lent colossal sums of money in worthless, sub prime loans and then repackaged those loans and sold them on to the rest of the global finance industry disguised as respectable investments. This was legalised fraud on a massive scale.

The crisis was duplicated in the UK where Northern Rock, another bank up to its eyes in sub-prime mortgages, suffered the first run on a British Bank in over 150 years. It soon became clear that a number of our banks were on the verge of collapse and had to be bailed out by the tax payer. The resulting recession meant that tax receipts dropped, welfare payments increased and the deficit went through the roof as the economy was hit for six.

Let’s also remember that by 2010, under Labour, we were in recovery and that it was George Osborne’s misguided reliance on austerity (2010 -2013) that stifled the recovery, left us teetering on the verge of  recession and lost us our triple A credit rating.  All countries eventually recover from recession, only the Tories could try to take credit for two wasted years and the longest UK recovery in over 150 years.

It is  annoying but hardly surprising that regardless of how much evidence you produce it is impossible to shift the minds of those who live in that alternative universe created by the Daily Mail and the Tory spin machine.

However it is particularly galling that during the General Election, and even, during the party leadership campaign, little effort was made by Labour party leaders to counter the barrage of lies and false statistics from the Tories and their friends in the media.

What happened to the bankers who led us into this mess? Northern Rock, once a respectable building society, was demutualised in the 1990s.  Under the leadership of Matt Ridley, Northern Rock developed a business model that involved borrowing heavily, selling large quantities of sub-prime mortgages and then reselling them on the international markets. When the market for those ‘securitised loans’ collapsed, Northern Rock was insolvent, there was a run on the bank and Matt Ridley had to go cap in hand to the UK government for a bail out.

Where is Matt Ridley now?  Is he hiding penniless and in shame some where? Oh you needn’t have worried, a group of Tory hereditary peers elected him into the Lords.  He can now live quite well on £300 a day attendance allowance courtesy of the tax payer. That will go nicely with the income he gets from the opencast coal mine on his estate in Northumberland while he acts as Tory party climate change adviser.

And before you ask – yes – Viscount Matt Ridley voted in favour of tax credit cuts for millions of low paid hard-working families.

 

 

The charts below show how the financial crisis and UK Debt were not caused by excessive borrowing or spending prior to 2007 (source: UK Office for National Statistics).

 

CFb3_8tWYAAQVI5 CFb3_88WMAIY5TZ CFb3_89WAAAqGtj

GDP-2008-15
Click to enlarge

Further reading:

Here’s what the last governor of the Bank of England thinks – ‘Labour not responsible for crash’, says former Bank of England governor: http://www.theguardian.com/business/2014/dec/29/labour-government-not-responsible-crash-bank-england-governor-mervyn-king

Office for Budget Responsibility chief  rebukes Osborne: the UK was never at risk of bankruptcy:  http://www.newstatesman.com/politics/2012/12/obr-head-rebukes-osborne-uk-was-never-risk-bankruptcy

Here’s a summary of the Reality: The last government did not borrow excessively and it was the banking crisis that caused the recession.
http://www.neweconomics.org/blog/entry/mythbusters-excessive-government-borrowing-got-us-into-this-mess

 Here’s the full anaylsis – “Did excessive government borrowing got us into this mess” Charlie Cooper and Simon Wren-Lewis: http://dnwssx4l7gl7s.cloudfront.net/nefoundation/default/page/-/publications/Excessive%20borrowing%20got%20us%20into%20this%20mess.pdf

Labour is being far too reticent: it didn’t cause the global financial crisis and Coalition austerity policies have stalled the recoveryhttp://www.independent.co.uk/news/business/comment/david-blanchflower/david-blanchflower-labour-is-being-far-too-reticent-it-didnt-cause-the-global-financial-crisis-and-coalition-austerity-policies-have-stalled-the-recovery-10158888.html

 

Update: The strange, sad moral and intellectual collapse of Labour moderates”:

 

Dave Hartnett, HMRC, HSBC, the revolving door and legalised corruption.

In all the furore about the HSBC – Swiss Bank tax evasion scandal let’s remember that it was Dave Hartnett who, as the boss of HMRC (supposedly our tax collection agency)  negotiated the notorious tax deal that granted HSBC’s bankers virtually guaranteed immunity from prosecution for any crimes they might have committed relating to tax fraud in Switzerland.

Dave Hartnett is also the man responsible for doing dodgy deals with Vodafone, Goldman Sachs and other large corporations that have cost the taxpayer billions in lost revenue. He has now retired on a very generous pension having suffered no consequences whatsoever for given away billions of pounds of our money.

Ordinary hard working families including the most vulnerable members of our society  are bearing the brunt of the government austerity measures because people like Hartnett believe that “only the little people pay taxes

And where is Dave Hartnett now?  Working for HSBC of course.   Why don’t we call this what it is – legalised corruption.

 

 

HMRC boss Dave Hartnett receives a life time achievement award for “Services to Corporate Tax Avoidance”: http://www.reasonandreality.org/?p=1610

The man who did the deal that gave HSBC immunity went on to work for HSBC: http://www.taxresearch.org.uk/Blog/2015/02/09/the-man-who-did-the-deal-that-gave-hsbc-immunity-went-on-to-work-for-hsbc/#sthash.v6k4izaq.dpuf

UPDATE: 3rd March 2015  Dave Hartnett to appear in front of  Public Accounts Committee:

Subject: Tax avoidance and evasion: HSBC

See more at: http://www.taxresearch.org.uk/Blog/2015/03/03/this-looks-like-it-could-be-fun-on-monday/#sthash.hWDG79eg.jub1EvPP.dpuf

 

 

The Phones4U scandal is just one more example of the screw everyone capitalism so prevalent in our current financial elite

This is an outrageous scandal:

“Phones4U was bought by the private equity house, BC Partners, in 2011 for £200m. BC then borrowed £205m and, having saddled the company with vast amounts of debt, paid themselves a dividend of £223m. Crippled by debt, the company has now collapsed into administration.

The people who crippled it have walked away with nearly £20m million, while 5,600 people face losing their jobs. The taxman may also be stiffed on £90m in unpaid VAT and PAYE. It’s like a version of 1987’s Wall Street on steroids, the difference being that Gordon Gecko wins at the end and everyone shrugs and says, “Well, it’s not ideal, but really we need guys like him.”

“This sort of utterly amoral screw-everyone capitalism has become much more prevalent in the last 15 years. Our financial elite is now totally out of control. They learned nothing from the crisis, except that the rest of us were stupid enough to give them a second chance.”

Source:  Alex Proud Daily Telegraph 22 Sep 2014  http://www.telegraph.co.uk/men/thinking-man/11109845/Why-arent-the-British-middle-classes-staging-a-revolution.html

Sooner or later people will snap.  You can only fool some of the people for some of the time. When the current debt fueled pseudo boom goes bust and we find that there is no way that ordinary people can bail out the financial elite yet again, all hell will break lose.

 

Rate fixing, money laundering, misselling of a wide range of financial products, sub-prime loans, credit default options,  huge losses,  continuing need to be bailed out by tax payers, illegal business with tyrants, forcing small and medium businesses to go broke, the list is endless. Here is a very small selection of the financial scandals of the last few years (remember virtually no individual has been reprimanded let alone charged for any of the crimes that have been committed – they just take us for fools):

10 Biggest Banking Scandals of 2012:
http://www.forbes.com/sites/halahtouryalai/2012/12/27/10-biggest-banking-scandals-of-2012/

Barclays fined £38m for putting clients’ assets ‘at risk’: http://www.bbc.co.uk/news/business-29323483

Barclays, HSBC and RBS among 13 banks facing fraud claims in US: http://www.theguardian.com/business/2014/sep/16/barclays-hsbc-rbs-fraud-us-mortgage-virginia

The LIBOR scandal – The rotten heart of finance: http://www.economist.com/node/21558281

Help To Buy – the next big scandal / disaster??: http://www.reasonandreality.org/?p=2769

HMRC boss Dave Hartnett receives a life time achievement award for “Services to Corporate Tax Avoidance”: http://www.reasonandreality.org/?p=1610

“If You’re Not Outraged, You’re Not Paying Attention.”

Matt Ridley: “Do people mind more about inequality than poverty?” (So what if somebody else has a yacht?)

In a new article:  “Do people mind more about inequality than poverty?”  Matt Ridley has used public misperceptions of poverty and undoubted reductions in global poverty to obfuscate and trivialise the very real issue of growing inequality within nations.  In the article Ridley totally ignores concerns about the excessive concentration of wealth in an increasingly powerful global elite.

Ridley points out that public perceptions of poverty and inequality are unreliable but this is not earth shattering news – evidence abounds that the “British public is wrong about nearly everything” or “Perceptions are not reality

Evidence does show that there has been a decrease in global poverty and a small decrease in global inequality. These improvements are obviously good news and should indeed be publicised.  We need to ensure that these improvements continue and at a faster rate.  However, small changes to extreme poverty and inequality still leave unacceptable levels of extreme poverty and inequality.  Furthermore, looking at global figures it is easy to hide realities like:

“Almost half of the world’s wealth is now owned by just one percent of the population, and seven out of ten people live in countries where economic inequality has increased in the last 30 years. The World Economic Forum [1] has identified economic inequality as a major risk to human progress, impacting social stability within countries and threatening security on a global scale.

This massive concentration of economic resources in the hands of fewer people presents a real threat to inclusive political and economic systems, and compounds other inequalities – such as those between women and men. Left unchecked, political institutions are undermined and governments overwhelmingly serve the interests of economic elites – to the detriment of ordinary people.” [2]

This, below, is Ridley’s  concluding (penultimate) paragraph  (his final paragraph is bunkum – check it out for your self):

“None of this is meant to imply that people are wrong to resent inequality in income or wealth, or be bothered about the winner-take-all features of executive pay in recent decades. Indeed, my point is rather the reverse: to try to understand why it is that people mind so much today, when in many ways inequality is so much less acute, and absolute poverty so much less prevalent, than it was in, say, 1900 or 1950.  Now that starvation and squalor are mostly avoidable, so what if somebody else has a yacht?”

This is, at best, disingenuous. In the first sentence Ridley says that he doesn’t want to imply that people are wrong to resent inequality and yet in the following sentence he does just that – does he think we are all stupid? The final sentence starts with nonsense and finishes with a straw man.  The issue is not resentment or envy of the successful local entrepreneur who owns a yacht for sailing with friends and family, this is just a Ridley obfuscation. The real issue is the power that a £75 million super yacht’s owner has to influence or control the democratic checks and balances that protect us, however imperfectly, from rule by plutocracy. It is the fact that Global inequality is about power, not just wealth or yachts, that Ridley, no doubt deliberately, manages to brush under the carpet.

 

The graph below shows how the improvement in the global distribution of income is mainly due to rising incomes in the emerging economies like China.  At the same time ordinary people in Europe and the US have seen their incomes stagnate or decrease.   The winners have been those in the emerging economies that have been able and lucky enough to benefit from their country’s growth and a very small global elite. The losers are the very poorest (e.g. in sub-Saharan Africa) and the working / middle  classes of the developed nations.

income growth

 

 

 

 

 

 

 

 

 

 

 

The issue here  is not about talented or hard-working individuals being able to afford to own a yacht. It is about a small elite, less than 1% of the population, who are so excessively wealthy that they can exploit their resulting power to disrupt the normal political, democratic and regulatory processes for their own benefit and to the detriment of ordinary people.  This gross inequality of power is a major risk to human progress, impacting on social stability within countries and threatening security on a global scale.

Coincidentally, Matt Ridley (5th Viscount Ridley), with a family estate of Blagdon Hall, near Cramlington, Northumberland just happens to be a hereditary member of the 1%:
http://www.reasonandreality.org/?p=1468

Source  for graph  – Branko Milanovic: 
http://www.huffingtonpost.com/branko-milanovic/winners-of-globalization-_b_4603454.html

[1]  Global Risks 2014 (World Economic Forum): http://reports.weforum.org/global-risks-2014/executive-summary/

[2]  Working for the Few – Political capture and economic inequality (Oxfam):  http://www.oxfam.org/en/policy/working-for-the-few-economic-inequality

The Rise of Inequality, Branko Milanovic (IMF):  http://www.imf.org/external/pubs/ft/fandd/2011/09/Milanovic.htm

The richest 85 people on the globe – who between them control as much wealth as the poorest half of the global population put together – could squeeze onto a single double-decker: http://www.theguardian.com/business/2014/jan/20/oxfam-85-richest-people-half-of-the-world

Global inequality is about power, not just wealth:  http://newint.org/blog/2014/01/27/inequality-power-wealth-davos/

U.N. sounds alarm on worsening global income disparities (Reuters): http://www.reuters.com/article/2014/01/29/us-global-economy-un-idUSBREA0S1FD20140129

Capitalism vs. Democracy:  http://www.nytimes.com/2014/01/29/opinion/capitalism-vs-democracy.html?smid=tw-share&_r=0

Why Income Inequality Is Here to Stay by Branko Milanovic: http://blogs.hbr.org/2013/01/why-income-inequality-is-here/

Winners of Globalization: The Rich and The Chinese Middle Class. Losers: The American Middle Class, Branko Milanovic:  http://www.huffingtonpost.com/branko-milanovic/winners-of-globalization-_b_4603454.html

“British public wrong about nearly everything” or “Perceptions are not reality”: http://www.reasonandreality.org/?p=2887

Matt Ridley – failed banker and rightwing neolibertarian: http://www.reasonandreality.org/?p=1468

Two charts, same planet, not quite the same message.

I present two charts for your consideration:

The first chart is taken from Bill Gate’s Annual 2014 Newsletter where it caught my eye: Bill Gates and his “Three myths that block progress for the poor” http://annualletter.gatesfoundation.org/?cid=bg_tw_po0_012212/#section=myth-one

The chart (click on it to enlarge if necessary)  is interesting and thought provoking  but seems to have something missing.

income growth 2

 

Here is a similar chart, also interesting and thought provoking, particularly as it includes a little more information than Bill Gates’ chart.  (Credit : Chart by @jamestplunkett and it’s based on a chart from inequality economist Branko Milanovic via  http://www.businessinsider.com/chart-of-recent-global-economic-activity-2014-1)

income growth

 

 

This Incredible Chart Explains Almost All Of Recent Economic History

Winners of Globalization: The Rich and The Chinese Middle Class.  Losers: The ordinary citizens of the developed world.   http://www.huffingtonpost.com/branko-milanovic/winners-of-globalization-_b_4603454.html?utm_hp_ref=world …

Matt Ridley and “The Anglosphere’s long shadow”

Having brought about the ruin of the Northern Rock Bank[1], Matt Ridley has reinvented himself as a prolific writer of articles supporting a neolibertarian perspective on science and other issues.  I cannot compete with the many critiques of his science writing[1] but the other day I came across this article (click on title link):

The Anglosphere’s long shadow [2] by Matt Ridley
Published on Thursday, January 02, 2014, updated Thursday, January 02, 2014
Daniel Hannan argues that bottom-up liberty has deep roots

This week, in another article, Matt Ridley criticised scientists for cherry-picking their evidence but here we see Ridley raise the art of cherry-picking to Olympic standards.

His first assertion, that Anglo Saxon economics is really doing rather well and that Britain is on course to remain the sixth or seventh biggest economy until 2028 is based on just one economic forecast by the Centre for Economics and Business Research.  However he ignores a few inconvenient facts:

  • Anglo Saxon economics and bankers like Matt Ridley were directly responsible for the worst financial melt down in living history.
  • The banking system has not been reformed and most of the individual culprits are still in post (or just shuffled around a little).
  • The UKs current recovery is almost entirely dependent on increasing levels of private debt plus £1.5B of cash reluctantly issued by the Banks in repayment for PPI misspelling.
  •  If our current debt fuelled, house price bubble bursts the results will be unpredictable and potentially catastrophic.
  • Any increase in UK interest rates for whatever reason will result in large numbers of families defaulting on their debts with unpredictable but probably dire consequences.
  • UK productivity has gone from poor to worse since 2008. Output/hour 29% below USA, 24% lower than Germany & France.
  • The level of criminality in our financial services has been astounding and a number of legal cases are coming to fruition in the near future which are likely to see bankers actually going to jail.
  • The LIBOR rate was not the only rate fix – it seems that just about any rate that was capable of being fixed was fixed.

I could go on but don’t want to be ‘too pessimistic’ – the point is that Ridley’s glowing report on Anglo Saxon economics and the UK’s in particular just does not stack up.

Ridley rambles on about Dan Hannon’s book and the virtues of our common law system. He gives the overall impression that throughout most of British history the spoils of progress have been shared out pretty equitably and that we have avoided the excesses of ‘top down authority’.  Well this may well be true if, like Ridley, you are a member of the aristocracy, but for 99% of the population it has been somewhat of an up hill struggle throughout  history to win a meagre and now reducing share of the national wealth.  True we were lucky to escape the excesses of a Tsarist Russia or the violence of the French revolution and our system of common law may well be superior to the alternatives but ordinary people had to fight sometimes to the death in an attempt to get their fair share.  Ridley is talking as an aristocrat about the experiences of the 1%. He lives in an alternative reality where you make up your own narrative.

Throughout his article Ridley implies that it is too much government that is the problem, completely ignoring the fact that it is only through democratic governments that we have any semblance of fairness and justice. He makes no mention of any malign influence of big business or wealthy landowners like himself. Their misuse of ‘top down authority’ is wiped from the record.

Finally he espouses the benefits of free-trade agreements between nations again neglecting to mention that these agreements transfer power away from the civilising influence of our democratic institutions and pass them to large international corporations that will be able to run rough shod over the wishes of democratic governments and their citizens.  There will be no “bottom-up traditions” in an international free for all.  It will be “top down authority” from companies more powerful than individual nation states. 

The UK in the EU is part of a trading block that has the power (if it used it wisely) to negotiate free-trade deals from a position of strength.  (One is being negotiated right now). The UK on its own would be forced to negotiate free-trade deals from a position of weakness and without friends – we would be mince meat, particularly if Scotland follows the logic espoused by Ridley and leaves the UK.

In conclusion, Ridley’s article is shot through with holes from beginning to end and I would be more than happy to debate, based on facts, evidence and reasoned argument, any aspect of my response. I am happy to admit any errors in my logic, reasoning or sources of evidence.

As I find time I will provide links to sources of support for my assertions – something that is conspicuously absent from Ridley’s article.

 

 Sources:

[1] Matt Ridley – failed banker and rightwing neolibertarian: http://www.reasonandreality.org/?p=1468

[2] The Anglosphere’s long shadow Published on Thursday, January 02, 2014, updated Thursday, January 02, 2014: http://www.mattridley.co.uk/blog/the-anglosphere’s-long-shadow.aspx

UK productivity has gone from poor to worse since 2008. Output/hour 29% below USA, 24% lower than Germany & France.  http://www.theguardian.com/business/2013/sep/18/productivity-gap-uk-g7-output  Guardian Sept 2013

Mortgage rise will plunge a million homeowners into ‘perilous debt’:
http://www.theguardian.com/money/2013/dec/28/mortgage-rise-homeowners-perilous-debt

Conservative groups spend up to $1bn a year to fight action on climate change: http://www.theguardian.com/environment/2013/dec/20/conservative-groups-1bn-against-climate-change

Plans to create an EU-US single market will allow corporations to sue governments using secretive panels, bypassing courts and parliaments: http://www.theguardian.com/commentisfree/2013/dec/02/transatlantic-free-trade-deal-regulation-by-lawyers-eu-us

Help To Buy – the next big scandal / disaster??

Is this where we are in the life cycle of the housing bubble??:

Housing Bubble graph Oct 2013

 

It’s a funny old world.

A major and seemingly accurate criticism of ‘New Labour’ was that their economic “success” up to the time of the financial crisis of 2007 was dependent on a house price and private debt boom.  The Tories have made much of this although they were pretty quiet at the time.

When the Tories came to power they made a big deal about getting the public debt (caused by the financial crisis) down and how dangerous a debt fuelled expansion would be.  The subsequent cuts in government spending and public sector lay-offs resulted in it taking us longer to ‘recover’ from the crisis than it took to fight the second world war.   Most of us based in the real world wondered why it wasn’t possible to use loans (with an effective interest rate of zero) to kick start the economy by building or improving infrastructure and building homes. This would have immediately increased employment, increased tax income, decreased welfare benefits and hence reduced the debt at a faster rate as well as start to tackle the housing crisis. (The reality is that debt has in fact gone up under the Tories)

Strangely and suddenly (less than two years before the next election) we now have “Help to Buy”, a debt fuelled policy that will stimulate demand for non existent houses – there are two possible outcomes, either the policy will fail to help first time buyers (perhaps they will be too worried about taking on 95% mortgages for houses that they know they cannot really afford) or we will see house price inflation and another bubble, i.e. a debt fuelled expansion. It may only be in London and the south but what happens when the bubble bursts.  The banks and this time directly the tax payer will be landed with another batch of worthless sub-prime mortgages. Except this time when the unreformed, still too big to fail, banking sector comes to the tax payer for bailing out, the kitty will be empty and the  consequences are likely to be catastrophic.

 

What “Help to Buy” means:

  • Stimulating demand by increasing debt while doing nothing to increase supply (relying on delayed reaction of property developers who may just carry on waiting for the prices to rise further)
  • So just churning the existing housing stock
  • Prices rise so that first time buyers have to borrow even more to buy over priced houses they cannot afford – insanity
  • Prices rise so lower income “hard working people” forced out of the market – only the well off benefit.
  • Creating an economy not built on sustainable growth but on debt
  • High loan to value ratio (i.e. 95%) is single biggest predictor of mortgage defaults
  • Govt & state-rescued banks are luring naive first time buyers into imminent negative equity & debt servitude – a disaster waiting to happen
  • Independent experts agree house prices currently probably >25% overvalued. if house prices fall that much UK banks will need to be rescued by >£500 billion – a mother of all financial crises.
  • Government is encouraging first time buyers to take on bigger mortgages than in the previous boom – 95% v 83%
  • Generally, with house price / earnings ratios where they are now, a crash has to come within 18 mths or so
  • Climbing up a (housing) ladder with a huge sack of debt on your back is an accident waiting to happen
  • Off-balance sheet financing to subsidise banks & make houses (more) unaffordable. What’s not to like?
  • In 3 years if Help To Buy expires and base rate is 2-3% (or higher), then will the Tories pay the bill or the unlucky First Time Buyers or the taxpayers?
  • In 3 years time when Help to Buy ends ends and interest rates are normalised what will happen to the First Time Buyers?
  • Emigration is the only real option for first time buyers. Germany with low inflation, rent controls, low house prices sounds like a paradise.

 

As it is quite possible that I am the only person who reads this blog I have not bothered to provide references for the above points, but believe that I can do so if required.  Just use the reply box below to ask (click the comments link at the top right if the box is not visible). Please let me know if you disagree with my logic or any of the data.

 

 

The dangers of using the “Tax Payers’ Alliance” as a source of information

Latest message from John Glen:Taxpayersalliancegraph

 Here is the graph (from the link in the message above) that I am “reluctant to share with you”. It didn’t have a title so I have added one:

UK vs OECD Spending as % of GDP

spendingvsoecd1

It comes from the Tax Payers’ Alliance (TPA) and so unsurprisingly is designed to deceive us.

I will be kind and assume that the incorrect label for the black line is probably just a mistake because it should be labelled OECD Average.  But the expanded vertical scale is clearly designed to exaggerate the relatively small difference between the UK and the OECD average, 44% vs 40% for 2007 just before the Banking crisis.  It also misinforms by simply using the OECD average which hides the fact that the OECD  includes countries like South Korea – not a country we would normal compare ourselves with.

To shed some light on the debate I have shown below a graph that shows the full OECD data, not the TPA distorted version.

oecdspending

Interestingly, the UK seems to be pretty much in the middle.  Ireland had one of the lowest government spending figures – look what happened to them!

I feel no obligation to defend New Labour under Blair / Brown but I do object to current politicians trying to blame the mess we are now in on a previous government based on made up facts and distortions.   In the end reality always wins – as we are beginning  to witness.

 

Source of Figure 5 above:
http://www.americanprogress.org/issues/economy/report/2009/10/02/6746/comparing-public-spending-and-priorities-across-oecd-countries/