Monday, March 16, 2009

A Return to the Thirties?

There was an episode, in that classic political television satire, 'The New Statesman', when the Government was trying very hard to lose the next election, because it knew, the country was in such a mess, that the best option was to let the opposition take the blame for trying to clean it up. It would then make a swift return to power at the polls in five years, once that same opposition had become unelectable as a consequence.

I rather suspect that's the position that the Government finds itself in today. There's certainly talk among people I know, that a change of Government would be a 'poison chalice' for the Conservative opposition, with the economy on its knees and a legacy of ten years of misguided experimentation which has caused such damage to the fabric of our society.

The media are headlining a new warning from the Bank of England today which reports that the country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month.

The Bank says that families with high debts could fall prey to the debt deflation trap. This means that the cost of their debts, which are fixed, would rise compared to average prices throughout the economy. While inflation erodes debts, deflation makes them relatively higher.

The report suggests that Britain is particularly at risk because there is a high proportion of families with significant levels of debt, and many of them are on fixed mortgage rate, which means they will not benefit from rate cuts.

Britons’ total personal debt – the amount owed on mortgages, loans and credit cards –now stands at £1.46 trillion, more than the value of what the country produces in a year.

Total personal debt has risen by 165 per cent since 1997 and each household now owes an average of about £60,000.

The Conservatives claim this is the highest personal debt level in the world but our Government may claim that it's worse in Zimbabwe, which is comforting!

Elsewhere, I'm seeing real fear among businesses as trade shrinks and more people I know are worrying about their future and that of their families as Government desperately tries to plug the gaps in the economy with more money.

I really hope that a collective effort on the part of the G20 Finance Ministers works but I suspect the pendulum of financial chaos has now swung so far in one direction that it will not rebalance itself to a point of equilibrium for a matter of years. By then, I'm certain we will have a new Government that will have to take all the blame for puttingthe economy and our broken society back on its feet again.

5 comments:

The Refuser said...

It seems like 1978 revisited I'm afraid. The public never seem to learn. Voting socialist is bad for your wealth. They all seem to end in ignominious failure when they run out of other people's money to spend. Mind you Brown seems to want to go down in history as the most incompetent PM/Chancellor in our history. The Tories must be worried by the scorched earth approach these scoundrels are taking. It will be interesting to see how the June elections play out. Maybe some one will step up and offer Brown the loaded revolver and bottle of whisky?

rockyraccoon said...

I visit the online bookies to see what odds they give for interest rates staying low.

I spoke to an insolvency practitioner last week who had just handled a voluntary bankruptcy for a buy to let landlady. She had 41 properties with DSS benefits tenants.

16 were pocketing housing benefits under New Labour's let them steal two months rent without consequence policy (called local housing allowance).

A problem is if you stand two months arrears then you can get the housing benefits paid direct to landlord. BUT that opens up a power to the council to recover overpaid benefits against landlord if his tenants are caught dole fiddling. So if the tenant is fiddling and has pocketed two months rent as well ... the landlord can end up four months rent out of pocket. Under New Labour the Council can recover overpaid benefits against the other honest tenants of the same landlord by stopping their housing benefits.

When the IP did the sums. equity, cost of dealing with 16 bad tenants who enjoy loads of protections thanks to New Labour etc .. The result was the landlady declared bankrupt and sent 41 sets of keys back to the building societies.

Average cost now of dealing with a naughty benefits claimant tenant is five months rent plus £800 Court fees.

The benefit of her going bankrupt is about a million quid better than struggling on as a socially responsible landlady.

Another problem is if she struggled on the cost of finance will increasingly become a form of indirect taxation as the banks get the money to repay govt plus make a profit from the fact they needed public money to bail them out.

Strange times. Do the Tories really want power this time round ?

rockyraccoon said...

I should add that Thanet Council seems to enjoy a good reputation as one of the most pragmatic in its admin of Local Housing Allowance. Getting landlords paid direct with minimal fuss. That way the tenant is made more secure in their home and the situation is less likely to get as unstable as the Northern town where the lady above just chucked 41 sets of keys back at the lenders. That is 41 families who, down the line, will face repossession by the Building Societies gaining vacant possession for auction.

Tony Beachcomber said...

Simon, The next general election is due in over a years time and you are coming up with excuses already should the Conservative win. That is hardly a vote of confidence in the competance of the Conservative leadership.
The problem we have is the capitalist system and the changes made in by the Reagan/Thatcher era (big bang), plus the capitalist disease unregulated greed.
As for the debt level which no doubt has been thoroughly researched, it should be remembered that some of this debt is backed by assetts like property etc., and not on a jolly up as most conservative commentators seem to suggest.

Anonymous said...

anon again!
Rent skipping could easily be avoided by the Landlord, if he insists on being paid directly by DSS, instead of them handing the money to a thief and hoping for payment. I too, suffered something similar, but went to the DSS to arrange guaranteed payment.

What are the Conservatives going action on the Youth Murder 'game'.
2 more killings of youngsters over the weekend... Labour's Mr Brown seems to be ignoring these in the Lord nelson faux pas (by looking at the problem through his glass eye).
How many more Soldiers have to die by Drug Pushers paid for bullets in Afghanistan? Surely 150 is far more than enough... shoot a few dealers here, let them know we don't want this sort of thing happening here. Then, wait and see.

There's lots more where that came from.... these were just the burning problems.