It`s different this time

Pobby

Sure is! Just how many times did i listen to that one in the early noughties? Why, I asked, how have house prices suddenly shot up and why won`t they come down with a bump? Well it`s different this time they replied. By 2005 I realised that the " value " of my modest home in the city, a few years earlier, would have bought me a fabulous huge pad with loads of land out on the moors.

So here we are in recession land and they were right, it`s is different this time. Last time round IRs hit 15%, oh how we craved for a benign 8% just to give us a chance. Well here we all are, IRs at .5% and from where I am sitting , it`s doing diddly squat to help matters. I`m getting really rather scared that the system is broke and they have no idea how to fix it.

Over the last decade or so debt is the new wealth. I have received a veritable rain forests worth of correspondence begging me to take out a new credit card, cheques have arrived through my door just asking me to use them and the balance would be debited to my account. Phone call after phone call asking me to borrow money one way or another.

What really gets to me is that many had warned of the dangerous territory we were treading into. Books have been written on the subject yet no steps were taken earlier on to attempt to control this orgy of lending. Surely we had a warning in the late 80`s after Queen Margaret let go of the brakes in the banking industry. Certainly it ended with a backlash that took many years to recover from. Seems to me we have gone down the same path but have ventured further.

So guess they were right. It`s different this time.

ad9898_3

It is different this time for sure.

1. Insolvent banks
2. Economy, on the ropes despite .5% rates
3. Inflation of essentials, deflation of wages.
4. QE, which if it works will cause even more inflation.
5. Massive, and I mean massive tax bill, just around the corner.

House prices will fall by 50% before this is over. It's almost a dead cert. now.

scousethife

It aint different cos everyone is still greedy.

Allways have been allways will be

treliac

scousethife wrote: »

It aint different cos everyone is still greedy.

Allways have been allways will be

Greed can be expressed, when there's a chance of achieving it's desires, even if by the smoke and mirrors of using non-existent capital. That's going to change.

The mindset will change gradually. It took a while to get to this place, it'll take a long while to get anywhere better.

scousethife

treliac wrote: »

Greed can be expressed, when there's a chance of achieving it's desires, even if by the smoke and mirrors of using non-existent capital. That's going to change.

The mindset will change gradually. It took a while to get to this place, it'll take a long while to get anywhere better.

Ive bent my cash cars so I keep putting my glass on it to un bend it.

It aint working

bendix

Pobby wrote: »

What really gets to me is that many had warned of the dangerous territory we were treading into. Books have been written on the subject yet no steps were taken earlier on to attempt to control this orgy of lending.

Why does everyone insist on calling it an orgy of lending. It's better described as an orgy of borrowing. Consumer incontinence has fueled this situation; the banks had no choice but to follow suit and service that desire otherwise they would have gone out of business.

Calling it an orgy of lending does serve one purpose though; it moves responsiblity away from ourselves onto a much more convenient bogeyman - the banks.

One day we will grow up and grasp the concept of individual responsibility.

bendix

Actually it isnt all that different. As someone else said, humans remain greedy. Markets are no more than a constant struggle between fear and greed. At the moment, fear dominates but you can't keep greed down. It will return as robust as ever.

Banks will decide they need to make money again and get greedy by lending. People will get greedy again and start borrowing and buying. Share investors too and, unlikely as it might seem right now, property buyers down.

Human nature is the one constant in global history - it always prevails.

Pobby

bendix wrote: »

Why does everyone insist on calling it an orgy of lending. It's better described as an orgy of borrowing. Consumer incontinence has fueled this situation; the banks had no choice but to follow suit and service that desire otherwise they would have gone out of business.

Calling it an orgy of lending does serve one purpose though; it moves responsiblity away from ourselves onto a much more convenient bogeyman - the banks.

One day we will grow up and grasp the concept of individual responsibility.

Point taken. However this cuts both ways. The finance industry has been hell bent on selling debt, sweetly packaged, heavily advertised and aimed often at those who have little or no chance on ever being able to pay it back.

Imagine this. An 18 year old boy is offered a £15 grand loan, total repayable £24,000 to buy a car. He is training to be a roofer. Does that make sense? It doesn`t to me yet it happened to my nephew and all the persuasion in the world didn`t stop him taking up the offer. He is now currently unemployed.

A middle aged couple, friends of mine with a poor credit history are offered a mortgage at a sub prime rate, the bank even lent them a deposit. They are not high earners and a few months into the mortgage they are struggling to make the repayments.

OK, back to your point. Yes they signed up for this. In both cases the parties involved were not money savvy. There fault you might say but I do feel the lenders share some responsibility.

Go back to the 70`s. My wife and I both had to jump through hoops to obtain a mortgage. Both of us young in a developing career path. Lenders then were far more careful to whom they lent money to.

Imho had lenders stayed cautious and prudent in their decisions a lot of this mess would have been averted.

julieq

There's just as much irrationality in the view that this recession is different from previous ones as there was in the idea that house prices, tech shares, tulips, shares in the South Sea company or whatever were different from previous paradigms.

Most people look along straight lines and extrapolate blindly. It's basically a herd mentality. This recession will end, just like all of them have, and quicker than you think. It wasn't that long ago that countries like Russia were on the brink of economic collapse, they seem to have done alright for themselves since. It's a cycle.

It's not different this time. It's severe but not the apocalypse. All the people whinging about not getting nice big safe interest rates because of the "f eckless chavs" are ignoring the fact that what paid for their nice big safe interest rates was the explosion in credit fuelled consumer spending. They did NOTHING apart from save to earn the money they claim is theirs by right, so just where is it supposed to come from? You can't divide this into groups of the virtuous and invirtuous, because it's a closed, interlinked system.

bendix

Pobby wrote: »

Point taken. However this cuts both ways. The finance industry has been hell bent on selling debt, sweetly packaged, heavily advertised and aimed often at those who have little or no chance on ever being able to pay it back.

Imagine this. An 18 year old boy is offered a £15 grand loan, total repayable £24,000 to buy a car. He is training to be a roofer. Does that make sense? It doesn`t to me yet it happened to my nephew and all the persuasion in the world didn`t stop him taking up the offer. He is now currently unemployed.

A middle aged couple, friends of mine with a poor credit history are offered a mortgage at a sub prime rate, the bank even lent them a deposit. They are not high earners and a few months into the mortgage they are struggling to make the repayments.

OK, back to your point. Yes they signed up for this. In both cases the parties involved were not money savvy. There fault you might say but I do feel the lenders share some responsibility.

Go back to the 70`s. My wife and I both had to jump through hoops to obtain a mortgage. Both of us young in a developing career path. Lenders then were far more careful to whom they lent money to.

Imho had lenders stayed cautious and prudent in their decisions a lot of this mess would have been averted.

It is not the banks' job to protect people from themselves. It is their job to lend money at a higher rate than they pay to savers, thus securing a return for their shareholders. They will do this by seeking to lend money, usually with a relatively safe level of collateral to secure the loan.

One can assume that in both cases you mentioned they did just that, with the understanding they can receive their money back or take the assets in their place.

It is, however, the borrower's responsibility to work out - as rational, self-interested human beings - to make decisions based on sound criteria. Do I need this thing? Can I afford it? Can I borrow, and can I repay a loan if I do borrow? You dont need to be financially savvy to do that. You need to have the thinking processes slightly higher than a tadpole. It really isnt rocket science.

I'm sorry to be harsh, but I am so fed up of hearing examples like this and blaming the banks for giving people what they asked for, yet assigning no blame to a generation or two of irresponsible, greedy, gotta have it now, financial illiterates.

Pobby

bendix wrote: »

It is not the banks' job to protect people from themselves. It is their job to lend money at a higher rate than they pay to savers, thus securing a return for their shareholders. They will do this by seeking to lend money, usually with a relatively safe level of collateral to secure the loan.

One can assume that in both cases you mentioned they did just that, with the understanding they can receive their money back or take the assets in their place.

It is, however, the borrower's responsibility to work out - as rational, self-interested human beings - to make decisions based on sound criteria. Do I need this thing? Can I afford it? Can I borrow, and can I repay a loan if I do borrow? You dont need to be financially savvy to do that. You need to have the thinking processes slightly higher than a tadpole. It really isnt rocket science.

I'm sorry to be harsh, but I am so fed up of hearing examples like this and blaming the banks for giving people what they asked for, yet assigning no blame to a generation or two of irresponsible, greedy, gotta have it now, financial illiterates.

Yes right and hav`nt the banks done a good job of that. Just have a look at the debt free wannabe board to see how lending " based on sound criteria " has ended up . Or maybe the nationalisation of Northern Rock. Bet their share holders are loving their return on investment.