UK economic recovery worse than Great Depression, and no sign of improving

HAMISH_MCTAVISH

Thrugelmir wrote: »

The real problem is that mortgage debt effectively doubled between 2003 and 2007 from £600 billion to £1,200 billion pounds.

OK, you're going to have to explain why that's a problem.

Mortgage debt of a Trillion pounds represents somewhere around a 25% LTV ratio on the total value of UK residential property, even at today's low prices.

And debt service for mortgages is at record lows in terms of percentage of income. And even in 2007 was nowhere near the all time high, which was in the early 90's.

Going to take a generation 15 -25 years for debt levels to correct back to a sustainable level. At the moment the BOE is helping to fund the liquidity thats required to keep the heavily exposed mortgage lenders (banks) afloat.

Ahhhh, that's why you think it's a problem.

Because to your Luddite way of thinking, all mortgage debt must be internally funded without access to wholesale markets.

nearlynew

House prices are a matter of judgement.

But the debt is real.

Generali

HAMISH_MCTAVISH wrote: »

OK, you're going to have to explain why that's a problem.

Mortgage debt of a Trillion pounds represents somewhere around a 25% LTV ratio on the total value of UK residential property, even at today's low prices.

And debt service for mortgages is at record lows in terms of percentage of income. And even in 2007 was nowhere near the all time high, which was in the early 90's.



Ahhhh, that's why you think it's a problem.

Because to your Luddite way of thinking, all mortgage debt must be internally funded without access to wholesale markets.

The problem of reliance on wholesale money market funds was seen in 2008:

http://www.bos.frb.org/news/speeches/rosengren/2012/032712/032712.pdf

Pages 7-9 cover it very well.

To paraphrase Mr Rosengren (Head of the Federal Reserve Bank of Boston), the problem with money market funds is that they don't have the stable core of depositors whose money tends not to get moved even in a crisis and they don't have access to Central Bank funds as a rule.

Wholesale funding is great right up to the moment when it isn't any more. In 4 weeks(!) in 2008, $500,000,000,000 or about a quarter of prime money market funds were withdrawn. We are still feeling the effects of that liquidity crisis today, exacerbated by crazy levels of Government borrowing.

HAMISH_MCTAVISH

Generali wrote: »

Wholesale funding is great right up to the moment when it isn't any more. In 4 weeks(!) in 2008, $500,000,000,000 or about a quarter of prime money market funds were withdrawn.

Wholesale funding is vital in a global economy.

It allows efficient allocation of capital to satisfy demand, without creating the artificial blocks to growth which exist under a deposit funded regime.

A permanent return to the sort of obstructive, backwards, inefficient lending practices of the old building society days is completely impossible.

It would destroy any possibility of sustainable recovery.

We are still feeling the effects of that liquidity crisis today, .

We are indeed.

It's complete insanity that a liquidity crisis was allowed to escalate into a solvency crisis by the "too little too late" approach of politicians and central bankers.

Rosengren's comment that central banks added liquidity "eventually" is very telling.... Although I disagree with his typically American thoughts that markets should find alternate means rather than central banks to overcome such liquidity crises in the future.

Liquidity is the lifeblood of an economy and it's absolutely incumbent upon government and central banks to ensure liquidity is never disrupted.

That it was is a failure of policy, of government, and of central banks.

ILW

HAMISH_MCTAVISH wrote: »

Wholesale funding is vital in a global economy.

It allows efficient allocation of capital to satisfy demand, without creating the artificial blocks to growth which exist under a deposit funded regime.

A permanent return to the sort of obstructive, backwards, inefficient lending practices of the old building society days is completely impossible.

It would destroy any possibility of sustainable recovery.



We are indeed.

It's complete insanity that a liquidity crisis was allowed to escalate into a solvency crisis by the "too little too late" approach of politicians and central bankers.

Rosengren's comment that central banks added liquidity "eventually" is very telling.... Although I disagree with his typically American thoughts that markets should find alternate means rather than central banks to overcome such liquidity crises in the future.

Liquidity is the lifeblood of an economy and it's absolutely incumbent upon government and central banks to ensure liquidity is never disrupted.

That it was is a failure of policy, of government, and of central banks.

What is your definition of a recovery?

MiserlyMartin

HAMISH_MCTAVISH wrote: »

Yes it was.:cool:

Your "solution" is mental.

Only for those who were 'mental' enough to have piled into BTL greed.

MiserlyMartin

HAMISH_MCTAVISH wrote: »

OK, you're going to have to explain why that's a problem.

Mortgage debt of a Trillion pounds represents somewhere around a 25% LTV ratio on the total value of UK residential property, even at today's low prices.

And debt service for mortgages is at record lows in terms of percentage of income. And even in 2007 was nowhere near the all time high, which was in the early 90's.
.

You really are insane if you think that.