Banks or Government

I'm sure that's largely true, but such events can be read about in books. They do happen every three generations or so. All it takes is for a generation to forget just how treacherous a friend debt can be, and we're off to the races again. The longer ago the last such bubble, the easier perhaps to forget.

Perhaps back at the start in 1985. By the time a bubble is going, a greed-maddened public will simply replace any politicians who try to get in the way. I recall that even back then, Margaret Thatcher was advise to curtail the nascent housing bubble by removing mortgage interest relief. Having a good understanding of her public, she stated "Over my dead body".

That assumes that the economy is something under someone's control. It isn't. It's just a bunch of people trading with each other. To that extent the economy is a tool. If people misuse it, it will break.

People thought that by continually trading houses to each other using higher and higher numbers on the cheques, they could get rich. In a way they could, by borrowing against those higher values. Unfortunately all that debt still needed serviced, though some seemed to assume it was somehow money for nothing. It's no different from Fred and Barney becoming millionaires by selling each other their caves, swapping houses, and then each smashing up the million quid tablets.

It can't be stopped, but anyone who tries can be replaced.

They're not trying to help as yet. They're trying to resurrect the bubble. See the nonsense about restarting the securitisation markets so that we can go back to the banks making dodgy loans and then passing them onto someone else in a long chain of pass-the-debt-bomb.

They're nuts and they're throwing all our future earnings at a problem that has already solved itself. The securitisation markets were part of the problem and their death is part of the cure.

Demand will return to pre-bubble levels because people are going to have to relearn to save and spend rather than borrow-and-spend. The businesses which built up to service the borrow and spend mentality will have to shrink or vanish because they're making more than we now want. That's already happened with cars. It will happen with a great deal more. We'll all be the poorer if we continue to pay for people to make cars which they'll simply have to rent space for while they rust.

Most? No.

Most? No. Many? Yes.

They'll go bust and be reposessed eventually anyway. The reset is underway and cannot be reversed. It can be slowed though, in which case those businesses and people will lose yet more money befre they go under. Quite how that does the owners or people a favour escapes me.

I'd hardly call throwing trillions at the problem an "efficient" transfer. We might later need that cash to help people.

FoFP

Reply to
M Holmes
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And if the bank did go under, the savers would be protected, but the administrators would either have to call in all the mortgages or sell them on. Not all mortgagees are toxic, so why should they suffer?

Reply to
Simon

Maybe they should teach more about debt in schools? I certainly had to find out by myself.

I'm sure some sensible borrowing restrictions could be found. Like maximum LTV on house purchases, lenders should be forced to check whether the borrower can afford the loan etc..

Reply to
Mark

They'd sell them on.

In what way would a mortgagee suffer if the mortgage was sold on? They'd simply make the same payments to a different ultimate destination. The same could be said of mortgage securitisation. How many folks suffered from their mortgages being securitised?

FoFP

Reply to
M Holmes

I certainly believe they should.

Fannie Mae and Freddie Mac required conforming mortgages and they're still bust. There was a lot more awry in the bubble than high LTV and no-doc mortgages. If you went that route, you might also want to limit loans to 2.5 times income and require borrowers to save with the institution for two years to prove they could manage the mortgage. Then we'd be back to where we were before the bubble started.

It'd help of course, but I confidently predict that the 2060's bubble will see all well-meaning legislation put in place now repealed, sidelined, or suborned. I also predict the Golden Ticket won't be domestic housing next time, and since that's what everyone will be watching for...

FoFP

Reply to
M Holmes

Unless the terms of the new owner of the mortgage are significantlt worse, or even worse, what is to stop the administrator simply calling in the loan.

Reply to
Simon

I agree that the government strategy is simply to return to the previous bubble times.

This is why I am in favour of a different approach that avoid large scale bankruptcy and repossessions. If people sit around doing nothing and live off benefits that isn't doing any good.

If they are not going to help people stay in their houses and keep businesses going via loans then they would need to stop benefits and force people back to work at lower wages rather than do nothing on benefits.

Reply to
PeterSaxton

Because it also takes the money away from the people who were reckless.

It would be impossible to just charge the reckless because of the new "namby pamby get off free in a year" bankruptcy laws that we now have.

tim

Reply to
tim.....

They promised all deposits.

Time will tell. As I haven't seen the banks lending list I can't tell. I suspect you haven't seen this list either

Agreed, but then UK PLC would be out of steel making. If the banks went bankrupt we'd have to re-establish them

I suggest you try finding sensible homes for a million in 50K packets (no I don't have a million)

Only in the short term. In a couple of years I'll be getting 5% on my deposits and they'll be living in a house with a 100K NE. Some will go bankrupt, many (hopefully) will grin and bear it.

I think it will still be over in 2 years. The Japanese situation is strange, very strange!

tim

Reply to
tim.....

How are these mortgagees suffering ATM?

tim

Reply to
tim.....

The fact that as houses are illiquid, they wouldn't get their money. (Worse case is the borrower would hand you the house instead and go bankrupt)

tim

Reply to
tim.....

No, the worse case is that the home owner will not be able to find alternate finance, the administrator will sell the house from under you and you are homeless.

Reply to
Simon

I hope it's something useless like tulip bulbs, not something my children need.

Reply to
Mark

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