Households on 'money knife-edge'. Much worse to come ............

I know from reading and hearing about it from several reputable sources that the level of consumer debt has almost doubled from 1997 to 2006 and now stands close to $1.2 trillion.

I'm sure it's nothing to worry about though as they said on the bridge of the Titanic upon first spying the iceberg ;-)

Reply to
Crowley
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It's limited by failing to draw past comparisons that's true but it's generally a very gloomy report. The FSA aren't trying to flog us anything are they so can we assume they are reasonably neutral and objective in their expressions of concern ?

=========Thats my point, how do you know its gloomy? maybe all the figures they mention were 10% worse 5 years ago so there has been an improvement?

Reply to
Tumbleweed

Is this a wind-up ? The whole tone of the survey was gloomy wasn't it or am I living in a parallel universe where gloom = joy ? I know you're a "glass-half-full" type TW while for me it's often "half-empty" but surely our perceptions can't differ that much ?

Even the title hints strongly at the contents ............. 'Households on 'money knife-edge', though I agree the provision of past figures would have been useful as a comparison tool.

Reply to
Crowley

No wind up, serious point, unless you have comparative figures, how do you know it is gloomy?

Take their figures on pensions,and think about the past. Was it 42% didnt have pensions they thought would be sufficient? Put it another way, 58% do,and whats more, do you think that 100 years ago, 58% had sufficient pension provision? Probably not. What about 50 years ago? Probably not. What about 10 or 20 years ago. Dunno. Thats the point, without comparisons, how can you say its gloomy?

Suppose that only 10% in Holland or France have sufficient provision? Then we are looking good. But if its 85% we are looking bad. Again, without the comparative info, those figures mean nothing.

Here's another comparison. I live in a house, and owe, on a mortgage, probably several times more than my grandfathers total lifetimes earnings. Is that gloomy (I owe so much?) or good (I live in a much better house, most of which I own, than he did or ever had prospects of so doing,and I can pay the mortgage off eventually so I'll one day own the house) That mortgage is part of the 1.2 trillion UK personal debt you mentioned* So, now is it a bad thing?

Tw

*I think it was you but if it wasnt, you would have posted it if you'd seen it :-).
Reply to
Tumbleweed

The majority of us will survive a financial downturn relatively unscathed because (if we don't lose our jobs) we can meet our financial commitments without risk of repossession, bankruptcy etc. It seems from the FSA survey however that a sizeable minority are now in a different boat entirely, not that I have much sympathy for those irresponsible enough to take on debts they cannot meet.....................

"Two million households are living on a financial knife-edge, susceptible to an economic downturn, a Financial Services Authority (FSA) survey has suggested.

A further half million households are already having difficulty paying bills and meeting debts, the report found............."

2.5 million households, that's a sizeable minority. Aren't there about 12 million households in total ?
Reply to
Crowley

I suspect through most of modern times its always been similar, eg a large percentage of the pop 'on a financial knife edge', susceptible to losing a job and being evicted from their (mostly rented) properties. Remember 'cathy come home' from the 1960's, a period of supposed properity? Amd wasnt Shelter founded in the 1960's? is there much difference between someone in say the 1960's losing their rented house, and someone now losing their mortgaged house?

Reply to
Tumbleweed

Isn't your position just as simplistic? Are there no irresponsible lenders? Does society never have any impact on crime?

There are some examples of irresponsible lending that are beyond the pale IMO - though I'd focus more on the lenders who charge people below the poverty line 173% APR interest rather than the mainstream credit card lenders.

Thom

Reply to
Thom

Behind the scenes there have been growing misgivings amongst financial movers and shakers for the past couple of years concerning levels of debt amongst the western and anglo-saxon conomies. However nobody wants to get the blame for precipitating a crisis by calling one. Thus we have Greenspan and Bernanke precipitating emergency interest levels (one percent) to prevent a US deflation (and incidentally producing another US asset bubble, which was what got them there in the first place). We have behind the scenes bankers and leaders meetings discussing how to repair the US trade and budgetary deficits. We have the European Bank taking the kinds of action the US Federal reserve has been too frightened to take. We have bond yield curves inverted. We have gold rising in price at rates unprecedented for decades.

Few of the most famous have been willing to call a spade a shovel. Amongst those who have are Warren Buffet, the world's most successful investor. He warns that a crisis and Dollar collapse (followed by a massive interest rate hike and land/property/bonds/shares collapse) will be precipitated in the derivatives markets. The world's largest fund manager, Bill Gross predicts somewhat similar harbingers of doom. Finally Professor Kindleberger, arguably the world's greatest expert on bubbles, argued that we'd entered the largest bubble the world has ever seen and that large bubbles always end badly.

Something bad is coming and it will see some currencies washed from existence.

Reply to
M Holmes

Nope. Only towards the ends of credit cycles does the debt to GDP ratio grow monotonically.

Indeed, but you're not thinking in long enough terms. A credit cycle lasts around 70 years. For how much of that has negative savings existed, and how are those years placed in the cycle?

Not really. We've known for two or three decades that the pensions crisis was inevitable in a system that spends the contributions of today instead of holding investments against liabilities. It was called a Ponzi scheme in the 1960's. It's just due to demographics that we've finally found that the pot is empty.

Yup. In fact I note that the scapegoats for the coming crisis are already being lined up:

Banks who lend too much. Unscrupulous estate agents. Reckless hedge find managers. Unfathomable derivatives traders.

We'll probably see speculators added to that, and anyone who makes a profit out of what's coming better be able to hide it well or they'll find themselves in jail with the government seizing their assets (in my view a very likely fate of the hundreds or thousands who are later discovered to have lied about income on mortgage forms). What is constant in every other cycle is that people will not blame themselves for their predicament and governments certainly won't accept blame. Thus those who made money in the bubbles will be held responsible and their faults and weaknesses will be sought out and exposed while their assets are seized to fill abyssymal cracks in the financial system. It happened to stockjobbers in the 1720's. It happened to canal stock traders and later railway barons. It happened to the shakers of Wall Street in 1929 and it happened to the junk bond traders in the 1990's. It's happening to the folks at Enron now, and in a few years, it'll be happening to the estate agents and BTL landlords who made too much obvious money and who can be proven to have cut corners.

My suspicion is that the smart money already realises this and is getting out, hiding the stash, and living the quiet life. Not all those closed estate agencies went bankrupt.

Indeed. The trouble is that that point is what used to be called "K-Winter".

I've been on holiday, but I've been waiting for some time for ructions in bond markets as inverted yield curves whip out again. It looks suspiciously as if that's now happening and it's a much commented-upon marker that the party is over and the piper is bringing us his bill.

What happened in Iceland (interest rates hiked to 11.5% to cover a currency crisis and as a result the killing of a housing bubble) and Arab stockmarkets (crashes) are almost certainly the first evidence of the collateral damage that's to come.

The bears are probably about to be proven right, though I'm certain that there'll be interesting new wrinkles that none of us will have spotted.

FoFP

Reply to
M Holmes

Why? Those guys are capitalist heroes. They're risking their capital by being the only people who will lend those people money at a market-clearing rate.

It's the folks lending make-believe money to the mass-markets who are landing us all in the shit. Though admittedly they too are victims of the bubble.

FoFP

Reply to
M Holmes

There has not been any currency crisis (the króna is coming back down to it´s normal level after having been unusually high for a time) and neither has there been a housing bubble, the housing prices have been rising but that is not unusual in an expanding economy. The Icelandic economy just got the highest marks possible from the Moody´s just to show how far from the truth the reports of impending crisis are.

Reply to
sigvald

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