(Daily Doom) UK on a knife edge

[Spacecadet]

Ah well, horrific.... a few people will be burned out... the ones who bought in the last 2 years thinking that it will go up forever... the majority will just see their dreams of becoming rich in a few years time vanishing (hardly can feel too much sympathy for that) and most of them will stop feeling like millionaires only because they have one house. In reality young people and the ones on an average income will finally be able to get on the property market. In a few words... let the crash roll ... it's for the benefit of the country....

you forget about all the baby boomers who are now hitting retirement age and don't need to move out of their now empty 4 bed detached houses

[BlasterBates]

Ah well, horrific.... a few people will be burned out... the ones who bought in the last 2 years thinking that it will go up forever... the majority will just see their dreams of becoming rich in a few years time vanishing (hardly can feel too much sympathy for that) and most of them will stop feeling like millionaires only because they have one house. In reality young people and the ones on an average income will finally be able to get on the property market. In a few words... let the crash roll ... it's for the benefit of the country....

...no not only individuals, which would be bad enough and the buzzword here is "equity withdrawals" but also building soc's and banks going insolvent. In other words the UK will have to set about paying off that huge debt.

[PAH]

Interesting programme last night - the very last part is what worries me the most - Credit Default Swaps - basically an insurance policy on a company going bust.

The trouble is these insurance policies are oversold to many times the market cap of the companies they are based on. IF a big FTSE100 company goes down in the coming downturn, then many banks are going to have to pay out on their CDSs - potentially worsening the downturn.

These debt products are all very well in a known market, but in these uncertain times nobody knows what the hell is going to happen.

Incredible how the Bank of England and FSA were so ignorant of what has been going on. Though the banks have been a bit naughty using products outside of regulation to allow them to gamble to such massive levels.

I particularly liked how it was shown that a lot of the mismanagement is born out of brownstuff's change to split powers between the Bank of England, FSA, and itself so no one knows what the hell is going on and who should be in charge of taking action.

[PAH]

...no not only individuals, which would be bad enough and the buzzword here is "equity withdrawals" but also building soc's and banks going insolvent. In other words the UK will have to set about paying off that huge debt.

How could they (or should I say we) possibly pay it off if it came to that? Devalue the pound somehow?

[HRH]

Does anyone here seriously believe we are heading for a late 80's/early 90's style property crash? Not merchants of doom, just honest opinions pls.

[BlasterBates]

The doom scenario begins

[NoddY]

My view is that we are at 'peak debt'. This is coincides with strong employment, a stable society and high productivity. The surplus value of labour is also high. Of course this is not sustainable.

It will soon become a mental strain on the little people to work hard for an ever increasing liability (their house); some will 'give-up' leading to defaults, but most will slug it out until the currency becomes depreciated (inflated) or the value of their labour increases relative to their liabilities.

The 2001-2007 house price bubble was really the last gasp of breath from a dying Britain; a culmination of managed decline since 1914.

[PAH]

Does anyone here seriously believe we are heading for a late 80's/early 90's style property crash? Not merchants of doom, just honest opinions pls.

It could be worse than just property. Apparently commercial loans are also at risk, hence the real possibility of a full-blown recession.

Overall no-one can predict the future, just plan wisely so it doesn't catch you unawares if the worst (or anything like it) does happen.

My main long-term worry is the affect this will all have on pensions, seeing as pension companies are also said to have invested heavily in dodgy sub-prime products. I don't suppose private pensions are protected are they?

[Diver]

What we need is a prolonged housing value crash. loads of cheap houses for me to BTL then a short boom so that I can sell off all my property and retire in comfort to my farm in Spain.

[Francko]

...no not only individuals, which would be bad enough and the buzzword here is "equity withdrawals" but also building soc's and banks going insolvent. In other words the UK will have to set about paying off that huge debt.

I still cannot see how this is such a big problem for the average bank. People have a debit with the bank. Sure some of them will not be able to repay and the bank will suffer a lost. But honestly, how many of them will need to have their houses repossesed? Not many, only the ones who foolishly bought a studio flat in London for 400k thinking that next year will go up to 500k or the ones who believed to be rich and bought 7 properties with the minimum deposit and took a variable rate mortgage. Yet I don't see this to be a big scale problem. The majority of people will pay back their debt and the final result will only be that the majority of people are more poor and the banks richer. If there was unemployment perhaps this might have turned nasty, but the economy is doing well and people will be able to pay their debts.