Government (ie. your taxes) at work

[tim123]

Actually, my alarm bells started ringing in 2002, soon after 9/11, when Tony Blair came on TV exhorting the nation to spend, spend, spend.

I don't believe that personal (unsecured) borrowing is the problem. Whilst there may be a few people who have borrowed to the extreme, the average is going to be less than 10K per person. This is manageable for the economy, even if not for some of the individuals.

It was the ridiculous level of mortgage borrowing that was the problem. This must have got to (an average of) 100 K per person. This was completely ignored by the "system" when the country's indebtedness is calculated,
because it was though to be backed by an equivilent asset value.

Of course that asset value was entirely bogus and much of the lending is not secured at all. And the amount swamps personal borrowing.

tim

[Cyberman]

I don't believe that personal (unsecured) borrowing is the problem. Whilst there may be a few people who have borrowed to the extreme, the average is going to be less than 10K per person. This is manageable for the economy, even if not for some of the individuals.

It was the ridiculous level of mortgage borrowing that was the problem. This must have got to (an average of) 100 K per person. This was completely ignored by the "system" when the country's indebtedness is calculated,
because it was though to be backed by an equivilent asset value.

Of course that asset value was entirely bogus and much of the lending is not secured at all. And the amount swamps personal borrowing.

tim

... but it was the secured debt on mortgages that was used to cover irresponsible borrowing on credit cards. Mortgage borrowing to pay off debt should never have been allowed, because this then encouraged further credit-card debt. This was the crux of the problem that was never addressed.

[chris79]

... but it was the secured debt on mortgages that was used to cover irresponsible borrowing on credit cards. Mortgage borrowing to pay off debt should never have been allowed, because this then encouraged further credit-card debt. This was the crux of the problem that was never addressed.

I agree with that.

[jkoder]

This reminds me of a time when I was working in Germany and I was trying to explain why the German economy was in a mess, and an arrogant german guy in the office said, 'you are just a programmer.... how can you know the economic situation in Germany.'

I think he was right too. Unless of course you have the knowledge of their UK chancellor equivalent as well as the intelligence and experience. It is possible you could make a good call about something but without having the scope it would always be a guess or a recommendation based on the small amount of info that's available to you, not to mention the fact they are thinking for a whole country, you just don't have the experience and knowledge to to think like this and why would you? You're an IT contractor from the UK

[jkoder]

The main problem is that we have people in power who are 'learning' on the job !!

I'd fully agree with that. I mean who was the last government to go through a "Credit Crunch"? Of course they are learning. You're in the right place for learning on the job, I am sure there are a lot of wingers on here.

[Cyberman]

I'd fully agree with that. I mean who was the last government to go through a "Credit Crunch"? Of course they are learning. You're in the right place for learning on the job, I am sure there are a lot of wingers on here.

You shouldn't be in government if you don't understand the meaning of 'Lender of the Last Resort' which obviously GB and AD had no idea about when the Rock came calling for a loan.

[jkoder]

You shouldn't be in government if you don't understand the meaning of 'Lender of the Last Resort' which obviously GB and AD had no idea about when the Rock came calling for a loan.

As they made such a schoolboy error, maybe you should take over? You obviously know a lot on the subject. I'll vote for you

[bobspud]

I think he was right too. Unless of course you have the knowledge of their UK chancellor equivalent as well as the intelligence and experience. It is possible you could make a good call about something but without having the scope it would always be a guess or a recommendation based on the small amount of info that's available to you, not to mention the fact they are thinking for a whole country, you just don't have the experience and knowledge to to think like this and why would you? You're an IT contractor from the UK

You talk about the government being expert in their field and us being novices. However how can they be experts when they change their civil service posts on a regular basis ?
A post lasts 2 years on average so our economy will be in the hands of a bod thats either about to clock off and wont be held liable for his watch or a chap thats just moved in and can't be hung for his predecessors mess. So that leaves paid advisors...
I have rarely come across a civil servant that listens to the advice given to them in the IT industry so why the hell should I think that the treasury could be any better?

I met a chap that was very relevant to this mess last year his opinion was that the traders did not need regulating or watching as on the whole they would cancel each others trades out over time... In his view it was about watching the heads of the banks as it was a higher game to be played....

Turns out the truth of the matter was the top chaps didn't have a clue that the dealers were buying poison assets in complex instruments, and Lehman's was in the toilet a few weeks on...

Yes there are plenty of very knowledgeable people around ...

[d000hg]

... but it was the secured debt on mortgages that was used to cover irresponsible borrowing on credit cards. Mortgage borrowing to pay off debt should never have been allowed, because this then encouraged further credit-card debt. This was the crux of the problem that was never addressed.

Quick question for those who have studied the numbers, although house prices were crazy and therefore average mortgages grew very large, was there actually a significant level of people not managing to make repayments? I can see statistically 100% or 105% mortgages will have a higher delinquincy ratio (if that's the right term) but even so was it significant?
Was all this mess due to people not affording their debts, or due to the finance sector getting scared this would be the case and acting accordingly?

[Cyberman]

As they made such a schoolboy error, maybe you should take over? You obviously know a lot on the subject. I'll vote for you

Actually, I learned about 'Lender of the last resort' as a schoolboy in 1972. That is what makes the country's plight so sad. We have people in power and authority that do not know their own jobs, especially Mervyn King, governor of the BofE.