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Britain’s Next Credit Crunch on the Books Already

Pivotfarm's picture




 
 

Let’s imagine that you’re a thirty-something, just bought the first house and now it’s 2016. The elections in the UK will have taken place, leaving the country in disarray because there will be a hung parliament yet again and the Conservatives will have probably tied the noose with UKIP and Mr. Farrage. Europe will be teetering on implosion because even the French will be wanting to get out of it after voting for Marine Le Pen and the anti-European Front National (always surprising how you can be against something and yet work in it). But, there are worse things happening. That thirty-something will be experiencing the second credit-crunch in their so-far short life. They’ll be suffering from the consequences of yet an over-inflated real-estate market that will have fuelled nothing but the bank accounts of the richest.

Crunch Time

Crunch time will hit in Spring 2016 according to some economists in the UK. That’s the time when the British will suffer the consequences of the rising annual house-price rate in the country standing at 17% per year. Oh, the people are rejoicing that their houses are worth hundreds of thousands and increasing every year. They are rejoicing that the Cameron government has got the unemployment rate to below 7%. But what about the part-time workers, Mr. Cameron? That was the point that the Governor of the Bank of England, MarkCarney stated that he would raise interest rates. Raising interest rates might be a recipe for disaster some will say, but Carney’s not there to take political decisions; he should be taking and implementing policies that are independent of politics. If only it were true, however! The people are rejoicing but they will be the ones that end up with egg on their faces.

When the key rate of the Bank of England reaches 3%, which according to the Deputy Governor of the BankCharlie Bean will take place in about 2018 (after rising in small increments over the next few years), then one in every three borrowers in the UK will be at breaking point in their finances.

The Resolution Foundation in the UK has calculated that there will be 770, 000 households in the country that will find it impossible to remortgage and to renegotiate their loans for property because they will be low-income or self-employed people. Perhaps the difference this time round will be the mere fact that the governments around the world have done everything in their means to shore up the banks and make them money rich. It’s not the banks that will stop lending this time because they won’t have the money. It’s simply the banks that won’t lend because they won’t trust your solvability. The second credit crunch in the UK will be just the one that gets felt by the ordinary person. What will ensue will be red-letters, final warnings, repossession, forced sale and the collapse yet again of the market. The politicians, including populist scare-mongering UKIP will be standing around saying “oh, my, my, whatever happened this time?”. They will never learn.

• The UK’s Financial Stability report in November 2016 showed that 16% of mortgage debt was owned by households that are cash-strapped with only £200 at the end of the month after paying out all bills. 
• Those very same households have a mortgage to the tune of £100, 000 and they have a borrowing rate of3.6% (variable, of course).

But, it won’t just be the mortgage-borrowers that won’t be able to pay; it will be the entire country. The British borrowed all over the country in the great years prior to the 2007 crash. They were earning so much that the good times were supposed to never end. Borrow today and keep borrowing a I’ll always have the money to pay it back was the order of the day back then. But, it wasn’t like that. Then, even when the credit-crunch came the lenders (loan sharks) were granting just under 50% of all loans for property to people without even asking them to prove their income. But, even David Cameron has confused debt and deficit of the UK, telling people that he is “paying down Britain’s debts”. His administration is making an attempt to down just the deficit; British debt will continue to rise and will explode with the 2016 credit crunch.

• National Debt stood at £1,185 billion in 2012/2013.
• That’s £18,606 per person in the UK. 
• In 2013, the UK coalition government borrowed £91.5 billion, but it only invested £23.7 billion in big projects to boost the economy.

The last on out needs to turn out the lights, please.

Originally posted: Britain’s Next Credit Crunch on the Books Already

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Sun, 06/01/2014 - 19:49 | 4814727 monad
monad's picture

There was a time,
When Rome was a Republic,
When anyone proposing a new law
Pitched it to the senate,
Standing before them with a bowstring around their neck.
If the proposed law was not accepted, the asshole was strangled on the spot with that cord.
Rome had 12 Tables of laws, now lost.
They were not about to recarve the books...
Kill the lawyers.
Kill all the lawyers NOW.
Then kill all the liars...

Sun, 06/01/2014 - 12:04 | 4814327 shovelhead
shovelhead's picture

I think it was one of those Australian fellers that said something about unbridled credit expansion leading to only one place.

The shitter.

Or something like that.

 

Sun, 06/01/2014 - 11:12 | 4814191 AdvancingTime
AdvancingTime's picture

The economic news flowing from the UK has been spun to give the impression of robust growth. How do you explain the pick up in growth to a mature country that has been struggling under debt? In general the UK economy is not particularly competitive, over-weighted in the service sector and global finance it is vulnerable to problems that surface throughout the world.

As usual we must look deeper into the facts to get a clear picture of what is really happening. It now appears much of the recent strength comes from the fact that thousands of Britons are receiving compensation for Payment Protection Insurance (PPI).  Most Americans reading about the pickup in Britain's economy never even heard of the PPI. The total paid out so far, £13.3bn or about 22 billion American dollars has been a huge economic boost. More about this in the article below.

http://brucewilds.blogspot.com/2014/02/uk-economy-flood-of-questions.htm...

Sun, 06/01/2014 - 11:23 | 4814215 SAT 800
SAT 800's picture

Payment Protection Insurance ? that's brilliant ! Someone should point this out to Obama immediately; we should get this going right away. Stimulus !! Unicorns and sunbeams forever !

Sat, 05/31/2014 - 20:29 | 4813443 The man with po...
The man with pointy horns's picture

Like interest rates will ever rise in this country. I bet this author is some Yankee tosser.

Sat, 05/31/2014 - 15:07 | 4812791 Cosworth
Cosworth's picture

Cameron n the banks here are up obamas and Americas arse, whatever happens to USA will have grave consequences here.

Sat, 05/31/2014 - 16:48 | 4813000 Jumbotron
Jumbotron's picture

The cracks are showing up now all over.

2020...give or take....the wheels really fall off and our long, collapse to equilibrium picks up steam.

Sat, 05/31/2014 - 15:50 | 4812861 Winston Churchill
Winston Churchill's picture

The GBP will die with the USD.

Neither will make it to Spring 2016.

Sun, 06/01/2014 - 11:26 | 4814221 SAT 800
SAT 800's picture

I respectfully disagree; the GBP is a currency without a visible means of support. it's hugely over-valued. it'll implode first. The UK doesn't even HAVE an economy. it's a kind of "old timey england" theme park for tourists, and the GBP is only supported by the Financial Industry in the City; a frail reed, very vulnerable to many ill winds.

Sat, 05/31/2014 - 13:23 | 4812657 Kreditanstalt
Kreditanstalt's picture

"• In 2013, the UK coalition government borrowed £91.5 billion, but it only invested £23.7 billion in big projects to boost the economy."

Maybe that's because the rest was blown on social welfare spending, military toys, new government departments, the surveillance state/"security" mania and foreign adventurism...?

But moreover this writer REALLY BELIEVES that government spending can "boost the economy"...Hahahahahahahaa....! LOL

Sun, 06/01/2014 - 11:27 | 4814223 SAT 800
SAT 800's picture

Yes; I upvoted you. the article is based on conventional sutpidity. that's a hell of a screen name you've got.

Sat, 05/31/2014 - 13:01 | 4812640 killieboy
killieboy's picture

'Populist' is what lefties say when a position is popular but they disapprove.

Sun, 06/01/2014 - 12:17 | 4814354 shovelhead
shovelhead's picture

And usually they disapprove because it is a rational reaction to insane policy they have forced the people to endure.

After all, what's a little decapitation and under-age sex slavery when you're building a Utopian paradise of multiculturism?

 

Sat, 05/31/2014 - 12:32 | 4812603 Vegetius
Vegetius's picture

You don't need a crystal ball to know this mess is going to explode sooner or later across the globe and then we will see the regional wars really catch fire. Europe is going to be a fun place then, a bloodbath same as it ever was.

That is the problem for the elite they have engineered a collapse of epic proportions and this time they cannot credibly deny it.

“The yet more terrible Romans, from whose oppression escape is vainly sought by obedience and submission. Robbers of the world, having by their universal plunder exhausted the land, they rifle the deep. If the enemy be rich, they are rapacious; if he be poor, they lust for dominion; neither the east nor the west has been able to satisfy them. Alone among men they covet with equal eagerness poverty and riches. To robbery, slaughter, plunder, they give the lying name of empire; they make a desert and call it peace”

De vita et moribus Iulii Agricolae - Tacitus

 

Which goes to prove, the more things change, the more they stay the same.

 

 

Sat, 05/31/2014 - 17:10 | 4813058 Charles Wilson
Charles Wilson's picture

Tacitus, Histories, Book 4:

"Mucianus ordered these men to be drawn up apart, making the British, the German, and any other troops that there were belonging to other armies, take up separate positions. The very first view of their situation paralyzed them. They saw opposed to them what seemed a hostile array, threatening them with javelin and sword. They saw themselves hemmed in, without arms, filthy and squalid. And when they began to be separated, some to be marched to one spot, and some to another, a thrill of terror ran through them all. Among the troops from Germany the panic was particularly great; for they believed that this separation marked them out for slaughter. They embraced their fellow soldiers, clung to their necks, begged for parting kisses, and entreated that they might not be deserted, or doomed in a common cause to suffer a different lot. They invoked now Mucianus, now the absent Emperor, and, as a last resource, heaven and the Gods, till Mucianus came forward, and calling them "soldiers bound by the same oath and servants of the same Emperor," stopped the groundless panic. And indeed the victorious army seconded the tears of the vanquished with their approving shouts..."

Sat, 05/31/2014 - 12:20 | 4812593 RaiZH
RaiZH's picture

Thanks... just made a note of it in my diary for Spring 2016. 

Sat, 05/31/2014 - 10:15 | 4812424 stopcpdotcom
stopcpdotcom's picture

One 'r' in Farage.

Sun, 06/01/2014 - 11:33 | 4814233 SAT 800
SAT 800's picture

Thank You, Nigel.

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