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Tuesday, 19 December 2017

Debt

Reading Polly Toynbee's mind at work is almost heartbreaking. Today, she fairly and accurately describes a queue of debtors being dealt with by the civil courts; the list is pretty evenly divided between B2B debt and failed household credit, the major creditors HMRC, local councils and banks. The witness evidence could have formed the basis for an informed and constructive article, but instead Polly just can't resist the trite and bromidic - it's all the fault of gub'ment austerity. 

Many of you will also have caught on TV one of the rival fly-on-the-wall progs about bailiffs and sheriffs; again, a litany of business debt and evictions by private landlords mostly for failure to pay rent. If HMRC, councils and banks are creditors for these cases they stay clear of any mention, or perhaps they don't permit their bailiff actions to be filmed. Where creditors are revealed, they're frequently in no better financial position than their debtors - single-house landlords, other skint small businesses.

And we ain't seen nothing yet. We're still at the top end of the curve. It's said that in 2008 the banks weren't prepared and took the hit - but today they are, and it's their debtors that will feel the real pain this time. The ECB are already preparing for the next crash - measures are even now being enacted to staunch outflows in the event of bank runs and restrict depositor access to protected deposits (€100k). 

As far as I can see the victims of debt are not victims of government cuts - and every time a council wrings its hands and closes a library I am reminded that CIPFA valued local authority reserves at £21bn in 2016 - but of globalisation. Half the country haven't done well economically and are the first casualties. The other half - the public sector, universities, global corporates, legal and accounting megafirms, media, digital economy - have done comparatively nicely, but are by no means free of debt. Their turn will come when austerity really does hit. A metropolitan elite economy based on Amazon Prime, Netflics and Lloyds Gym memberships, a leased car and three designer coffees a day is built on sand.  

That's the bloody problem. We all know it's coming, but when? Until the storm hits, we're all just marking time and standing ready. And until it does come, growth just won't return.

13 comments:

Poisonedchalice said...

I once thought that Trump wouldn't last a year, but that was then and this is now. His halving of corporation tax is a masterstroke that will bring companies and money flooding back into America securing his next term of office with blue collar workers, who propelled him into the Whitehouse in the first place.

And that's the point; if your base-line blue collar workers are confident that their jobs are safe and that pay is acceptable and that taxes are reasonable, then the economy stays sound. Look after them (and I do not mean in a "socialist" way) then they will take care of the rest. And this is what we must get right as we leave the EU. We must make the UK an attractive place to do business, come to work and do our part.

DeeDee99 said...

Assume, as Toynbee claims, that this is all the result of cutting public services and "austerity." All she ever proposes is more government spending, leading inexorably to more government debt and therefore higher taxes, because we simply cannot afford all the "free" services she wants.

And assuming, as Raedwald says, it is the result of globalisation and its consequences (which I agree with), all the likes of Toynbee wants is for that globalisation - in the form of EU membership - to continue, further wrecking the life-chances of the people she claims to want to help.

Socialism has no answer to the problems this country faces. In a globalised economy, if they load taxes on the wealth-creators, they will simply move somewhere where tax is lower (as Scotland is about to find out). as Mrs Thatcher said "the problem with socialists is they always run out of other peoples' money."



rapscallion said...

We all have debt in one form or another, well most of us do. Fortunately mine is just a mortgage, and that's less that 40K now. The point is that I'm still worried, and I have no other debt at all - mainly, it has to be said because I absolutely hated and still hate incurring debt of any sort unless I absolutely have no other choice. What's it going to be like for families who have mortgaged themselves to the hilt, have some credit card debt, who have next to nothing in the way of savings? I never understood this phenomena of wanting something better than somebody else. What I have works for me, I'm happy with it, and frankly that's all that matters as far as I'm concerned. What others do is their business - but getting yourself into such debt just to "be better" than so and so, it utter insanity.

As ever Radders, you're right - the faux lives built on Amazon Prime, Netflix, leased "green" cars and all other trappings of modern life is going to be their undoing. To use an analogy you'll appreciate, the barometer is dropping steadily, quite soon its going to drop to 3mb an hour and then we really will have to batten down the hatches.

Anonymous said...

Raedwald as a generally conservative (small c) type this statement: "As far as I can see the victims of debt are not victims of government cuts" is true, but you don't mention the reality which is that in general....

"The victims of debt are the victims of government profligacy".

And when the next carefully engineered recession happens, we might just as well top ourselves.

Mark The Skint Sailor said...

The bulk of private debt is in the housing market. As interest rates rise, those that are on the limit paying repayments at 0.2% interest will default. And there are thousands of people like that out there, paying huge mortgages on houses that are only priced so high due to demand, rather than actual value.
That's what the bank are preparing for: Once interest rates go up or the government gets a grip and starts building houses in proper numbers, those with mortages will default and the value of the asset (the house) will go down, at best negative equity will be rife for a few decades.
The housing market is one of the ticking time bombs that successive governments have refused to defuse.

mikebravo said...

Poor old Polly. Forever stuck in a cycle of despair.

She is the Alf Garnet of the Graun.

"It's the bloody austerity innit - we need to get rid of all those austerities that are ruining us"

Thud said...

Well that was cheery!

Oldrightie said...

As with the crash of 07/08, there is a way out of the mess. Debt forgiveness for individuals instead of for institutions. The latter, both governments and corporate, gangster funded banks. That then followed by draconian control of future lending.

As for the main culprits, globalisation and its mission to rule over exponential population growth are two cheeks of the same arse of human existence.

Dave_G said...


Let's get the blame aimed precisely where it's due - the banks.

How much of peoples debt is interest? How much more 'wealthy' would people be without onerous interest charges (30% on credit cards?).

How many people take proper stock of the interest paid on their mortgage? Hundreds of thousands of pounds over the term that COULD be in your own pocket if interest wasn't applied. Tens of thousands if interest was 'reasonable'.

Interest is designed to hold people in debt - to make you dependent on banks and .gov. Every attempt to introduce debt-free currency has been met with assassination - every attempt to sidestep the banking cartels met with war.

Interest repayment is the most pernicious form of enslavement ever devised and yet we tolerate it day-by-day.

If there was ever the possibility of any media explaining and exposing the actions of bankers and other credit lenders to EVERYONE simultaneously then maybe changes would occur - but, even then, I reckon the banks would instigate WW3 than give up their hold.

THIS side of finance (debt) is never discussed.

English Pensioner said...

I am constantly being pressed to take on debt. Why not have a John Lewis credit card? Why not have a M&S credit card? Why not a Tesco Credit card? What about increasing your cards' credit limits? Even PayPal are at it now offering loans.

'Touch and go cards' don't help. When you pay cash, you actually see the money coming out of your wallet, but with 'touch and go' you don't notice the small amounts which add up by the end of the month.

Some people just can't resist spending and seem so surprised when they end up in debt. The banks must take a large part of the blame for the debt situation.

Dave_G said...


@EP - precisely. I've lost count of the number of times CC companies have increased my limit to tempt me to spend.

Fractional Reserve banking is now at a crisis point - well it was decades ago and time is well past for its collapse. The Bitcoin bubble is now the latest 'saviour' of the markets, without it there's nowhere else for people to invest and the stock market is way, way overpriced as it is.

The next step would be for a limited war situation (step forward NK) which may keep things rolling for another couple of years depending on how well such a scenario could be controlled (yeah, right!)

It doesn't bode well for the immediate future, does it?

Anonymous said...

UK National Debt @ 15:20 today:

£1,955,852,800,000

Steve

Anonymous said...

@Anonymous Dave_G

Yes it is no accident that both Slasher Hussein and Mad Gadaffi were both proponents of a new local currency for trading oil products before they met with their respective demises.

right-writes