UK Government buys Fifty Billion Pounds of Bad Debt

Last week in the Guardian was a quote from the banking industry that said:

“The banks will now only lend to people who can repay the loan”

That's like saying that the banks will only employ people that know the difference their Elbow from there... well you know the rest of the phrase!

No other business, industry could, or would, expect the government to bail it out when it made a loss. Further while the banks keep all of their profits when they make them, it will be the tax payer that picks up the tab for all these losses. The UK government has just knowingly bought fifty billion pounds worth of bad debts from the banks. So it is the tax payer that will have to pay for this stupid and reckless lending.

There will be some people that disagree with me, but providing a mortgage of 125% of the value of a property is reckless. While for people struggling to afford to buy a home a loan that allowed the buyer to obtain the property and furnish it may have seemed like a blessing. But that thinking is based upon the assumption that house prices would only go up. While looking at the historical data many people could be forgiven for thinking that was the case, however looking at all the other data should have alerted people to the fact that house prices were artificially high.

There has been direct and deliberate manipulation of the housing market. Builders who have been providing false price and sales data to the Land Registry. Estate Agents who have been manipulating prices by not passing on details of lower offers. Charted Surveyors, the valuers that are not given work unless they provide valuations that match the asking price. All reported in the media over the past five years, but no one wanted to take notice. Thus the value of property has been kept artificially high by direct and deliberate price manipulation add to that the irresponsible gambling by the banks all added to the artificially inflated value of properties.

Then there is the role of the government, for the last ten years and more, the economy has only been growing by promoting consumer spending via borrowing. This has lead to the average person owing more than twenty thousand pounds in personal debt. Yet like any borrowing it now has to be paid back.

While this situation is far from ideal, it is far from a crisis. While it will be difficult for some people, and people don't need to panic. While the paper value of your home has fallen and it will continue to fall, as long as you keep up repayments you will not loose your home. Again while it will be hard, pay off those credit cards and only spend the spare income you have. Look at not replacing all the toys and gadgets that litter your home. Unless a vehicle is vital for work, if you can use public transport or cycle to work, sell the car or cars.

Eventually, once those debts are cleared you will be better off not only financially, but you will have developed a real sense of value of the chattels you own.

This is all part of a change that I have been foreseeing for years. The endless growth of the economy, in the way that it has been occurring, had to end. Where growth will happen now will be in rebuilding of the infrastructure that really matters.

These events are the start of the real green revolution the planet has been waiting for. With the increases in the cost of living that is happening and will continue, the need for people to tighten their belts, will reduce the spending on environmentally damaging activities, such as the rampant consumerism and flippant global travel. With less money to spend on luxury goods like TVs or iPods or any number of manufactured items, we will see less damage to the environment occurring. It will not happen over night, but these events are the start of us humans being re-educated about what really matters.

While events yet to happen will still show us that we need to work with the environment and not against it, the people that start to adapt now will have a head start. This includes using your spare time to grow at least some of your own food. Be this some salad crops in pots on the window seal or two or three neighbours sharing an allotment, you will need to grow at least some of your own food. Food prices are going up and quite soon, this year or next, growing some of your own food will become vital.

The cost of energy will continue to rise, especially petrol (Gas). So learning to do away with the car will become essential. Not having a car will save you at least two thousand five hundred pounds per year, and that excludes the cost of using it. While this is not going to be realistic for everyone, it will be the people that can give up their cars that will cope with the changes that are coming.

There will be people who read this and think this is mostly a lot of nonsense, but weather events will seriously impact food and energy over the next ten to twenty years. This will seriously and adversely effect the conventional economy. Further, the sudden influx of seawater from rising sea levels will disrupt our ability to travel.

The choices we all make now will effect how well we as individuals, our families cope with the changes that have already started.