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I'm sure it comes as no surprise...

(39 posts)
  • Started 13 years ago by Instography
  • Latest reply from crowriver

12

  1. Instography
    Member

    I'm not sure what you're saying then when you say, "Did a "few individuals" force millions of households across the Western world to get up to their scalps in debt, buying houses, holiday villas, cars, consumer durables, etc, that they could not realistically afford? Did a "few individuals" create huge speculative property bubbles on a global level too?".

    If you look back over the history of both industry pressure and public policy, the answer is a plain and emphatic yes, they did. When you give people enormous discounts - 70-80% of the market value - to get into debt to buy their own council house, when at the same time you create, in effect mortgages on 120-150% of the market value and 3-5x income multiples to encourage people to chase a housing bubble, and when they then bundle those mortgages up into securitised, tradable assets, changing them from balance sheet liabilities into assets, then yes, the whole housing bubble was created by a comparatively few individuals.

    Posted 13 years ago #

  2. crowriver
    Member

    Sure, people were sold a dream by ideologues and big business. Just as they were with motor cars in the 1950s/60s. And people were very willing to believe the dream, to buy into it, to take on unwise levels of debt. Yes, folk were encouraged, persuaded, by those in positions of power, but nobody forced them. Almost everyone, especially in the UK, wanted to believe they were richer, more successful, higher status than they really were. Why did/do they do it? Because everybody else is doing it too. We used to call it "the rat race" in the olden days.

    There was always the option to not get involved in the property ladder game, or to live within one's means. But who wants to be a hippy, communist or loser? Very few.

    Posted 13 years ago #

  3. chdot
    Admin

    "It’s for like Hippies I suppose from that generation; that have grown up into corporate lawyers."

    Posted 13 years ago #

  4. Instography
    Member

    When the social rented sector was reduced to a rump, when local authorities were forced to ring-fence their housing revenue accounts so that rents were pushed up to 'market' levels, then I'd argue that people were forced. When all the other choices have gone, the notion of an unforced choice goes with it.

    Posted 13 years ago #

  5. crowriver
    Member

    @Insto, I hear you. What I'm saying is there was a drip-drip-drip effect rather than just a small group of "bad apple" bankers to blame.

    Property was already growing into a bubble in the 1970s, but it was quite tricky to get a mortgage in those days, so lots of folk rented or lived in council houses: there was no stigma attached back then (rather like some countries in Europe today, Germany springs to mind).

    I'd argue several things that Thatcher did had a huge effect.

    Lifting exchange controls and capital flow restrictions in 1979, nearly the first thing she did in office. That decimated investment in manufacturing in the UK as investors looked to the US, Japan, Germany. Following a severe recession, financial services were touted as the replacement for the lost industries...

    She also abolished rent controls and security of tenure for tenants, leading to 'market rents', large numbers of evictions and short term lets, with rents going up after 6 months in some cases. Once there was a good profit to be made from renting out property, the buy to let era was ushered in.

    The privatisation at knock down prices of social housing was a killer blow for the poor and unemployed. All the good housing stock was creamed off, often sold on at a profit. Only the problem estates and high rises were left in the public sector...

    Posted 13 years ago #

  6. Instography
    Member

    We don't seem to disagree much. I think the late 1970s and early 80s was revolutionary and driven by, at the risk of sounding too conspiratorial, a network of interests with bankers at the centre. My main issue was the implication that people really only have themselves to blame, that they could have used their free will to reject all this and would now be sitting comfortably untroubled by the recession. I think, on the whole, that people's choices were so completely engineered and constrained that any other outcome was, for most people, unavoidable.

    Posted 13 years ago #

  7. ruggtomcat
    Member

    And it was only 30odd years ago, they are the same people.

    Posted 13 years ago #

  8. alibali
    Member

    I think, on the whole, that people's choices were so completely engineered and constrained that any other outcome was, for most people, unavoidable

    Agreed. The reality is that to make the contrary choice would have meant being denied the substantial benefits afforded the majority and then have the "upside" stolen by high inflation and low interest rates that support debt and devalue savings, a situation engineered by the same forces that shaped the earlier phase.

    Posted 13 years ago #

  9. crowriver
    Member

    That may be the case now, with very low interest rates as a seemingly endless policy of the BoE. In the 80s and 90s interest rates fluctuated quite a lot. I remember earning quite good interest on modest savings in the mid-90s, at a time when many householders were caught in a negative equity trap and paying relatively high interest on the inflated mortgages they took out in the late 80s. My interest wasn't enough to pay the rent, but it certainly helped.

    After that point, the property bubble started again and kept going for over a decade. Lots of people got greedy as they saw the profits that could be made by essentially doing very little. Credit is still incredibly cheap, it's just that the rules on who can borrow how much have gone back to being almost as tough as they were in the 1970s...

    Posted 13 years ago #

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