The housing market is on the move again of that there is little doubt and of course along with it the cost of buying a home is rising albeit slowly at the present time. The highest level of unemployment in my region stands at 6% which of course is not much fun for those without work but it does mean that 94% have jobs. Car production is rising once more and bankers bonus payouts are still obscene.
All this does not mean that the recession is over but points to it at least bottoming out. The massive bill to stave off the worst of the global economy crash will still have to be paid over the next couple of decades and will have some negative impact on most of us. Most of us being the ones who played no part in the disgraceful financial gambling of the past ten to twenty years although most of us were a part of the rampant consumerism that gripped the developed world.
A few minor inconveniences have been put in place to curb some of the excesses of the financial traders but by and large as the recovery gets under way it will be business as usual and so setting us up for a repeat performance in another decade or so down the line. Bankers will be making fortunes out of the future labour of ordinary people not even born yet, houses will be purchased as investments and not as homes to live in, industry will again expand and add to the climatic pollution that is already out of control.
This global catastrophe presented the World and I suggest, the UK in particular, with a golden opportunity for change. That chance has already been squandered and we are doomed to repeat the mistakes of the past and the next time may not contain within it opportunity for change.
I recently wrote to my (Lib/Dem) MP to clarify their position on support for selling off part of the Post Office and Royal Mail.
We can agree that the Post Office needs a cash injection to maintain and improve what is actually a brilliant service but according to my MP it is likely to against EU law for the Government to supply this finance which leaves selling off a part of it the only viable option.
If this is indeed the case (I have written to my MEP for confirmation) there is something seriously wrong with a law that denies supporting an efficient national service while at the same time allowing huge sums to be given to bail out private banks.
The Government is doing all that it can to re-finance the banks in order to get them lending more and to help this along the Bank of England is steadily lowering interest rates which are heading towards zero. Other governments around the world are taking similar actions and Obama expected to announce a massive cash injection into the US economy.
In order for the banks to lend, someone must borrow which is pretty self evident. People and business borrow in order buy something, again pretty self evident. The more people buy and the more that they borrow in order to buy more then the faster industry works and the economy, national and global, expands . Again, it is self evident that this cannot go on indefinitely. Economic growth must hit the buffers sometime. OK I know this is Marxist theory but it is also commonsense. The global economy has hit the buffers and the political engineers are now doing all that they can to move the buffers further down the track, build up a credit based head of steam once more in order to hurtle down the same track heading for the same result at an indeterminate date in the future.
The housing market is used by many as a yardstick for the health of the economy but it’s the same story here. House prices cannot increase above inflation ad infinitum but while they do rise to dizzying heights their buyers are saddling themselves with huge debt, meaning that they have to work longer and harder and often put off having children just so they can pay the mortgage. Is this the life that we want for ourselves and for our children, if we manage to have some? Some mortgages are already crossing over to the next generation.
We have an opportunity with the current crisis to pause and take stock of what is best for our health, mental, physical and spiritual. Houses are losing their value and easing to a more sane level but have a way to go yet. Good! If government could but grasp the nettle and decree a return to mortgages being granted on the basis of 2.5 times the annual earnings of the highest earner in a partnership, life would be far more pleasant for those making the purchase. State investment in social housing would keep the building industry active and aid recovery too.
The fat cats would squeal in anguish of course but I don’t think I would lose any sleep.
The system under which we live, Capitalism, may not be at all desirable for many of us but it is the system at present and so there is no alternative but to deal with the problems as they arise. The Government has, I believe, acted responsibly and decisively over the past few weeks in dealing with this financial crisis and was faced with little room for manouver.
The bankers and dealers and short term profit makers have rightly come in for huge critisism and public condemnation. However, we should not apportion all the blame to them. People taking out mortgages bigger than they could realistically pay are to blame, people who self certified over inflated salary’s to get a mortgage are to blame, people who took out multiple credit cards and ran up debts they couldn’t in the end pay, are to blame, people using the expected future equity in their homes to buy another home to rent out, are to blame. Spending bonus’s on luxury items and exotic holidays instead of putting it by for the rainy day that just had to come sometime, are to blame.
In short, you, me and most of us, are to blame and we should remember that, not just now but in the future when this crisis is finally over.
House prices continue to fall in the UK with London showing it’s first fall in over eight years. Bad news if you’ve bought a house expecting it to increase in value, above the rate of inflation, indefinitely. If though, you bought a house to be your home to live in, which is what they are really for, what difference does it make? If you need to move then the cost of the house you wish to buy will also have gone down by approximately the same percentage rate as yours. If the current financial crisis continues and it looks set to do so for a year or two at least, then house prices may stabilise at a sensible and sustainable level. It’s not likely, unfortunately, that the current government will accept my suggestion and nationalise all land (see).
Perhaps and I won’t hold my breath, regulations will be brought in requiring a hefty deposit to be put down when buying a home and a limit on lending of say, three times annual income. In the case of a couple buying, based on the highest single earner only, thus removing the financial block on having babies. These regulations would have the added benefit of keeping prices on a more even keel.
The talks currently still under way in the USA, as to how to prop up the banks with how many $billions are going to do little for mortgaged to the hilt buyers in the US and in the wider world. ‘Trickle down’ has never worked as we all know too well after the Thatcher years. How about at least some of these now almost countless billions going to the mortgage payers who are in trouble, by way of installment interest relief. It would help them and help the wider economy and if the greedy bankers could possibly learn the lesson it would help to stabilise the banks as well.
Oh well, dream on.