From The Telegraph:
The Bank has estimated that as much as 8pc of UK mortgages are in forbearance, equivalent to about £100bn of debt. On commercial real estate loans, it reckons a third are in forbearance – or roughly £75bn. In other words, banks are more at risk than they claim to be on £175bn of UK debt – and that’s before mentioning any eurozone exposures.
The Bank may have given the banks state guarantees to boost lending, but as long as they have a smouldering keg of dynamite on their balance sheets they are not going to volunteer to lower lending standards and load up on more risk. Hence the regulators’ desire to make banks own up and clear their potential losses.
There is another angle in this for UK growth. Ask any economist for a key reason the economy is struggling, and they will invariably answer that it’s because there is no consumer demand...
There are three solutions. To reduce the stock of debt, to reduce mortgage rates , or to raise disposable incomes. So far, the action has been on lowering rates. But a growing body of economists reckon the real, longer-term solution is some form of debt forgiveness – wiping out a portion of a borrowers’ obligations.
A small change of theme
2 hours ago
7 comments:
He handily ignored the third option, raise disposable incomes, of course.
B, yes, the blindingly obvious fourth solution is "cut taxes on production, output and employment", there's no point wailing on about lack of demand, you might as well say lack of supply - the trick is to reduce the tax wedge between the two.
Aaaaargh!
Even as someone hugely in debt I can see the flaw in this. Cannot "economists" also?
*Runs out, spends money on the nearest non-perishable goods*
BE
BE, correct.
Now, I can sort of see a justification for giving a debt waiver to somebody who was stampeded into buying a home at the peak of the bubble, has been doing his or her best to pay off the mortgage and now wants to move for work but is in nequity. Those people can start again in a cheaper house with a smaller mortgage and no hard feelings.
But that wouldn't apply to somebody who remortgaged up to the hilt shortly before retirement, or somebody who took out an interest-only mortgage later in life and never bothered with capital repayments.
Just another way of postponing the inevitable / unpopular, and so of politicians trying to keep themselves in power.
FT, yup. What puzzles me is why the Tories didn't "do a John Major" and allow house prices to crash straight after they were elected, they could have plausibly and reasonably blamed it all on Labour and then the economy would have recovered tout d'suite.
MW, once again, the reason jubilee is by far the best option, is because all the others are worse. But not on its own. Lvt must and can only be adopted after the default.
Lvt on its own is classic wishful thinking because no one will do it until there is no debt. Everyone is a rent seeker. Duh! But they will hapilly do it after the jubilee, free from fear.
Wages you cannot raise the lowest wage until the debt is gone. Where will it come from.
The problem with the claim that bad borrowers should not be let off is ignorance in the extreme. Nothing will change until the system defaults anyway. Circular reasoning looking to punish rather than get on with it.
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