Whats happing to the economy?

carlazai said:
The lower tier in the US are worse off than us i.e. minimum wage people. Its the upper tier in the US that makes you think they are so mch better off than us.
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yes, and we only see the upper tier orange county plutocrats

the 50 million with no health insurance are silenced
 
Kitchster_uk said:
Why? Of course the minimum wage has had a major impact. There is more money is the economy, therefore people spend more and you get more two-car families, more families can afford houses and thus demand is greaer than supply, leading to higher house prices. There is also the fact that higher wages have allowed more people to get credit, as the bank's scorecards are set up with salary as a major factor (or certainly were until very recently). Finally, as businesses are having to pay more for staff, they simply pass this on to the customer, the same as when diesel goes up the cost of goods in the shops go up as the delivery firm charge the supermarket more and the supermarket charges us more.


Look at my post again, anyone on a minimum wage is still no better off, even though they are earning more. In fact, whilst it has fuelled the economy by making the bottom earners feel better off, all it has done is helped triple house prices and thus was a wholly pointless excersize.
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W-hat.

Bringing in the minimum wage is not the cause of the housing bubble and subsequent bust. People on the minimum wage still don't qualify for mortgages and traditional loans - do you not think the lenders would adjust their credit scales to take into account rising wages? That's the starter for 10!

Banks have relaxed lending requirements because they've been finding new ways to repackage the debt and sell it on to other finance companies, so they've been more removed from the problems that irresponsible lending can cause. Because the usual downsides to lending have been removed or mitigated, lenders have been much more willing to take risks to get the rewards. Now the risks have come back to bite them.

I know given the your signature you must be oh-so desperate to pin this on Brown and Labour, but making up ill-informed crap like this is just plain wrong. I fail to see how you can lay the blame for this on socialist policies of our government - it's not like other countries are finding themselves immune from this whole thing.
 
There are many sides to the pre-recession buzz - first, we are currently actively TALKING ourselves into recession. There was one Northern Rock crisis, and it was mostly because it was a mickey mouse lender (125% mortgages with additional loans - come on) with poop for management and no proper supervision from financial watchdogs. It overstretched, slipped, tore hole in its clown pants and media started "end of the world" mantra. As direct effect it started the panic, people started queueing to the doors just because others queued before them, all over the market investors stopped investing, firms all over the city started downsizing "just in case" and every financial outlet began recalculating annual budget. But the fact is - the actual weight of the situation is laughable. There are no grounds for credit crunch or recession. We are not loosing massive industries. We are not suffering delayed effects of currency loosing 50% of its value. We don't even have sensible housing market slump. 0.6% property price fall across London across one month is no price fall at all. It's certainly not a reason for mortgage deals to suddenly jump from 3.99% to 7.5%. But the atmosphere of panic actually benefits the banks, because they can now lock X amount of people coming down from sweet fixed rate deals into 2/3 year of complete misery on high APR. It's good for them after years of 0% and transfer deals on plastic to shove 16% up between every stoozer's buttocks for months to come. The panic and the "credit crunch" only means money, money, money. For every penny they lost in unfair charges payouts, for every penny the lost on disorganization of the financial market under Brown, where all of a sudden every tom, dick and harry, Tesco and Shoe Express has range of insurances, credit cards and loans the banks had to compete with.
So make no mistake.
We are being talked into recession for profit. We haven't seen subprime in this country. There are no lenders with "limited capital" offering deals to unemployed with "Ophra Winfrey" as co-creditor, double the value of trailer bungalow at 20% for 50 years on behalf of large banks. We never had that kind of lending. Therefore we cannot be affected by crash within it. What happens on our accounts resembles nothing of the kind. And the current scaremongering should be investigated, responsible people fired and those who came up with the idea to cash on it shot on public tv.
 
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v0n said:
Words
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Take off the tinfoil hat please.

The credit crunch is a legitimate problem, it's not 'made up' so that people can make a profit...where on Earth are you getting this rubbish from?

Poor people in America are having trouble paying mortgages off, which means banks are less willing to lend to anyone else at the moment, so there's a lack of credit available for other people/businesses, which means they can't use those loans to grow their business. Plus the Average Joe is feeling the pinch of having less money available in terms of finance and remortgaging, so they spend less on TVs and Hifis and all sorts of consumer goods. That's why the recession is happening in a nutshell. Not many businesses will make decent profits over the next year or so.
 
Scottly said:
The credit crunch is a legitimate problem, it's not 'made up' so that people can make a profit...

Poor people in America are having trouble paying mortgages off, which means banks are less willing to lend to anyone else at the moment,.
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It's legitimate problem where it exists. But we are not in America. We don't have sub-prime lenders. Our banks would not lend to poor and unemployed people at any point. Even if we actually had trailers cheap enough to mortgage on those basis. Our economy didn't suffer from currency devaluation or massive inflation. The chap who just finished paying his first two years into 95% 5x annual salary, over the top mortgage for overpriced and overvalued London flat is still perfectly capable of paying it now, it's just that today no one will offer him 95% LTV at sensible rate. That's not sub-prime or credit crunch, that's exactly opposite - it is forcing people to make up that missing 5% via loans with massive APR. Or accepting really bad 95% deal. If anything, this is exactly the kind of politics that caused collapse of mortgage market in US. But instead of market reacting to collapse, our banks actually shut down the bottom of the market as form of preemptive strike.
 
I know. I know. It's the device I'm typing on. When I check it later on on normal screen it looks like rantrantrantrant (and breathe)... :D
 
v0n said:
It's legitimate problem where it exists. But we are not in America. We don't have sub-prime lenders. Our banks would not lend to poor and unemployed people at any point.
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the problem is that on an institutional level these sub prime mortgages were classified according to risk and assigned gains accordingly and then simply packaged and sold on. all institutions were to some extent trading in these debt instruments, albeit unknowingly. this has had an impact across the board, including uk based pension funds.

that said it is widely held that as yet the problem in liquidity rather than credit.
 
v0n said:
It's legitimate problem where it exists. But we are not in America. We don't have sub-prime lenders.
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Yes it is (including here), no we're not, and yes we do.

The debt is an international debt, it's traded around the whole of the world financial system. Bear in mind that many of the biggest banks (HSBC, Citi, RBS, all of which are being quite badly affected) trade both here and in the States - a problem for them means a problem for us.

Of course we have sub-prime lenders, what the hell do you think Northern Rock was? We have a housing market which has greatly outpaced earnings in terms of growth. People with 125% mortgages, interest only mortgages, no deposits at all - 10 years ago these people wouldn't have been eligible for mortgages. They might not fit the exact definition of sub-prime, but they are very risky bets for the lenders, and with the current contraction of the mortgage market a lot of people are going to be in serious trouble because they were counting on remortgaging, which is going to get more and more difficult.
 
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Scottly said:
W-hat.

Subsequent guff from not reading the post...
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Shall I try to explain more S-L-O-W-L-Y???

If a 2-income family, one professional earning £20k and another in a cleaning job on £3/hr (that's £6.2k per year...) wants to buy a house, an income of £26k would see them from £75-£100k mortgage. If both wages increase by 2% per annum over 10 years, then they have a total income of around £31.5k, allowing for between £90 and £120k of borrowing. If wage 1 increases by 2% per annum and wage 2 almost doubles to £12k, they will have a joint income of £37k, allowing for between £110 and £150k. Now they want to keep up with the Jones's so they can get a 4xjoint income mortage and with a 10% deposit can afford a £165k house and guess what they buy?

What they don't realise (and neither do you, obviously) is that wage 1 has gone up by 2% per annum compound, meaning it's gone up by c.25% over 10 years. This government's economic policies has seen the essentials - bread, petrol, Council Tax - go up by 100%. They are now ina position to borrow much more on mortgage but don't allow for the fact that everyday items are much more expensive. Sure, the likes of ipod's and TV's haven't gone up but the couple above now have a bigger income, but a bigger mortgage and they have DRIVEN the mortgage prices higher. Because they can afford it.

Go back 10 years now. 2 people both earning £3/hr. Combined salary of £12k. They could afford to buy a 2 bed street house up here as they were around £12k. Same house is now £50-60k. Same couple now have a joint income of £24k and can still just about afford the same house, albeit with a greater deposit. What good has the minimum wage done them???

Just to simplfy things further. If a house goes on the market for £150k and sits there, little or no interest, for a year, you have to reduce the price for it to sell or wait for that one person that might fall in love with it. If it sells for th asking price within a week, the next one like that which comes under that agent will be advertised for £160k so that agent makes more money. This may sell for £155k after a couple of weeks, but house prices in that area have now risen nearly 3.5% in a month. It's pretty simple, you put more money in someone's hands and they will spend it.
 
we're in for an all mighty crash

Brown has more or less got away with running the economy into the ground... for a government to borrow so much during the so called "good times" is idiocy.
 
Kitchster_uk said:
Conjecture
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None of which proves that the housing boom was caused by the introduction of the minimum wage.

The price of bread and petrol has gone up more because of American policies, not our own. Oil has gone up because of the war in Iraq and continuing tensions over Iran, and bread has gone up because the US government's pre-occupation with corn ethanol has pushed grain prices way up.

Also, you completely failed to take into account inflation in your handy yet completely irrelevant example. Wages rising at 2% per year will not even keep pace with inflation, so in real terms those wages are actually falling. If the minimum wage were the cause of rising house prices, there would be some correlation between the two, but guess what? House prices have far, far outstripped both inflation and rises in the minimum wage. Note also that the last housing boom took place before the minimum wage was introduced, and a similar boom took place in the States, where the minimum wage is much lower than ours and rises at a much slower rate.

So why don't you try again, with a less condescending tone this time, tory boy.
 
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Scottly said:
None of which proves that the housing boom was caused by the introduction of the minimum wage.
blah blah blah
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I didn't say the minimum wage CAUSED the explosion house prices, they have just helped them rise. See my previous posts, there has been a social shift towards two income households and because of the moinimum wage, many 2nd incomes have increased beyond inflation.

In your socialist idealist paradise, it's all down to George Bush and nothing to do with his little labourite puppy dog Tony... so take your socialist bull**** and haev a look at the realy world.
 
Scottly said:
Of course we have sub-prime lenders, what the hell do you think Northern Rock was?
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What (the hell?) do I think Northern Rock was? Simple case of overselling. They found themselves with £24 billion actually not secured against anything. It wasn't that the people with 125% mortgages couldn't pay their mortgages, it was just that they couldn't pay it fast enough for it to produce any kind of long term scalable scheme.

It's nothing new to UK economy, Abbey for example seems to be pouring from nothing to empty for years - they don't have money to lend on certain terms but they will do it anyway - do you remember when Abbey pulled out all revolving Cahoot loans in 2006 literally from under unsuspecting clients just because they couldn't afford to have few million unsecured pounds "frozen" on not yet withdrawn loans waiting for customer to maybe buy that car or sofa? It wasn't that all people accepted for the cahoot loan couldn't pay what they owed back. It was just the case of fear - if every customer that was accepted for the loan but hadn't used it up suddenly decided to go on shopping spree Abbey would end up deep in red with nothing but funny face secured against it. They simply oversold.

What gets my goat is that there is no threat of collapse for most of the banks, but the atmospehre of fear is used as leeching method. Yes - it's about time to stop over 100% mortgages and stop counting on rapid house market growth as method of securing the lending, but there is no excuse for banks whooping high interest across all products - yes, it's very profitable, but it will actually destabilize the market, rather than make it safer.

I do take your point on our banks being affected by bad investment tactics abroad though. One of the biggest dramas of US subprime was that the actual bottom feeding "door to door amway salesman taking double the mortgage on his trailer" mortgages were presented by serious partners to investors as AAA securities.

This, however doesn't change the fact, UK market suffered no sub prime collapse, it's the banks that lost on sub prime in US that create panic and effectively will talk and manouver our market into recession.
 
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Kitchster_uk said:
In your socialist idealist paradise, it's all down to George Bush and nothing to do with his little labourite puppy dog Tony... so take your socialist bull**** and haev a look at the realy world.
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Yeah, whatever. All I said was that you couldn't prove that the minimum wage was a major cause of rising house prices - and I was right! You can't prove it because it's not true. And I don't know where you're getting this socialist paradise stuff from - I'm not the raging socialist you seem to think. I suggest that you need to take a greater look at the situation, because you blatantly don't know what you're talking about.

Also spelling lol.

@v0n:

The UK sub-prime collapse is going on right now. It won't be as dramatic as the American one, but it'll be bad enough. There's a story on the BBC about repossesions being at their highest levels for years, and 50% of those are repossesions of sub-prime homeowners. Cheap mortgages are vanishing, which is going to mean that lots of people will have higher repayments. Some of them won't be able to pay.

You're right that banks need to be more responsible about lending, that's why the they're being a lot more selective over their mortgages right now. It sucks if your rates are going up, but remember, it's not an inalienable right to have a cheap mortgage. If you've bought a mortgage with variable rates and are about to feel the pinch, you must have known that something like this was possible.
 
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Ok, none of you can agree on much lol.

But I have a question or two. I'm off to Uni in October so obviously I am going to skint, this also means my debt will be ever higher at the end with higher interest rates yes?

Now I should be in around £24k worh of debt, round about with interest >I think<. So after 3 years of Uni, and 2 years to full qualify (I'm doing Law) and a wage of £20k during those two years what is the likelihood of me being able to secure a decent house and will the housing market have dropped by then in my favour?

And etcetera? Basically explain whether I'm going to be raped by the credit crunch and spend my life miserable and in debt :D
 
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