Life in post-Labour Britain
- Thread starter Sankari
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But wasn't it personal credit and the easy means of writing it off the caused the banks so much trouble in this country.
I see what you mean though, i've often wondered what the world would be like if you removed money from the system, sort of created a socialist world, I can only assume the people with all the money made from a capitalist system would be the only ones to get upset.
No. It was the drying up of the international credit markets.
Good story that! However to the rest of us the deregulation which helped get us here started with the "Big Bang" of 1986, compounded by chronic underinvestment in the manfacturing industry around that time.
Don't forget the destruction of manufacturing and production by the unions
Although that was really the 1970s. It was just the life support was turned off in the 80s...
Associate
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That's the problem... 'So much trouble in this country'.
A recent article I read explained how the banks could have absorbed the losses without government intervention. Can't remember where it was but I'll try and find it.
As I understand it, what happened was lenders in the US lent money to people who couldn't really afford the repayments so that they could then put the value of the houses they bought with that money on their balance sheets in order to lend more (against those assets). Whilst they were doing this, they hit a wall in the amount of money they could lend (due to circumstances, lack of assets, whatever) and decided that they needed more from bigger lenders (i.e. US and European banks) in order to continue lending to these risky customers. So they packaged up these loans and mortgages and sold them to banks across the world, because they expected the housing market to continue to grow which would have given all of those banks a nice return on their investment.
Then, disaster! The housing market crashed (BECAUSE so many new houses where being over-valued to generate more profit) and caused a tidal wave through the balance sheets of each respective customer, lender and bank.
Now the problem that this caused was a sudden loss of liquidity in the entire system because so much value was written off overnight (because they had been over valued in the first place) which caused the system to contract.
The result of this was less money to lend to unrisky customers, less money to lend to businesses, less money to lend governments and because there was less money to lend, there was less money for people to spend which put an end to the growth in the retail and services sectors. Less growth = higher prices to maintain profit margins, which kicks off inflation = less demand on the manufacturing sector = less demand on the agricultural/mining sector = job losses throughout all of these sectors.
Now fortunately many retailers and companies were making so much profit before that they could absorb the money they were losing in the sudden downturn in business, otherwise prices would have gone up.
All of these things result in the state we're in today. Now the problem was exacerbated by Labour borrowing more and more money (through government bonds issued by the BoE which are such a low interest rate it's essentially free money in times of economic growth due to inflation - not so during a recession) and trying to stimulate the entire economy by creating new wealth by creating new jobs in the public sector. This didn't work for various reasons.
It was also Brown's light touch regulation through the FSA that allowed our banks to get involved in the sub-prime market in the first place.
Ideally, we would have never bailed the banks out because if we hadn't, they would have been forced to survive by revaluing their balance sheets rather than just taking in new money lent by the government to cover their losses.
I don't know that much in detail, but that's the gist of what happened.
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You forgot that US law forced banks to lend, and forced Fannie Mae and Freddie Mac to buy the mortgages. You also forgot that US law allows people to walk away from a mortgage far easier than they can in the UK, leaving the bank holding the mess.
The problem was some of the banks wouldn't have survived, and we'd have ended up paying out to compensate people, and possibly to bail out companies depending on how far we were willing to let it go.
The actions of Labour in response to the actual recession weren't that bad, the problem was they'd made them unaffordable with their actions prior to the recession...
Still perpetuating this myth I see. The banks were not forced to lend money on sub-prime mortgages, in fact the term sub-prime specifically excludes mortgages that meet the two FM's mortgage lending criteria. The reason why banks bet the farm on sub-prime mortgages was because of the risk-premium associated with them i.e. we think you'll have problems paying back this loan, therefore we'll charge you more in interest for it - it makes sense to bankers. This was a failure above all else of the free market and the sooner we as a society acknowledge this the sooner we can move on and start repairing the damage so it doesn't happen again.
The banks were required by law to not discriminate against lending to people who live in certain areas, which may have played a minor role in the sub-prime lending crisis, but not excessively so as the right-wing commentators would have you believe.
And yet we did afford it, and would have continued to be able to afford it under Labour's spending plans. The difference is that we would still be able to afford schools that don't flood under Labour.
life in post labour Britain is fine and dandy until you are the one that loses their job.
Unfortunately quite a few are going to have that experience.
I do not think the labour party did much right in power, but I don't think the tories before did and I think the condems have got such a mess to deal with, no one could sort it out.
We are on the way to the end of the credit led economy, indeed the constant growth economy.
Unfortunately quite a few are going to have that experience.
I do not think the labour party did much right in power, but I don't think the tories before did and I think the condems have got such a mess to deal with, no one could sort it out.
We are on the way to the end of the credit led economy, indeed the constant growth economy.
Still unable to face the facts I see. The rules regarding the sort of loans Fannie and Freddie could accept were changed in th 90's, including a direction to provide increased funding to below average earnings.
http://en.wikipedia.org/wiki/Govern...Mae.2C_Freddie_Mac_and_the_FHLB_in_the_crisis
The only reason people come out with the argument you have is if you take the definition of sub-prime as 'a mortgage than Fannie/Freddie can't accept', rather than the more conventional ones
No, we didn't afford it. We borrowed massive amounts of money, and only started to think about stopping when various groups started to threaten to hike our interest rates. Labour left so much pledged but unfunded it's ridiculous, and even Darling was promising 'cuts worse than thatcher' had labour been re-elected.
I know you have an irrational hatred of the conservatives and anyone who earns large amounts of money, but you could at least try and not be delusional as well.
Soldato
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Indeed the Badger was!
They pledged a great many things which are now classes as cuts.
They actually ramped up borrowing in their last months in power, stating massive cuts ahead, knowing they would never have to make them.
The chap who left the message 'Sorry, there's no money left!' called it exactly as it is. Granted he did it as a jibe, but they have left our finances in a truely shocking state.
There is no way this will be sorted by the BS labour goal of 2014, it is simply impossible. 2020 might be a target for an end of borrowing, but then there will be interest payments still coming out and many years of repayment.
I find it quite sad that people in general can't comprehend just how bad the situation currently is, and just how bad things will become over the next few years. Folks will be out of work for years unless private sector manage to somehow magic up employment, as the government employees of the civil service won't be allowed to sit around on their arses doing nothing.
I wouldn't be surprised if at some stage civil service sick leave isn't investigated, and letters from doctor for certification required at a much earlier stage than it currently is. Northern Ireland appears to be the worst for this, and I wouldn't be surprised if the cull hammer lands atop us with great expediency.
Nothing has changed. Petrol is still around 112.9-114.9 a litre locally, food is just as expensive as ever in the supermarkets (and sub standard fare for the most part) If I need to see my doctor I phone up on the day at 8:30am and get an appointment for that day. Daughter is attending Crèche for her final 4 weeks before school so I will actually be 'richer' next month (small wahoo)
Associate
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Pretty crap for me really - Our firm have just lost their family law legal aid contract so there's no chance of me getting taken on now due to a revenue loss of £130,000 a year. Training contracts are now going to be few and far between, even more so than before because funding to train young lawyers like me has been cut! Not sure this is directly due to this particularly government, maybe more of the fact that we have a massive deficit to repay and money must come from somewhere, but still. Bad times!
Man of Honour
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Cuts are biting in my line of work.
Then again even under the last government, 10 million in efficiency savings had to be made by merging departments and cutting spending.
The coalition have said well done but another 1.4 million has to be cut as well and all police staff have been sent notices that compulsory redundancies are going ahead.
Then again even under the last government, 10 million in efficiency savings had to be made by merging departments and cutting spending.
The coalition have said well done but another 1.4 million has to be cut as well and all police staff have been sent notices that compulsory redundancies are going ahead.
Soldato
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Life in post Labour Britain?
Well they're threatening job cuts in specific departments at my work, granted the company is basically streamlining their efficiency by relocating posts but given the fact we made huge profits in the last quarter (Tesco) it seems surprising that this is happening.
I know my job is safe given I've recently left the office (IT) department and I'm now doing more physical work (my own choice) my wife on the other hand has spent the last four years at college / uni and will graduate this Sept as a fully qualified nurse. Is there any jobs for nurse's - nope!
At the moment we're looking at the possibility of relocating and that maybe abroad given the state this country is in at the moment it may not be a bad move!
Well they're threatening job cuts in specific departments at my work, granted the company is basically streamlining their efficiency by relocating posts but given the fact we made huge profits in the last quarter (Tesco) it seems surprising that this is happening.
I know my job is safe given I've recently left the office (IT) department and I'm now doing more physical work (my own choice) my wife on the other hand has spent the last four years at college / uni and will graduate this Sept as a fully qualified nurse. Is there any jobs for nurse's - nope!
At the moment we're looking at the possibility of relocating and that maybe abroad given the state this country is in at the moment it may not be a bad move!
Soldato
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The coalitions lack of directionon energy policy may yet condemn us an uncertain energy future around 2017-18.
My industry is seeing withering job losses but much of that is a consequence of the recession hitting demand rather than Government policy.
The Coalition is still carrying on the fine British tradition of shafting it's constituents whilst making outrageously costly commitments abroad, such as Climate Change legislation, Afghan war, the £7Bn "Iternational Devlopment" budget and funding the EU (net EU$57Bn).
We could save some serious wedge by being a litle more selfish and reducing our committment to some of those costs.
My industry is seeing withering job losses but much of that is a consequence of the recession hitting demand rather than Government policy.
The Coalition is still carrying on the fine British tradition of shafting it's constituents whilst making outrageously costly commitments abroad, such as Climate Change legislation, Afghan war, the £7Bn "Iternational Devlopment" budget and funding the EU (net EU$57Bn).
We could save some serious wedge by being a litle more selfish and reducing our committment to some of those costs.