September 20, 2007

Did the US Fed and Bank of England just sink into a housing crash moral hazard abyss?


Have the recent moves of the US Fed and Bank of England to bail out failed mortgage gambler banks at taxpayer expense left you with a sickening feeling in the pit of your stomach that nobody competent is minding the store?

Here's the word on the street from the UK, where moral hazard is raging and a great collapse is now assured.


The first thing to remember about the collapse and de facto nationalisation of Northern Rock is that it was essentially about house prices. Since ministers have done so much to inflate those prices, it is understandable that they should feel obliged to relieve Northern Rock's depositors of any risk.

I repeat, this all began with houses. For half a century home ownership in Britain - termed a "right" by Brown - has been indulged beyond economic reason. It has sucked savings out of the productive sector. It has tied up pension money that should be helping the economy in the stock market. Its tax reliefs have immobilised young people who, in most countries, remain in the more fluid rented sector until later in life. It has led to mass hysteria with every price rise or fall. Housing sees the British, their rulers and their newspapers, at their most innumerate and irrational.

10 comments:

Anonymous said...

It was much better when real estate was cheap . I remember when real estate was kinda cheap and it was just a place to live and maybe a tax right off .

Oh sure , the rich people had the big house on the hill ,but they could afford to heat and cool it .

Nobody thought they were entitled to own a house ,back in the good old days ,but people thought it was a noble pursuit to try to get the American dream of home ownership by working ones way up the pecking order . The bankers didn't give those loans away easy in those days ,you had to prove you could pay and than some .

The investment goal was to own your home by the time your retired so you could be in peace in your final golden years ,than maybe pass on the estate to the younger ones.What happened ?

Anonymous said...

John Stewart interviews Alan Greenspan
http://tinyurl.com/369slr

AMIGAUSER said...

Northern bank nationalised, since when?

All that has happened is the government has tried to prevent a run on the bank

You should stop acting like a gold bug, and go look for the financial instition that is paying the most money for deposits and put your money there.

The government will now have to back all the deposits in every bank in the UK.

Role on private profit, and if the institution fails, the public by way of the government will bail us out completly - is'nt capitism great ;-)

Anonymous said...

GOLD TO DA MOON ALICE!!!!!

Anonymous said...

The investment goal was to own your home by the time your retired so you could be in peace in your final golden years ,than maybe pass on the estate to the younger ones.What happened ?

That was okay when the property tax was low... but with rising prices along with an increase in the property tax means that older people on fixed incomes can't afford to own their homes.

A fixed income is just that... it's FIXED. Meaning that if prices rise (ie food, fuel, heating, taxes, etc.) then something has to give. Combine this with the fact that when you're older, you tend to get more sick than a person in their mid twenties.

Just picture it... midle of winter, a few sticks of furniture, and an old person huddled in a blanket in a freezing room trying to heat up their slice of spam over a candle.

Bleak... but hey... that's capitalism!

Capitalism gives you the right to be a billionaire - as well as starve to death.

Trevor Cordes said...

Interesting. See a talkback on CNN.com, which represents the "average joe" better than HP, probably. I read through the very numerous comments and about 95% said a stern "no bailout". If the average voter isn't just a dumb home debtor, and instead is more aware it's their tax dollars and inflation losses being blown here, these bailouts could backfire politically.

see here

brown's bottom said...

Brown (the current PM) is the DOPES that sold most of the UKs gold at $275 an ounce.

Anonymous said...

Its going to get nasty in Europe.
once reality sinks in, and people realize they are working harder and more hours then Americans just to pay for a tiny flat in crowded areas.

it will get ugly.

Meg said...

Here's an interesting article found on Fool called "Why Rescue Some Savers But Not Others?"

http://tinyurl.com/2pfovt

Exerpt:
"Northern Rock had amassed a large number of affluent, older savers by promoting special savings accounts aimed at the over-fifties. What's more, the Golden Generation of over-55s own around three-quarters (75%) of all UK wealth and, crucially, are the group most likely to vote in elections. By appearing to save their savings, Gordon Brown wins their goodwill and, with any luck, their future votes."

Makes a lot of sense, really. Golden Brown is protecting his interests....*sigh*

Anonymous said...

Anonymous said...
Its going to get nasty in Europe.
once reality sinks in, and people realize they are working harder and more hours then Americans just to pay for a tiny flat in crowded areas.

it will get ugly.

September 21, 2007 7:44 PM

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Dude, Europeans work FEWER hours than Americans. Far fewer. Americans work more hours per year on average than people in any other developed country. Yeah, housing in Europe is expensive. Europe is pretty crowded so that shouldn't come as too big of a surprise. And yeah, there is a housing bubble in Europe too, which has driven up the costs of homedebtorship. But hey, at least the Europeans get like ~7 weeks of vacation a year and can come to the US for a cheap vacation -- they get $1.40 for each euro.

The main problem with Europe is that they're getting overrun by Muslims. That, and they've got a heck of an entitlements problem. But the first problem is far more serious than the second.