I am not an economist but it seems to me the height of folly for a Government to allow a consumer debt load of unprecedented proportions to grow in this country and then relax bankruptcy rules and allow people to walk away from their debts through Individual Voluntary Arrangements. As the advert above states, an almost unbelievable solution to enable you to walk away from debt. How many living in rented accommodation and with no savings or assets have, are and will be walking away from their debts?
How much of this country's financial problem is being caused by those with no qualms about spending others' money and then effectively refusing to pay it back with the sanction of its Government?
Maybe our problems are not entirely caused by the US sub-prime mortgage debacle.
6 comments:
I couldn't agree more
Bertie our government appears to be heading for a situation where we get a run on the banks, and by that I mean all the banks. They are repeating the mistake that America made that caused the run on the banks there, I could be worth popping in and getting an American history book.
Look forward to popping across and browsing, Michael.
The problem has been that credit cards are too easy to obtain caused by governments that need a regular increase in consumer demand. I am an economist but trained in the days (1960s) when HP was the way folk bought things. Controlling HP was the way the government of the day controlled spending. Remember the days when out parents saved up to buy things? Now the increase in aggregate demand needs a constant flow of money. The Tories controlled things by using money supply but that can be skewed by credit. Bankruptcy is not an easy solution as it is difficult to get a bank account afterwards. Students who renege on student loans soon discover they can't get a mortgage (when they were easily available) due to their credit history. Thatcher's government must be held partly responsible for encouraging the consumerism we see today.
Interesting explanation anon 17 23
The first we heard of this was Clarissa of the Two Fat Ladies who said on radio that if she was student now she would graduate and then go bankrupt. (she is a barrister).
There have been many comments about benefits scroungers on threads and these comments are associated with "low life" on the streets.
But the fact is that many young people now are pragmatic and do not aspire to a mortgage.
Two examples
(1) Thanet girl who passed A levels went to university. First term contemplated the student debt problem. Called boyfriend. Got pregnant. Left uni before the second term. Got council house. Claimed incapacity and tax credit so as to avoid having to co-operate with CSA. Boyfrioend uses his parenhts address as his official home. Their net income cohabiting in council house is over 700 pounds per week.
(2) Thanet girl reaches mid twenties working in the care industry. Ambition to have two kids by the same father. No intention of living as a couple in poverty. Works part time so as to get working and child tax credit and avoid co-operatioon with CSA. Housing benefits (like above) in private rented. Partner address officially his parehts address. Their cohabiting net income between 800 and 1000 per week (he in well paid work)
The matter of not being mortgageable is not a worry to them. They will, if they choose, get a partner who is mortgageable on a buy to let and rent from their partner.
Perhaps when we think of benefits fiddlers we should have a mind image of new cars and good quality rented houses.
Only fools and horses ....
09.54 illustrates one problem and CitiGroup in Telegraph today seems to agree with you Bertie that consumer credit defaults pose a serious risk to the banking and economy.
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