economic situation is dire

[mjmooney]

And the mortgage gets paid off next year.

out of interest and without delving into peoples financial affairs ...

would you then be tempted to take out a loan and give yourself a lump sum that you could spend on something like a car /holiday / extension /millions of books :winkold:and pay back over say 5 years ... or would you save what was the mortgage money each month and spend it on something you desire once you have built up the funds ? or indeed just save it for a rainy day ?

Good question, but it sort of doesn't arise, as I plan to retire in two years anyway.

So I'll only have one year of salary with no mortgage. Negotiations with the financial director (Mrs M) are ongoing as to our future plans. In other words... dunno really.

[omariqy]

And the mortgage gets paid off next year.

out of interest and without delving into peoples financial affairs ...

would you then be tempted to take out a loan and give yourself a lump sum that you could spend on something like a car /holiday / extension /millions of books :winkold:and pay back over say 5 years ... or would you save what was the mortgage money each month and spend it on something you desire once you have built up the funds ? or indeed just save it for a rainy day ?

Good question, but it sort of doesn't arise, as I plan to retire in two years anyway.

So I'll only have one year of salary with no mortgage. Negotiations with the financial director (Mrs M) are ongoing as to our future plans. In other words... dunno really.

Well I'm hoping you have a pension to look forward to in retirement?

[mjmooney]

And the mortgage gets paid off next year.

out of interest and without delving into peoples financial affairs ...

would you then be tempted to take out a loan and give yourself a lump sum that you could spend on something like a car /holiday / extension /millions of books :winkold:and pay back over say 5 years ... or would you save what was the mortgage money each month and spend it on something you desire once you have built up the funds ? or indeed just save it for a rainy day ?

Good question, but it sort of doesn't arise, as I plan to retire in two years anyway.

So I'll only have one year of salary with no mortgage. Negotiations with the financial director (Mrs M) are ongoing as to our future plans. In other words... dunno really.

Well I'm hoping you have a pension to look forward to in retirement?

Yup, final salary related. Won't be rich, but should be OK.

[andyjsg]

Yes but I didnt say that money should be saved.

What difference is there between paying down debt and increasing saving?

The cost of money. Surely by clearing debt which is costing you more than the money you borrowed you would have more money to spend in the economy as you wouldnt be paying an extra say 50 a month in interest?

Personally I like be able to buy stuff (consumerism) but the difference is you should earn it or at least be able to afford it. But alas jealousy prevails and we end up in Bright House Britain.

[LondonLax]

I have a friend who is Financial Director at a huge company and he lives on a debt culture

he will take out one loan and then and then take out a bigger one months / years later and use it to pay off the balance on the other one , he swears by it

personally I wouldn't let him anywhere near my company :-)

but saying that , this process is exactly what Al Fayed does (but on a larger scale) , he trades on his name and potential equity , borrows £10m and when the debt is called in borrows £15m from elsewhere and pays back the £10m ..least that was according to private eye a few years ago

If you can make more money from the money you have borrowed than it is costing you in interest then it is a logical thing to do. Money for nothing in effect. Much like the Glazers at United.

[CI]

I did something I don't do very often yesterday, ventured up the M1 North on business

I spent half a day in a town up there and I was shocked at what I saw in terms of poverty levels, boarded up closed shops/pubs etc.

A real eye opener, we are drifting into a perilous position as a nation.

[mjmooney]

I did something I don't do very often yesterday, ventured up the M1 North on business

I spent half a day in a town up there and I was shocked at what I saw in terms of poverty levels, boarded up closed shops/pubs etc.

A real eye opener, we are drifting into a perilous position as a nation.

Define "up north".

Leeds is pretty much OK. Bradford is sub-third world post-apocalyptic horror movie.

[tonyh29]

I spent half a day in a town up there and I was shocked at what I saw in terms of poverty levels, boarded up closed shops/pubs etc.

A real eye opener, we are drifting into a perilous position as a nation.

I was up North the other day as well ,looked the same as it always was ,( see Mikes description for Bradford )

Pubs started shutting down around the time of the smoking ban and it continued as breweries got more and more greedy over the price of a pint ...

Boarded up shops is nothing new either ..interestingly the Peacock centre in Woking the shops started closing down before the crises first kicked in i.e Woolworths , HMV ... those shop fronts stayed empty until recently where they have now been filled ... when you look into why you found that the owners of those shopping centres thought the best solution to an economic crises was to increase the rent of those companies that had managed to survive ... pure greed (and stupidity) on their behalf ...

[snowychap]

Yes but I didnt say that money should be saved.

What difference is there between paying down debt and increasing saving?

The cost of money. Surely by clearing debt which is costing you more than the money you borrowed you would have more money to spend in the economy as you wouldnt be paying an extra say 50 a month in interest?

I don't think you're quite understanding the relevance of the question.

The effect on consumption spending now is the same for both. For the purposes of the paradox of thrift, they would appear to be equivalent.

Personally I like be able to buy stuff (consumerism) but the difference is you should earn it or at least be able to afford it. But alas jealousy prevails and we end up in Bright House Britain.

I'm not quite sure what you are advocating?

A consumerist society without credit?

[CI]

I also noticed that during the middle of the day, how many unemployed people there were just milling around

The only real investment on the high st appeared to be a new Weatherspoons being fitted out in an old bingo hall.

Sums it up nicely

[snowychap]

I did something I don't do very often yesterday, ventured up the M1 North on business

I spent half a day in a town up there and I was shocked at what I saw in terms of poverty levels, boarded up closed shops/pubs etc.

A real eye opener, we are drifting into a perilous position as a nation.

In a town centre? If so then I don't think it has a lot to do with North/South/East/West.

Have a look in Malvern Link, in Dunstable, in any number of places.

The UK high street is either a mix of modern pawnbrokers, Greggs, estate agents, charity shops, mobile 'phone shops and Primark or, often in more affluent areas, seems to have become just pubs and coffee shops.

The rise of the out of town retail centre (places which according to some supermarket chains are seeing reduced numbers because of petrol costs) kick started the change, I'd say.

[Richard]

The rise of the out of town retail centre (places which according to some supermarket chains are seeing reduced numbers because of petrol costs) kick started the change, I'd say.

+ internet shopping

[VILLAFC2000]

Any one know how the building trade is. We have had a few quotes from builders and they all seem to be jam packed with work which seems strange as they say that the building industry is one of the most vulnerable sectors...?

[peterms]

Any one know how the building trade is. We have had a few quotes from builders and they all seem to be jam packed with work which seems strange as they say that the building industry is one of the most vulnerable sectors...?

September was the lowest level of activity in construction since December, when the weather stopped much work from happening. The PMI (index of activity) was 50.1 - anything below 50 signifies negative growth.

[PIW]

The real indication of how an economy is performing is its construction sector. its the first to go into a downturn when the economy goes tits up.

[blandy]

As for the bit about private debt, I suggested this a few pages back and it was swiped away because people wouldn't be spending money and as our economy is reliant on this spending it would stop froth blah blah blah...

I thought Peter responded by pointing you in the direction of the paradox of thrift?

Yes but I didnt say that money should be saved.

Repaying debt is saving, in effect. When economists refer to the private sector "net saving", they describe situations like the present, when people are repaying debt. It doesn't mean that what people think of as their savings are increasing.

If the private sector is net saving, it follows that the public sector is in deficit (leaving aside the unusual situation where there is a balance of trade surplus massive enough to cancel out both the private and public sides).

If the private sector net saves, and the government tries to reduce the public sector deficit, the consequence is severely reduced demand, increasing unemployment, and recession. Which is what we have, and which was entirely predictable and was predicted.

It remains the case that a system based on pretty well everyone being in debt, which is what we have now, is great news for financiers, but unsustainable and guaranteed to result in periodic crashes and disasters.

One of your linked expert chaps - Keen, one who predicted the collapse says different, if not the exact the opposite. He says reducing private debt is the solution, though the way to do so is not the Tory way. He says borrowing more to spend would make it worse.

an ... explanation for the Great Depression and the current crisis.. both were triggered by a collapse in debt-financed demand. Aggregate demand in an economy like ours is composed of GDP plus the change in the level of debt. It is the sudden and extreme change in debt levels that makes demand so volatile and triggers recessions. The higher the level of private debt, relative to GDP, the more unstable the system becomes. And the more of this debt that takes the form of Ponzi finance – borrowing money to fund financial speculation – the worse the impact will be......from the late 1960s onwards, private sector debt in the US began to exceed GDP. It built up to wildly unstable levels from the late 1990s, peaking in 2008. The inevitable collapse in this rate of lending pulled down aggregate demand by 14%, triggering recession....the key to averting or curtailing a second Great Depression is to reduce the levels of private debt, through a unilateral write-off, or jubilee. The irresponsible loans the banks made should not be honoured. This will mean taking many banks into receivership. Otherwise private debt will sort itself out by traditional means: mass bankruptcy, which will generate an even greater crisis. ...

[peterms]

One of your linked expert chaps - Keen, one who predicted the collapse says different, if not the exact the opposite. He says reducing private debt is the solution, though the way to do so is not the Tory way. He says borrowing more to spend would make it worse.

an ... explanation for the Great Depression and the current crisis.. both were triggered by a collapse in debt-financed demand. Aggregate demand in an economy like ours is composed of GDP plus the change in the level of debt. It is the sudden and extreme change in debt levels that makes demand so volatile and triggers recessions. The higher the level of private debt, relative to GDP, the more unstable the system becomes. And the more of this debt that takes the form of Ponzi finance – borrowing money to fund financial speculation – the worse the impact will be......from the late 1960s onwards, private sector debt in the US began to exceed GDP. It built up to wildly unstable levels from the late 1990s, peaking in 2008. The inevitable collapse in this rate of lending pulled down aggregate demand by 14%, triggering recession....the key to averting or curtailing a second Great Depression is to reduce the levels of private debt, through a unilateral write-off, or jubilee. The irresponsible loans the banks made should not be honoured. This will mean taking many banks into receivership. Otherwise private debt will sort itself out by traditional means: mass bankruptcy, which will generate an even greater crisis. ...

His comments about borrowing more to speculate refer to private debt - look at the sentence immediately after the one you bolded. This passage doesn't address the public/private point I mentioned at all, it's a comment about a different thing.

But on the point about whether Keen thinks the public deficit should be reduced at a time when the private sector is net saving, it may be better to go to the source rather than Monbiot, who was quite frank in his article about not having followed it all. This is from Keen's own website:

My focus is and will remain on explaining how the crisis came about, but in the middle of the crisis, government policies have the potential to either lessen the crisis or make it more extreme. Two of the best commentators on sensible policies to lessen the crisis are Yanis Varoufakis and Richard Koo...

...Both Yanis and Richard argue that government austerity at a time when the private sector is in a debt crisis is counterproductive. If the private sector is reducing its expenditure by deleveraging, then the same behavior by a government intent on “balancing the budget” will amplify the depressing impact of reduced private expenditure, thus deepening the crisis. Unfortunately this is precisely what the EU proposals for the PIGS are likely to do. Richard’s historically based analysis predicts that these austerity measures will deepen the crisis, and quite possibly result in increased rather than reduced government deficits, on the experience of Japan...

...Anyone who thinks that austerity is the way to go, on the basis of simplistic analogies to the situation of a household having to balance its budget or the like, should watch the presentation below by Richard Koo.

But yes, I completely agree with Keen's view that it's the level of private debt that's the problem, and that it should be reduced. My point was more that if at the same time it's being reduced, the government tries to cut the public deficit, there will be chaos. I believe Keen agrees with that.

[cheltenham_villa]

The rise of the out of town retail centre (places which according to some supermarket chains are seeing reduced numbers because of petrol costs) kick started the change, I'd say.

+ internet shopping

interestingly in Cheltenham we have rules regarding out of town precincts. No shops selling small items that would detract from the town centre are allowed unless the shop commits to also retaining a presence in the high street. Not sure of the exact ins and outs but generally its worked. Not to many gaps in the main parts of the high street.

[peterms]

...ps

In the Richard Koo presentation which Keen quotes approvingly, at about 35 minutes, Koo says "the UK budget deficit is large, but it's not large enough to stabilise the UK economy". He's making exactly the point that if the private sector deleverages, then public sector deficits increase, and should increase.

He also shows a little earlier that in Japan, attempts to reduce budget deficits when the private sector was net saving initiated a crash, which led to falling tax receipts and ironically the deficit increasing instead of reducing. He's quite critical of G20 finance ministers for failing to understand this.

[VILLAFC2000]

Any one know how the building trade is. We have had a few quotes from builders and they all seem to be jam packed with work which seems strange as they say that the building industry is one of the most vulnerable sectors...?

September was the lowest level of activity in construction since December, when the weather stopped much work from happening. The PMI (index of activity) was 50.1 - anything below 50 signifies negative growth.

Pertems - Youre a legend, Its good to know not everyone reads the Daily Mail...!