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Beginning of the end or end of the beginning? (doomy gloomy thread warning)

(47 Posts)
Callisto Wed 15-Oct-08 08:21:25

So the markets seem to have stabilised and gained back some of their losses and lots of money has been pumped into the banks to help kickstart lending BUT the housing market is static and house prices are falling (no bad thing imo, though I know many disagree), manufacturing is shrinking and the service industry has just self-destructed.

So do you think that the recession will be relatively shallow with things recovering quite quickly or do you think we are in for a very rocky ride with a recession/depression on the way that will resemble the 1930's? Your reasons for your opinion would be most welcome. smile

smallwhitecat Wed 15-Oct-08 10:08:39

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smallwhitecat Wed 15-Oct-08 10:09:47

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morningpaper Wed 15-Oct-08 10:12:50

Taxes are going to increase and public spending will decrease.

Frankly it's a bad time to win an election.

Hopefully, the Tories will get in, get blamed for the mess, and then get voted out next time....

Callisto Wed 15-Oct-08 11:46:25

I read that quote too, smallwhitecat, and was equally [hmm}.

MP, your post is so cynical. It really sums up the NuLab philosophy imo.

Callisto Wed 15-Oct-08 11:47:15

That should be hmm of course...

HowlingattheFullMOONMother Wed 15-Oct-08 11:52:14

Things will be rocky for a while, banks will be over-cautious, spending will fall, businesses will fail, so unemployment will rise..... so Yes the doom and gloom will stay for a while.

But in my opinion, it doesn't matter which political party has/is running the country, this was bound to happen , and it doesn't matter which party gets in, they will have a terrible job whilst the recession is around.

No Political party are miracle workers.

Housemum Wed 15-Oct-08 11:57:05

And if no-one wants to move and businesses are struggling, who is going to borrow all this money??? Only have experience of one bank but they are keen to lend where aporopriate - so are the gov't saying they should lend to the slightly iffy propositions? Isn't that what started all this in the States?

smallwhitecat Wed 15-Oct-08 12:34:59

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Housemum Wed 15-Oct-08 12:40:43

It was "bound to happen" in that there is a general attitude of want-it-buy-it-pay-sometime. Which does not absolve the government from actually exercising control on the economy. I'm just saying that this cheap credit bubble had to burst - in one generation we have changed from being ashamed of going over limits, and it being a stigma to borrow other than for very large purchases (car/house) to buying a £50 toy on buy-now-pay-later, and every shop flinging credit at you.

Housemum Wed 15-Oct-08 12:41:24

Maybe he means Churchil the dog? Just nods and says Oh, Yes"? Actually, he looks a bit like him, it's the eye bags...

smallwhitecat Wed 15-Oct-08 12:48:47

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morningpaper Wed 15-Oct-08 13:33:58

I have a lot of friends with INCREDIBLE amounts of debt, it is terrifying.

People who are renting with debts of half their annual salary seems extremely widespread among my friends.

Also several friends have interest-only mortgages with no way of paying more if the interest rate rises - and not paying off any capital!!!! I can't believe they were all sold this crap.

morningpaper Wed 15-Oct-08 13:39:07

Callisto my point re. the Tories was just joking

obviously I hope they don't REALLY get in because they will just dismantle the NHS and schools and shaft working families

and ALL before breakfast I expect

bunny3 Wed 15-Oct-08 14:03:58

It will get worse as people spend less and jobs are lost. All tax payers will be paying for this for a LONG time. I think house prices will continue to fall which is good for me as I want to buy a bigger house, crap for loads of peole I know who have over-extended themselves and remortgaged (why oh why do people remortgage to pay for a holiday or a new car ffs???).

The Conservatives will win the next election and sort out the mess and create a buoyany economy.... then labour will be voted back in and bring the country to its knees once again... It's cyclical. Doesnt anyone remember the winter of discontent?

midnightexpress Wed 15-Oct-08 14:07:08

'The Conservatives will win the next election and sort out the mess and create a buoyany economy'


morningpaper Wed 15-Oct-08 14:13:07

hehehe that IS funny

smallwhitecat Wed 15-Oct-08 16:19:43

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midnightexpress Wed 15-Oct-08 17:03:50

Those of you who think that the Conservative Party is the place to go for sound economic judgement, do none of you remember the ERM fiasco? Interest rates at 15% anyone? Housing market crash of late 80s?

One reason we are so heavily dependent on the banking sector is because they did their very best to destroy our entire manufacturing industry.

ElfOnTheTopShelf Wed 15-Oct-08 18:12:55

MP - whilst interest only repayments on a mortgage are generally not a good thing as they do not reduce the house value, at the minute it can be a lifeline for people in retaining their home.
For eg, we are with northern rock, our mortgage is very manageable (1 sixth of our monthly income). However, we are just coming off our fixed rate with NR and they are putting us on a 7.49% (up from 5.2%) which obv hikes up our payments.
Naturally, we would usually look at getting the rate fixed, but NR and not in a position to fix at that rate or anything lower, so we have to go elsewhere.
Whilst we sort out an alternative mortgage provider (some fiddly financial bits as we have a loan as well) we'll probably look at going interest only. NR wont care - they're getting interest payments. We'd fix with a new provider and NR would be paid off. We dont have to go interest only whilst we sort out a mortgage (which could take a while given the reluctance for banks to lend) but nobody is going to pay a few hundre more for a few months if they dont have to.
I realise this isn't the case for everybody - a lot of mortgage companies last year / year before were pushing the interest only offer, where you get between 1-3 years on interest only. We'd considered it if we sold and moved as we would co-incide the interest payments only for when I had another child and I woudl be on slightly reduced wages, but as we didn't sell our house, it didn't happen. But, interestlying, we found out that the bank doesn't automatically put you onto repayment payments after the end of the interest only period - it was up to the customer to remember and request their payments were switched to repayment - I do wonder how many people there are out there who have exceeded their interest only time but still paying interest only, and not reducing their debt.

smallwhitecat Wed 15-Oct-08 18:18:22

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peanutbutterkid Wed 15-Oct-08 18:19:29

Have not a clue, cannot get my brain around it all.

But obviously the govt. is borrowing lots of money (to lend to banks), and this will result in interest payments, we will have to pay higher taxes to meet the interest payments, there will be inflationary pressure from so much public borrowing.

My guess is that Most people will continue the habit of spending as much as they like for frivolous consumer goods, treating clothes as disposable, etc.

I cannot understand why most people are supposed to feel 'bad' about house price falls, I haven't benefited in the slightest from the ridiculous house price rises in past 8 years -- and I say that as a home-owner during all this time. The contrary, in fact, because the 'steps' on the property ladder were made much bigger by booming house prices.

expatinscotland Wed 15-Oct-08 18:29:58

house prices were over-inflated.

it's not a bad thing for most people if they fall. even by a lot.

markets haven't stabilised.

anyone bought that crock of shit that throwing billions at banks was going to make everything better is seeing now how that's going to work in the long-term.

people aren't going to borrow like that anymore and if they are i see no reason why they should be bailed out for being foolish.

they cut the interest rate to try to get more mugs borrowing - what caused a lot of this mess in the first place - and so inflation is up.


expatinscotland Wed 15-Oct-08 18:31:33

' I can't believe they were all sold this crap. '

I can't believe they were dumb enough to buy it.

ToughDaddy Wed 15-Oct-08 21:34:49

Flicked through thread and noted some presumptions that I would like to challenge. In particular, morningpaper saying 'axes are going to increase and public spending will decrease.' Probably not in this case. The public spending rules of thumb (2.5pc of GDP or whatever) will be broken by probably all of the West. SO, the normal penalty for increasing public spending will NOT be punishable by the markets via fx rates and inflation. This is a very important point. There is a growing consensus that govts out to INCREASE public spending in this period and avoid HUMAN wastage per the LAST RECESSION UNDER the TORIES. Keynes and (common sense) says the govt should take up the slack and increase spending in the downturn, keeping people in work as opposed to undertaking the cost of the dole queue.

This is one of the IMPORTANT changes in the economic paradigm per Friedman and others. The global nature of the shock gives govts an opportunity to do common sense things like increase oublic spending without any individual country being punished by the markets. The US public spending is already much higher as a proportion of GDP than UK, for example.

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