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Nov 2008 now, so 3 years ago means Nov 2005.

Interest rates were historically low (not quite as low as today), but they hadn't started rising, that didn't happen until Aug 2006.

Prices were high, but it could be worse, indeed it carried on getting worse until Aug 07.

And stamp duty was set at 125k+, as it had been for years. Admittedly a lot more houses were falling into that bracket due to the price increases.

 

At the moment your property is still worth what you paid for it.

 

You are right though, you're in the group of people worst affected, unfortunately though there's a far bigger group who can view this price correction as a good thing.

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Sorry Cyclone, you are absolutely right - I didnt purchase my property on Nov 13th 2005, so yes it wasnt EXACTLY 3 years ago. It was 3 years, 8 months ago. Soory for the mix up, I will make sure sure i do not generalise so much in future.

 

Believe me when I say I paid stamp duty on my property and it cost less than £125K. Either that, or I gave a grand to the government for no reason.

 

I agree that plenty of people see the fall in house prices as a good thing - i did not say that I was in the majority. In fact if i were renting I would see it as a gift straight from heaven - unfortunately im not, so I dont. I was meerly pointing out that it isnt just investors who have been stuffed by the house price fall, its first time buyers a few years ago that have been hit too.

 

Thank you for making my mood worse :mad:

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Or it may be that they actually hold a different view to you??

 

Yes it is a different view. One that turns out to be wrong time and time again because it does not bear up to scrutiny which was the point I was trying to make.

 

Here's a quote from today's Independent, "The change of plan reflected the speed with which the credit crisis has overwhelmed government efforts to restore order to debt markets."

 

This is the kind of trash that gets written time and time again. The reason the bailout failed and was never going work, was because it mis-identified the cause of the problem. So you get rubbish like "The speed of the crisis blah blah".

 

There are plenty of people who have predicted with great accuracy exactly how the economy will react to each Government measure. None of them work for the Govt and hardly any of them write in the press. You can sit and hope that the Govt and the press get it right eventually, but how much being totally and utterly wrong are you happy to tolerate?

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It started as a liquidity problem though, as they stopped lending to each other because they weren't sure how stable the other banks were.

And the trigger for the whole thing was lax lending criteria, more (I believe) in the US than here, and the fact that many US mortgages are no recourse (ie the home 'owner' can hand the keys back and walk away).

 

The liquidity problem is a symptom. I'll repeat it is a symptom. Treating the liquidity symptom will do nothing to stem the progression of the disease. The reason the banks won't lend to each other is that they've realised that each other are probably insolvent. And now that's spreading to sovereign wealth too.

 

The trigger for the whole thing? Well non-recourse mortgages are a bit of a red-herring, if the borrowers default in large numbers, the lenders are screwed either way. If the loans are recourse, the borrower is screwed too, if non-recourse the borrower gets to walk away to fight another day.

 

This is probably the most cogent explanation I've come across,

 

"The missing part of the argument is the creation of a new and totally unregulated currency by the banks.

 

I have said this before so I hope people will forgive me - but what else is the family of debt backed paper 'assets' but a currency. They are all bits of paper with a 'promise to pay the bearer'. They are traded, spent, and accepted exactly as any other currency. The only difference is that this new currency is not backed with anything. And that is a far larger part of the problem than the dollar. Though the two are entwined.

 

Why did the banks want a new currency? Because the old currencies are tied into all sorts of considerations that speculators find restrictive. Like balance of payments concerns, or the desire of politicians to have some stability in currency values. The markets neither need nor want stability. Speculation needs instability to bet on.

 

This new currency is based on debt. Debt, rather wonderfully is easier to find than gold or productive capacity. It is, as we are always being told, based ultimately on the 'confidence' that the debt will be repaid at some point. Which in turn means that the debt currency ONLY works when the economy grows.

 

And therein lies both its fatal attraction and its fatal flaw.

 

Debt backed currency get value in two ways. First the slow way. If you have confidence that the underlying loan will be paid back. Then the fast way. Debt backed assets can also get value even if the debtor is unlikely to ever pay back the loan (say the person is regularly unemployed) AS LONG AS the market is growing enough to lift the worth of the underlying assets enough to cover the original cost AND the interest on the loan. In that case you don't have to worry about the loan being repaid because the 'asset' is increasing in value no matter what.

 

And there is the credit bubble. In all its catastrophic glory.

 

Make loans, don't worry if the debtor has no hope of paying it back (You could sell to a corse - you just need a name and an x on the paper) and you have created a new piece of debt backed money which you can sell on and get rich.

 

The banks and dealers created a currency and got carried away with their own greed. Like every greedy and stupid person in history. They said why not make more debt currency and all be richer. Which they did in two ways.

 

FIrst by debasing the currency and then by leveraging to insane levels

 

They took good (gold) loans and mixed them with poor, tin loans (sub prime alt-a Aption ARM and corporate bonds from badly run companies ) and mixed them together into derivatives. The amount of this debased debt backed currency dwarfs by orders of magnitude the total number of dollars.

 

Then they took this currency based not on gold or tax revenues or even on productive capacity, but based on confidence that the debts would be paid back or the underlying 'assets' would appreciate in value, and declared these bits of paper to be solid gold and used them on their balance sheets. They counting them as assets even before anyone had actually paid them back, based on the expectation that the value of the underlying asset would appreciate, and then leveraged them to insane levels. In essence loaning the same 'assets' out over and over.

 

This is why the banks keep talking about 'getting confidence' back into the system.

 

The banks are sitting on a mountain of these 'assets' which they refuse to admit are worthless. Until this bad debt mountain is delt with the financial system WILL NOT RECOVER.

 

Interest rate cuts and tax rebates do NOTHING about the fundamental problem and do nothing to force the bad debts into the market to be burnt. They are simply about getting someone to start spending in the the hope that some of the underlying 'assets' start to be worth something again."

 

Note, it wasn't written by a journalist or a Govt official or a so-called expert.

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Nice find Tricky.

 

I find a comforting familiarity with the sentiment you expressed 2 posts above (post 303). There are those who know whats going on, there are those who think they know what's going on (including politicians from all parties, and many of the experts and/or journalists), and then there is the rest of (and the vast majority of) Joe Public.

 

I've found a few key people who for a year or more have been spot on with their predictions and estimates of the size of the underlying problems and what it means for governments/countries/the world economy. Looking further back, to the 2001~2004 period, these same few people were almost shouting from the rooftops that this would happen but no-one cared/listened. It simply wasn't in the interests of those who could/should have put the brakes on to do so.

 

Well now we shall pay the price.

 

 

P.S. Stebbil I do feel sorry for you, but shed no tears for 'investors'. Those that knew what they were doing have made their money and legged it, those that didn't see it coming helped cause this problem and most of them are now being burned. However normal people who weren't in property to make money and who didn't help fuel the fire of insane house prices by buying as many magical cash machines as they could, but who instead simply got caught out by them - like yourself - I have sympathy.

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Thank you SupraSteve, I appreciate your kind thoughts.

 

By the way, do you want to buy a city centre apartment? :hihi::hihi::hihi:

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Sorry Cyclone, you are absolutely right - I didnt purchase my property on Nov 13th 2005, so yes it wasnt EXACTLY 3 years ago. It was 3 years, 8 months ago. Soory for the mix up, I will make sure sure i do not generalise so much in future.

 

Believe me when I say I paid stamp duty on my property and it cost less than £125K. Either that, or I gave a grand to the government for no reason.

 

I agree that plenty of people see the fall in house prices as a good thing - i did not say that I was in the majority. In fact if i were renting I would see it as a gift straight from heaven - unfortunately im not, so I dont. I was meerly pointing out that it isnt just investors who have been stuffed by the house price fall, its first time buyers a few years ago that have been hit too.

 

Thank you for making my mood worse :mad:

 

March 2005 then.

So interest rates were low, not high.

You were quite unlucky with stamp duty, it was 60k at the start of March in 2005 and went up to 120k in the budget that month!

Still, 125k would have always been over, so my mistake on that one. It didn't exist for properties of any price though as you said.

My point was and still is that you have in no way been stuffed. Your house is still worth more today than it was when you bought it, your fixed rate was a good rate and you paid a small amount of stamp duty.

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Thank you SupraSteve, I appreciate your kind thoughts.

 

By the way, do you want to buy a city centre apartment? :hihi::hihi::hihi:

 

http://www.thestar.co.uk/headlines/Tallest-building-may-never-become.4689363.jp

 

if you are lucky, one of the people who doesn't end up getting one of Conran's City Lofts may decide to buy yours instead.

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Had a feeling the city lofts project would end up being half built.

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...IMHO the new year will see unemployment break 2million and maybe hit 3million before the year is out.

 

I see the CBI now match my thinking from 6 weeks ago;

'Close to 3m unemployed' by 2010

The UK's recession will be tougher and longer than first thought*, the business group CBI has warned.

 

...unemployment could peak at close to 2.9 million by 2010, up from 1.8 million at present.

 

 

* = only if you didn't think about it fully! :rolleyes:

If a numpty like me could see it coming, why couldn't our great & good? :mad:

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The liquidity problem is a symptom. I'll repeat it is a symptom. Treating the liquidity symptom will do nothing to stem the progression of the disease. The reason the banks won't lend to each other is that they've realised that each other are probably insolvent. And now that's spreading to sovereign wealth too.

 

 

 

That, right there, is exactly the point

 

Now if you and I, can, and have, seen this would be the result for a good few years, how the **** didnt nulab?

 

That is the question that wants shouting from the rooftops...

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