Credit crunch, where's the surprise?

So just a year into the "Credit Crunch" and all is doom and gloom. Repossessions continue to increase and are set to keep on increasing, inflation keeps on climbing (even though the price of oil has dropped some $30 in the last weeks). For those of you not young enough to have lived through the last recession then this may all be new to you, for people who have been around for a while there's nothing new here.

For a variety of reasons at the global level central banks have kept interest rates extremely low for years, this was done to stimulate growth while inflation remained hemmed in. The oil price was stable and prices for clothing remained low as we had all the cheap imports from abroad. This, along with some pretty poor advice from financial organisations, led to people believing that the good times would last forever. People became blinkered and forgetful, instead of doing a small amount of research:


17% in November 1979.

14.875% in October 1989.

Lowest rate throughout the 1980s was 7.735%



Source: http://www.thisismoney.co.uk/economy)

The all time average for the UK is 5-7%, so all those people who are moaning about the rises and the current rate being at 5% have taken a fool hardy short-sighted approach. In this day and age where advisers are able to show you repayment calculations, when you can run repayment models in standard software packages on your on PC (look up PMT in your spreadsheet package, and this is available in FREE, legitimate software).


Where does the blame lay?

The blame for this situation does not lay with any single person or institution, the banks have leant money to people that were a high risk, people have borrowed money at the limit that they could afford when rates were as low as 2.75%. That was never a realistic long term interest rate. People have once more turned to interest only mortgages but with the stock markets wobbling, the house prices falling we look set to re-visit another scene, where the endowment will not cover the full mortgage value at the end of the term.

Blame also has to be placed firmly at the door of those individuals who over stretched themselves in some foolish attempt to "keep up with the Joneses". They have set themselves up for a fall and it's a long way down from the pinnacle they've put themselves on.



Who are the winners and losers?

There's only ever one winner in this arena, the banks. They may be losing billions now but they've taken money, they've taken equity and they will come out ahead.

Those people who were given poor advise and have lost their homes are the losers in this, some now will be back in the world of negative equity that we last saw in the 1990s.



Don't trust your bank or building society, within reason they WANT to give you a mortgage, they will make a lot of money from you, typically you are looking at paying £2 for every £1 you borrow.

As you may well have noted from the tone of this if you want sympathy look elsewhere, I've done my homework, I've made sure I'm covered to some pretty horrific rates. I've built up a large cushion on my mortgage, I've got my "rainy day" funds, but then I borrowed within my limits and you'll find that my mortgage represents my only debt. If things should spiral out of my control then that's something I'll have to accept, but I've made every effort to cover myself for every eventuality.

The final straw??

A thought has started circling in my mind recently, it's not the first time this thought has come around. It's the first time I've started thinking about what the next steps are to act upon it.

As the oil price starts it spiral to infinity (ok so the price has dropped back to around $130 a barrel) and the UK economy begins its latest slump there are a lot of people who aren't feeling that enthusiastic about things here. Well all of that makes me smile my little smug smile as none of it means anything to me, well not yet.

For some time I've started to feel even more hacked off than usual. If you knew me, you'd be surprised this in fact possible, but it's true. The on going insanity that is life in the UK with its political correctness above common sense. Where the government want to take responsibility for economic stability when the global economy was stable but do not want to be held responsible for the current problems that are part of the global problem (hey either it's all your good work and fault or it's not). To the organisation that I work for following it's take over, we're now North American so to justify the millions that the CEO got for getting this deal through heads have GOT to roll.....

What it all means is, I've had enough. I've finally reached that point where I'm thinking about possible solutions and wondering if the only sensible options are the excessive ones. Needless to say I'm hoping that a few quiet evenings will calm me and relax me but that's hard to think of when someone is constantly drilling in ceiling above your desk at work. I fear that I may not make it to that calm and relaxed place, I fear that I will finally lose it with the mass of cretins that surround me. The same imbeciles that will congratulate themselves for any mediocre work as they have no concept of good work.

My only optimism is looking forward to a cell (padded) of my own where I won't have to deal with them, so the temptation to bring hell upon them also fades away.

Here's hoping.