nourishing obscurity

Could you spare 12 minutes and 30 seconds of your time?

60 mins: Help me out here – how does that make sense? For the lender, it would seem to be reckless in the extreme.

Witney Tilson, investment adviser: It was but the key assumption underlying the willingness to do this was that home prices would keep going up forever and in fact home prices nationwide had never declined since the Great Depression.

But now they have and it’s not even a question of price any more – it’s mortgages and those tricky little one percentage and zero percent interest rates which got people in. The sub-primers have defaulted and gone, drawing their dole payment each fortnight [in the UK] but it’s now the turn of the next tier up – those that took advantage of advantageous deals and offers and the graph below is the projected result of new defaults:

“We’re not going to get back on track until we’ve cleared out this garbage which is in there,” said Sean Egan, Wall Street credit rater [cited by Fortune magazine], to whom the 60 minutes presenter asked, “That hasn’t cleared out yet?  We haven’t seen the bottom?”

“It’s getting worse.”

There is massive and increasing supply of property no one can afford and on the other hand, massive numbers of defaulters and bankrupts who are without housing.  In the UK, this means needing to be on income based jobseekers benefits, a legal precondition for housing benefits with councils, in terms of mortgage relief.  That is – you must be unemployed first before anyone’s going to help you – great for those with wonky jobs and those taking pay cuts.

Witney Tilson added that it is not just the home mortgage sector but the corporate as well where wonky deals are going to come back at them in the coming few years.  OK, that’s the American situation where they don’t have the problem of the EU sucking the lifeblood out of the country in a major political grab which has the thinking pundit crying it from the rooftops and keyboards but no one is waking up.

Plus one more thing.  We are a services based economy now, we don’t produce anywhere near enough or even own it in this country any more and that means that what money does come in through re-stimulus goes right out again to the international lenders and owners.

That’s why the BBC article was so damaging – lulling people into a false sense of security, on the basis that the markets have turned around and people have been doing some spending.  As Tilson said, the markets are doing well and are back to their bullish, arrogant best, making a killing on people’s misery.  Repossession agents are also doing great.

That’s not the picture the BBC paints, a much rosier picture:

The UK economy grew by 0.3% in the final three months of last year, faster than previously estimated. The revision was due to stronger growth in services and production. The initial estimate released last month said the UK economy had grown by 0.1% in the last quarter of 2009, meaning it had emerged from recession.

However, the size of the overall contraction in gross domestic product (GDP) during the recession increased, from a 6% fall to a 6.25% drop.

Oh great, say the people, observing the brightly coloured graph on the right which shows a welcome sharp reversal in fortunes into the black. Hey, we’re on the way back, people think. The BBC inserts some “expert analysis” from one Ms Flanders, their “resident expert’ who says well that’s nice – it’s all getting better but lets all be careful.

Not in the least. Quite the opposite, hence the warning tacked on right at the bottom, casually mentioning the £178 bn borrowing, i.e. debt.

Just click on one of the accompanying articles and we get an article mentioning double dip risk but then not explaining it, preferring to put December sales falls down to the unusual amount of snow.

Meanwhile, the Telegraph has this:

Recovery? Who are you trying to kid? We are in a deep hole – and it looks like we’ll be down there for quite some time, says Jeremy Warner.

Just go into any job centre and check the number of local jobs. February is traditionally a month when things start to expand. I asked various job centre staff and they all agreed that people are reporting that there just aren’t the jobs there previously were, even last November/December.

Christmas was, of course, one factor there.

Theresa May underlined the problem, mentioning that the jobseekers actually went up in January, most worryingly in the long term unemployed and that’s a discussion in itself but also the new phenomenon of the under-employed who have mortgages and are only finding part-time or temporary positions.

And if you think that doesn’t affect you, any more than the American housing crisis, think again. In the modern era, every single dip in major economies has resulted in a worldwide flow on, from Wall Street through to Yeltsin’s 1998 default and the Asian capital flight crisis.

It very much affects you in these globalist times and then we come to the countries being bailed out by the EU which so many still seem to embrace as a jolly good thing – every party leader in the UK except for UKIP for example, otherwise they’d support a referendum to get out – and those countries lining up now to also bee bailed out, after Greece has lost all sovereignty, then we are getting a mass flow on effect which should not affect the UK but sure as hell will.

And what do key people say, party leaders et al?  Oh, we’re not interested in the EU or any referendum, we’re only interested in our own economy, as if the UK economy has suddenly become national in nature when we want it to be.

Even exports of what we still produce to our main market, Europe, is pulled down by two factors – firstly, that no one over there wants to spend, being in a recession and secondly, the EU regulations which are suffocating all economic life out of the European signatories.

So it is highly irresponsible, that which people who should know better are telling the people of the UK.  It’s not getting better. There is a faux recovery which even little old me wrote of one year ago [blind Freddy could see it would come] but the real horror, the systemic dysfunctioning of our economy, remains and is getting steadily worse.

Steps:

1. Get out of the artificial and constrictive EU superstate and revert to just trading with our European partners as a separate nation;

2. The incoming government must claw back the tax regime and provide employment providing incentives to businesses at small and medium level right up and down the country, also clawing back the mass of regulations preventing it from happening;

3. People need to work on new personal austerity and start genuinely living within their means, ditching credit and acting with maturity.

A strong Tory party, with everyone pulling together might just start the reversal in our fortunes but not the monstrosity we have at the moment.  I and thousands like me told you this is what Cameron would do, that he was entirely the wrong man and his command and control tactics are now showing just that, publicly, to the whole nation.

He may have a cunning plan to ditch the EU in five years but if he does, he’s keeping it under his hat. How is he going to deal with this sort of naked power grab?   Meanwhile, roll on the hung parliament – what a great way to start clawing back our troubles, eh?

These are the “practical politics” the humble Devil was instructing me on the other day.  We need out now so we can start the reconstruction.  No referendum, no out.  Simple as that.

H/T Wolfie

Filed under: Politics & economics, Society & human issues