Upcoming Recession and financial Crash

[Whatmuff]

12 minutes ago, miroku mk70 said:

I hope its not going to happen as we're in the process of buying a new house that needs full refurb and extension over next 2 years... however, it appears the banks havent learned much from last time... 

When we went to to the bank to arrange our desired 130k mortgage, we were told that they would have been prepared to lend us over 400k!!! 

I wouldn't sleep at night...

Thereby lies the problem.  Not everyone is sensible like you and unfortunately goes for the max amount they can borrow so they can have a nice big house and show off. Because property always goes up right? And who will be blamed? The banks? Nope?! Brexit

[shalfordninja33]

39 minutes ago, miroku mk70 said:

I hope its not going to happen as we're in the process of buying a new house that needs full refurb and extension over next 2 years... however, it appears the banks havent learned much from last time... 

When we went to to the bank to arrange our desired 130k mortgage, we were told that they would have been prepared to lend us over 400k!!! 

I wouldn't sleep at night...

I'm in the process of re-mortgaging to extend, we've been in our house 15 years and have a mortgage of approx a third of the value of the house, I want to take the mortgage upto 2 thirds value, my salary has remained completely static for the last 12 years. Accounting for inflaltation my relatime earnings have dropped something like £15k and still the banks can't do enough for me!

We've considered moving but it's such a massive jump in value to a 3 bed detached or 4 bed house, lot's of relatively poor quality housing too. Whereas i can spend £100k on my current house and effectviely end up with someing half as big again exactly how I want it.

Local builders is Essex seem to be pretty busy, I dont have much knowledge of the sector but I'm looking to start in the Spring and half of those I've spoken to are booked until late summer.  i want to get a new 5yr mortgage fixed in place sooner rather than later in case the rates start to rise next year. 

Edited October 11, 2018 by shalfordninja33

[scutt]

26 minutes ago, Whatmuff said:

Thereby lies the problem.  Not everyone is sensible like you and unfortunately goes for the max amount they can borrow so they can have a nice big house and show off. Because property always goes up right? And who will be blamed? The banks? Nope?! Brexit

The banks cos when I started work  my wages came in a pay packet as cash  and this was all you had in the world to pay your way. no credit no cheque book no cards  I didnt even have a bank account until we had to arrange one when wages went into the bank before you could draw from it to live .Then the banks had you by the short and curlys  😊

[AVB]

29 minutes ago, Whatmuff said:

Thereby lies the problem.  Not everyone is sensible like you and unfortunately goes for the max amount they can borrow so they can have a nice big house and show off. Because property always goes up right? And who will be blamed? The banks? Nope?! Brexit

The MMR regulations that came in force in  2014 significantly changed the criteria from earnings to affordability. You can no longer get a mortgage just on n x earnings alone. Anybody who has got a mortgage since can testify it being a pita with the amount of documentation you have to provide. So why should the banks be blamed? It is clearly down to the individuals. 

[SpringDon]

36 minutes ago, Whatmuff said:

As Springdon covered it could include a currency reissue, the next will be digital/crypto type and I think most probably gold or silver backed. If you take a look at what JP Morgan had been up too with regards too with silver hoarding. Russia and China have also been hoarding the precious metals and with the Gold backed Yuan in China it's starting to break the US dollar. 

Go back a few years and you may remember companies that were sweeping the country offering a cash for gold service? Well they did in the US and it went across the states. Where did that gold go? 

 

If a currency is back by gold then it has value, unlike the paper money system in place at the moment.

Yes. But a gold or any physical thing based currency has a ceiling unlike fiat currencies. So it seems unlikely that we would be in a world with £1000 phones or teslas simply because a sensible financial system could not allow such debt.

 With regard to the original question, there is no new financial crisis it’s just the end of the first one. Probably accelerating as central banks turn off the money presses.

[Whatmuff]

55 minutes ago, AVB said:

The MMR regulations that came in force in  2014 significantly changed the criteria from earnings to affordability. You can no longer get a mortgage just on n x earnings alone. Anybody who has got a mortgage since can testify it being a pita with the amount of documentation you have to provide. So why should the banks be blamed? It is clearly down to the individuals. 

The individuals should definately be blamed, however they are encouraged to borrow in today's society,  you only have to look at the adverts these day like experian and other banking adverts promoting loans for home improvements or new cars, this type of borrowing is encouraged to keep the economy booming. 

 

My mate managed to get a second mortgage on a new home on a wage that included a yearly bonus and he hasn't even landed the job. My mortgage was given to me based on an hour phone conversation and no further checks? I don't think the banks have changed. And I'm talking the high level stuff, things like CDOs are still going on and the derivative market and betting on futures contracts with borrowed money.

[blackbird]

2 hours ago, miroku mk70 said:

I hope its not going to happen as we're in the process of buying a new house that needs full refurb and extension over next 2 years... however, it appears the banks havent learned much from last time... 

When we went to to the bank to arrange our desired 130k mortgage, we were told that they would have been prepared to lend us over 400k!!! 

I wouldn't sleep at night...

What you should have asked if interest rates double in say 5yrs time which they easily could & will, what will my repayments be on my £130,000 mortgage & if I were stupid & take the £400,000 mortgage what would be the repayments on that be  in five years? I see it all the time young couples living in new build houses with two new cars on the drive which are on PCP.

Edited October 11, 2018 by blackbird

[Guest stevo]

In the East Midlands. House building is off the charts. I mean thousands being built just around lincolnshire alone. And will be for good few years yet. As has been said house building is always a good measure of what’s going on as it hits us before it hits you. We almost like an early warning system. 

[AVB]

1 hour ago, Whatmuff said:

The individuals should definately be blamed, however they are encouraged to borrow in today's society,  you only have to look at the adverts these day like experian and other banking adverts promoting loans for home improvements or new cars, this type of borrowing is encouraged to keep the economy booming. 

 

My mate managed to get a second mortgage on a new home on a wage that included a yearly bonus and he hasn't even landed the job. My mortgage was given to me based on an hour phone conversation and no further checks? I don't think the banks have changed. And I'm talking the high level stuff, things like CDOs are still going on and the derivative market and betting on futures contracts with borrowed money.

I got a mortgage two years  ago. My salary was £Y with bonus of 3x£Y I had a previous mortgage with the same bank of £Y (1 times annual salary excluding bonus) and was looking for a replacement mortgage of 80% of £Y.  A no brainier in my mind but it was a struggle due to my relatively high outgoings.  

I would genuinely like to know the lenders (and dates) involved in the two cases you mention and I’ll pass it on to contacts at the FCA. Sounds dodgy to me. 

On your other points. The CDO market is very small compared to pre-2008 and structured differently (short tenureband Corporate Debt rather than long tenure residential). Yes there is some risk but nowhere near as much risk in the system as before. What worries you in particular about CDO’s?

Derivatives? Any particular concers other than CDO’s?

and I have no idea what you mean by ‘betting on futures market with borrowed money’?  Well I know the practise but not in respect of Banking. 

[stumfelter]

I hope it comes soon as I have been buying tinned food and bottled water for quite a while but now I'm struggling to get in the cellar and the shed is rammed.

[TIGHTCHOKE]

3 minutes ago, stumfelter said:

I hope it comes soon as I have been buying tinned food and bottled water for quite a while but now I'm struggling to get in the cellar and the shed is rammed.

I hope you've been stocking up on tin foil too!

[ShootingEgg]

7 hours ago, Konnie said:

who works and saves for things now.

I do this. The only debt I have is my mortgage. 

[stumfelter]

7 minutes ago, TIGHTCHOKE said:

I hope you've been stocking up on tin foil too!

I don't have to, I've lined my deerstalker in tinfoil. 😁😁

[RockySpears]

8 hours ago, AVB said:

inflation and debt. Both of which are good

  Are you for real???

 

So you think it is a good idea that the £100 you had last year is now only £98?   Really?

This is what really gets me, the Bank of England has a target, an aim, its main task is to destroy your cash by 2% every year!!  You want them to steal 2% of your money every year?

Ask the people of Venezuela what level of inflation is good.

People are mad, they really are,

 

RS

Edited October 11, 2018 by RockySpears

[TIGHTCHOKE]

6 minutes ago, stumfelter said:

I don't have to, I've lined my deerstalker in tinfoil. 😁😁

Good planning!

[AVB]

1 minute ago, RockySpears said:

  Are you for real???

 

So you think it is a good idea that the £100 you had last year is now only £98?   Really?

This is what really get me, the Bank of England has a target, an aim its main task is to destroy your cash by 2% every year!!  You want them to steal 2% of your money every year?

Ask the people of Venezuela what level of inflation is good.

People are mad, they really are,

 

RS

And can you read? I also said within reason. 2-5% is what central banks aim for.  

A couple of reasons

1) Assuming that wages keep pace with inflation, and they generally do, the  mortgage (or any debt) you took out 10 years ago  is smaller as a percentage of your income now than it was then. 

2) if you knew that the car you were going to buy would cheaper next year then you wouldn’t buy it today you would buy it next year. Deflation causes people to save money not to spend it. That causes the economy to stagnate. 

Yes cash is eroded by inflation which is why it is important for your investments to outstrip inflation. Just leaving it doing nothing is stupid. If you are then you are the mad one  

 

[Whatmuff]

44 minutes ago, AVB said:

I got a mortgage two years  ago. My salary was £Y with bonus of 3x£Y I had a previous mortgage with the same bank of £Y (1 times annual salary excluding bonus) and was looking for a replacement mortgage of 80% of £Y.  A no brainier in my mind but it was a struggle due to my relatively high outgoings.  

I would genuinely like to know the lenders (and dates) involved in the two cases you mention and I’ll pass it on to contacts at the FCA. Sounds dodgy to me. 

On your other points. The CDO market is very small compared to pre-2008 and structured differently (short tenureband Corporate Debt rather than long tenure residential). Yes there is some risk but nowhere near as much risk in the system as before. What worries you in particular about CDO’s?

Derivatives? Any particular concers other than CDO’s?

and I have no idea what you mean by ‘betting on futures market with borrowed money’?  Well I know the practise but not in respect of Banking. 

The fact that the only asset backing up CDOs is the value or perceived value of the properties themselves, and when interest rates start rising people will default and the markets will start to crack. Property is only at the price it is because banks are lending, and where do they get their money from? QE? That's the only reason the markets have increased since 2008 is lower rates and 3 lots of QE, it's fake money, and printed out of thin air. If money stops being lent or printed and rates go up, let's say only to 4%, do you really think the economy will be the same as it is now? 

Where has all that money in the markets come from over the past 10 years? That's my concern, I bet they have no assets to back them up. The public have been taking huge sums of debt to bet on the stock market and the Crypto market, how does this do our economy any good in the long run? You can pretty much buy anything on 0% now, how is 0% any good for our economy long term? 

Debt levels are beyond anything we can pay back now, does that not flag up warning signs? The whole stock market is effectively gambling is it not? 

[Whatmuff]

7 minutes ago, AVB said:

And can you read? I also said within reason. 2-5% is what central banks aim for.  

A couple of reasons

1) Assuming that wages keep pace with inflation, and they generally do, the  mortgage (or any debt) you took out 10 years ago  is smaller as a percentage of your income now than it was then. 

2) if you knew that the car you were going to buy would cheaper next year then you wouldn’t buy it today you would buy it next year. Deflation causes people to save money not to spend it. That causes the economy to stagnate. 

Yes cash is eroded by inflation which is why it is important for your investments to outstrip inflation. Just leaving it doing nothing is stupid. If you are then you are the mad one  

 

Wages are no where near keeping up with inflation. I have had a pay cut for the last 10yrs and pay has been frozen. My pension has been halved. Inflation around 2% a year??? I think it's far more than that, it's not just general prices that have rocketed you only have to look at the quantity or size of products that you receive now. Bars of chocolate are reducing in size and bags of crisps, food contents, it's phantom inflation. So after 10 years my wages should have at least increased by 20%, and they haven't. I'm poorer every year, and every year I leave money in the bank it falls in value. 

 

[AVB]

4 minutes ago, Whatmuff said:

The fact that the only asset backing up CDOs is the value or perceived value of the properties themselves, and when interest rates start rising people will default and the markets will start to crack. Property is only at the price it is because banks are lending, and where do they get their money from? QE? That's the only reason the markets have increased since 2008 is lower rates and 3 lots of QE, it's fake money, and printed out of thin air. If money stops being lent or printed and rates go up, let's say only to 4%, do you really think the economy will be the same as it is now? 

Where has all that money in the markets come from over the past 10 years? That's my concern, I bet they have no assets to back them up. The public have been taking huge sums of debt to bet on the stock market and the Crypto market, how does this do our economy any good in the long run? You can pretty much buy anything on 0% now, how is 0% any good for our economy long term? 

Debt levels are beyond anything we can pay back now, does that not flag up warning signs? The whole stock market is effectively gambling is it not? 

Do you know how the CDO market is different today to what it was 10 years ago? By quoting what you are quoting I suspect not. 

“Where has all that money in the market come from...they have no assets”. That doesn’t even make sense. What market? Who are they? What assets are you referring to? 

“Public borrowing huge sums to bet on the stock market”. Where is your data to back that up? The stock market is dominated by institutional investors not Jo Soap. More of the public people bet on horses and fruit machines than the stock market. 

[Whatmuff]

14 minutes ago, AVB said:

Do you know how the CDO market is different today to what it was 10 years ago? By quoting what you are quoting I suspect not. 

“Where has all that money in the market come from...they have no assets”. That doesn’t even make sense. What market? Who are they? What assets are you referring to? 

“Public borrowing huge sums to bet on the stock market”. Where is your data to back that up? The stock market is dominated by institutional investors not Jo Soap. More of the public people bet on horses and fruit machines than the stock market. 

Different?? Really. I had a professor come to where I work to talk about psychology and leadership and he travels the country talking to banks and he also warned that he was seeing the same practices that went on back in the day before the recession, and is almost certain the same mistakes are being made again. Just because I don't have data, doesn't mean people aren't doing it, alot of people close to me are doing it, using credit cards to buy stocks and currency, that was in the news and well known.

 

Yes the stock market is dominated by institutional investors and the same people that own half of London, the same people that will take their money when the markets start to turn and who will loose? The small fry (public) everytime. 

I mean where has the money that has been pumped into the stock market over the last 10 years come from? It doesn't just reach all time highs from earnings and profits. That money has been borrowed to prop the markets up. Good for the economy?? Nope. 

 

I'm genuinely interested in economics and learning all the time and try to research as many sources as possible, I'm not trying to argue with you, I'm genuinely interested in debate and learning from others as to what's going on. It just interests me as people around me are making huge gambles and taking on massive debt while driving nice cars and not having the earnings to back it up, and on the other side the mainstream media and banks are saying everything is rosie. Just doesn't add up.

That was a few days ago??? That's the Bank Of England worried about debt being lent to companies with debt?? There are hundreds of these articles over the past 2 years.

Edited October 11, 2018 by Whatmuff

[Duckandswing]

57 minutes ago, ShootingEgg said:

I do this. The only debt I have is my mortgage. 

I’m the same

[Whatmuff]

An article I read last week with CEO of Charles Stanley who manages 30bn who stated central banks have created vast amounts of credit and lowered rates to keep the stock market afloat and to maintain debt management.

 

My point is that this economy is driven only by debt. 

[Whatmuff]

My select news page on the BBC, any good news in that lot? And all hours apart. There is my data and I have hundreds more. The warning signs are everywhere. And people still look to buy property with a 2 yr fixed 2% first time buyer mortgage with 10% deposit, a 30% loan from the Government over 40 yrs on two main incomes! 

That is utter madness!! 

What if rates rise

What if 1 looses their job

What if 1 becomes I'll

40yrs...... 40!!!!

2% is basically free money! 2yr fixed?!?!? That won't be 2% fixed for 40 years and by the banks saying to the applicant "please be aware that the rate is tied in with the Bank Of England Base Rate, and can change when you come to remortgage at the end of your contract, you can loose you home " is not a sufficient affordibility/lending model. People dont care about all the **** on the terms and conditions on an application, they just want the money and lifestyle.

[Whatmuff]

That was 2017? More data

[Whatmuff]

Now it doesn't take a genius to workout how they temporarily recovered from the 2008 crash with these charts. Still think we are in a good place? Near 0% rates and almost 100% debt to GDP?