Green Shoots of Recovery, Yay!!

Some debt porn nerd over at House Price Crash forum has put together a lovely little graph of average UK house prices as a multiple of average UK annual wages, based on data from the Nationwide Building Society going back to 1953...




Average property prices peaked a couple of years ago at over six times average wages. Every property crash in the last 50 years has seen property prices fall back to at least 3.5 times average wages. Which, if history repeats itself, would be a fucking excellent thing - unless anyone really thinks shackling future generations to a historically unsustainable ratio of housing costs to wages is a remotely sensible idea

Wages are either going to have to go up, lots.

Or house prices are going to have to fall further, lots

And I know which of the two options I think is most likely

That's it. That's the story

You are Here

And no amount of bollocks peddled by vested interests from the mainstream media, politics or business will change that


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Soto del Henares

Beat the impending Economic Apocalypse with 2.5% off take-away pizza (for a limited time only)

You don't have to look very hard to see that British retailers are expecting a pretty awful Consumptionmas season this year

Every day both my physical and virtual mailboxes are stuffed full of 'We miss you. Here's a 5%/ 10%/ £5 off money voucher which expires in a month's time. Please do some shopping. Please. Because otherwise we're totally fucked. Go on. Please....'

(The reason why so many retailers are potentially fucked is that they have colossal debt obligations, either directly in the form of loan charges or indirectly through rent, and need to clear a certain amount of money every month just to keep their bankers happy. For every £1 spent on British retail a large chunk goes straight to the banks, a similar chunk goes to the government (and then to the banks) and the teensy weensy bit left over goes to some Shanghai sweatshop owner. This is how vibrant, sustainable, 21st century economies work apparently)

The UK government also appears to be about to get in on the act

When faced with the prospect of the greatest economic recession in a lifetime, the powers that be could have chosen to pour state-funded investment into great public works which would create real jobs and benefit future generations - solar powered personal jetpacks, a national maglev train network, fusion powered hydroponic food for all - or it could take the braver and more farsighted decision to spank all that money on some discount vouchers on imported crap instead

I'm delighted to say that it looks like the imported crap is going to win


According to the latest news from the Ministry of Official Speculation...


VAT cut mooted for recovery plan

A VAT cut could be at the centre of the pre-Budget report on Monday, according to widespread speculation.

Reports suggest VAT could drop by 2.5% to 15% as part of Alistair Darling's plan to revive the flagging economy.

My latest money off voucher from ebay - 2.5% more than on offer from UK plc but it expires a little sooner

Readers of Robert 'He is become Pure News' Peston's blog will already be aware that major VAT changes are in the works, as yesterday he wrote...

"For the sake of transparency I should say that I don't know that there will be a VAT rise (after a temporary VAT reduction)"

Robert Peston

Robert is indeed transparent

in the words of one adoring commentator...

"From that I think we can all read that Alistair Darling has already given you the lowdown on what he's planning and that this too shall come I to pass. Much like your blog a month or two ago where you said "This may be hubris, but I think the way to solve the problem would be for the Government to take large stakes in banks and be paid a very high rate of interest". And what do you know, a few days later this is what was announced. Not foresight on your part - more like insider information. This blog seems to be the Government's new leak machine of choice, where future policy decisions are "suggested" by Robert to sound out opinion and get people used to the idea. Robert does this for reasons of hubris, as he can then claim he had the idea first, even though it's no such thing."


Personally, it seems only fair that the business editor of the State Broadcasting Company should serve such a valuable public function

The fact that the UK government is about to evaporate billions of pounds (which will be added to the tab owed to the banksters) on a stunt that is so obviously destined to fail is, however, just a tad perplexing

If the current government isn't engaged in the final stages of a deliberate plan to destroy the UK economy that started way back in the reign of Thatchler, it continues to do a fucking good impression of one

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Black Swans and Viking Kittens

Conspiraloons could be forgiven for pointing to the application of 2001 Terror Law powers to seize Icelandic assets this week and crying out 'I told you so!!'

Fans of 1950s British comedy could also be forgiven for thinking that there's more than a little whiff of The Mouse That Roared about this week's outbreak of distractive shenanigans between the British and the Duchy of Grand Fenwick Icelandic government

It's a real shame that The Mouse on Wall Street never got filmed

The Icelandic armed forces sailing into action - fear them for they are mighty

There is something genuinely comical about a country with 200 times the population of Iceland, with a claim to being one of the great financial centres of the world, getting reamed quite so badly by inhabitants of a tiny little volcano surrounded by fish

What isn't so funny, or is if you enjoy reading about people who had more money than you losing their life savings, are some of the stories coming out from Kaupthing Singer & Friedlander (Isle of Man) depositors who have almost certainly lost everything they had in the bank.

(It's worth bearing in mind that many UK-based banks won't open accounts for non-residents and so a lot of people who have retired or are working abroad open offshore accounts out of necessity. Any sense of schadenfreude on reading about their losses will almost certainly be misplaced in at least some cases)

And, reading through some of the KS&F depositors' stories, it seems fairly clear that KS&F were disappearing customers' money, presumably over to Iceland, days before the bank's parent went bust - which is what is technically known as thieving

This is the tip of the iceberg. The majority of people, in debt up to their eyeballs, are already in the bag. The harvesting of the minority of people who actually have a decent amount of cash put away has begun.

The number of people who will lose money in collapsing banks (taking their deposits but not their loans with them) might turn out to be small. That's a relatively crude and obvious way of thieving from people

The number of people who will lose out due to hyperinflation and hyperdeflation, a much more refined method of thievery, certainly won't be

One thing that did strike me as curious when reading through the KS&F customer stories is how could people shrewd enough to accumulate such relatively large sums be so daft as to stick everything they had accumulated into a single shonky bank

One of the answers to that question is that a fair few of them aren't that shrewd at all

For the last fifteen years or so virtually any Muppet who assumed risk, particularly property risk, made money

If you were prepared to take on multiple mortgages on multiple properties it was virtually impossible not to make a stonking profit off the back of the relentless price rises

A cautious nature, or any sense of decency and restraint, were positive handicaps

(It wasn't an income thing. In the course of a previous life I met a fair few people who had built up scarily leveraged property portfolios off the back of little or no income. They did, however, all have boundless and totally unjustified optimism for their lucrative future, along with a capacity to fib shamelessly at strategic moments)

Even if you do have a cautious nature, the quality of your assessment of risk is highly reliant on the information you are fed by mainstream sources

And, until a couple of weeks ago, the chances are your average punter was more scared of the risk of, say, Islamic Terrorism and roving bands of Internet-based paedophiles than getting fucked up the arse by the banking system

Well, shucks, gee, we live and learn don't we

I can't help noticing that Nassim Taleb is starting to pop up on tele a fair bit lately. Ah well, only about five years too late...

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