Actually, insidious implies that we can't see it coming. In a time of economic crisis, Gordon Brown seems to have reverted to type and instead of doing what is best in the long run by accepting a short-term pain, he refuses to do anything that might lose him votes.
Instead, he announces a savings account scheme that will be funded out of the taxpayer's purse, and that he will underwrite mortgages up to £400k for up to two years. Now correct me if my economic head is not screwed on correctly, but far from fixing the problem, that is going to prolong the contraction in house prices by artificially supporting the market. The market needs to normalise - the boom was artificial and unsustainable, but that doesn't appear to have ocurred to GB. He seems to have it in his 'towering intellect' that he can fix all this by throwing taxpayer's money at the problem.
Now, if I had taken on a mortgage of £400k and needed to take advantage of this little mortgage holiday, the chances are that I wouldn't have been able to afford it to begin with. If I were one of those who had lost their jobs, well that's what mortgage insurance is for. So this repreieve means I can get two more years of living in a house I can't afford without having to worry about it, at the taxpayer's expense, no less.
Far from treating the root of the problem, GB is encouraging us to spend and exacerbating the situation further. Imagine, if you will, that our economy is a castle that GB has built over the last ten years. It looked magnificent, and Gordon picked a spot that had a great view, but he forgot to check the soil and skimped on the foundations. It turns out it's on sand, and the weight of this monstrous construction is too much. Urgent work is needed to shore up the foundations before the mighty towers crumble and fall. Instead though, Gordon has called around his favourite architect, they're trying to build an extension to the east wing and add another floor on top, ignoring the fact that the building is collapsing around them.
Reality check. Please step outside the building and look at what is actually happening. Stop playing politics and grow a spine, stand up to the electorate, admit that you made a mistake and stop trying to buy their votes with crowd pleasing policies that are going to cripple us in the long-term.
aleakychanter
11 years ago
Posts
2 comments:
Hmm, I'm not entirely informed on the UK situation but I gather it’s linked to our economic crisis which is rooted in the over-lending and over-borrowing of bad mortgages.
Here, at least, the economic crisis cannot be solved in any other way than massive government involvement. There is no money to be loaned, and if these mortgages are allowed to fail en masse then our economic crisis will significantly worsen. It's actually very similar to 1929 where stocks were bought and sold by speculators on margin and when this balloon collapsed it helped to freeze up the economy, then spread to every sector. For 2008, just replace stocks with mortgages which have been similarly speculated not only domestically but internationally.
The solution is Keynesian economics. Only government has the ability to do anything, and, moreover, in serious economic crises it is entirely appropriate to deficit spend.
My 2 cents.
Ah, but Keynes would not have advocated massive government spending on that scale. The recovery after 1929 was in part helped by the advent of the 2nd World War which saw the US become a gross exporter. In today's world, that is a role that will now fall to China - the Red Dragon may well be the force to help the Western markets recover.
While I am not comfortable with it, I accept the necessity of government support in the economy. What I am not so happy about is their continued insistence on ploughing taxpayers money to support people who have made bad purchasing decisions and are living beyond their means.
People with mortgages they can't afford should not be given this 'get out of jail free' card they seem to be receiving. I would instead recommend a support mechanism that assisted them in 'downsizing' to a property they could more easily afford rather than artificially prolonging the price bubble by preventing reposession.
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