- This topic has 9 replies, 5 voices, and was last updated 14 years, 12 months ago by
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The mainstream press is finally reporting what has been common knowledge among lesser know blogs; the world is up to its neck in debt. They have passed the debt from banks to countries and there is no where to get a bailout from. The fabricated source of much of the debt – securitised mortgages – has vaporised and will never come back. The level of US debt to GDP exceeded 1929 in the early 2000’s (after the dot comm crash) and went ballistic – it was something like 50% higher than the 1929 figure and way higher than anything seen between 1929 and 2000.
The head of the Texas Federal Reserve said total US debt was $99 trillion – 7 x GDP. UK and other countries are in a similar mess.
It all points to one thing – a long hard slog to pay down debt in every shape or form for years, world-wide. A big dose of inflation to wipe away the debt and impoverish us all is likely. Stagflation, 1970’s style and worse.
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IMO we are going to see a massive crash in the markets. I sold out of my stock market ISA last week after the 5% election rally.
Spain must be near breaking point. I lost pushing 90,000 Euros on my “investment” property. Fortunately I can afford to take the hit (but it hurt!). I signed up for it in 2004.
If you say 2004-2009 (5 years) has seen 3 million new starts, which is an average 600,000 per year (2008 I believe was nearer 800,000). 1 million looking for owners, then thats 2 million owners sitting on probably a 50% loss. Eg a similar loss to me.
There must be 100,000’s of individuals that have dipped their toe in the Bulgarian market as well.
The issue is that these losses have not been crystalled yet since they still hold onto a property falling in value, whilst paying increasing taxes, community charge etc on it. Add in all those losing their jobs.
I can’t see any other scenario other than a major European crisis that is going to hurt. Spain, Greece needs to devalue, that is another downward pressure on property prices making losses even greater for bank and individuals.
Consensus is that Spain needs 20% devaluation. If you think property has reached the bottom today simply due to economic situation, over-supply then think again. As a 20% devaluation in the economy (which means salaries) then that will equate to a 20% fall in property prices to main the status quo we have today.
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My feelings are that the whole world (maybe the odd exception) is bust. It seems like there is more debt moving around, than there is cash/assets in this world. I heard a few months back, some economist was predicting that the USA would defaulting on it’s debts, he reckoned it would take a couple of years to hit. If the USA defaults, then the whole system will surely crash. China looks like a bubble, or a bunch of bubbles about to burst. It just all feels like an unsustainable mess.
I feel that we are in the death throes of the current globalised capitalist system, the rich & powerful people in this world will try to keep it alive at all costs, but it just seems unsustainable in the current form. I wonder what will follow 🙂
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The UK has temporarily suspended the awful HIPS on property, good news, however agents are now predicting many more properties coming on the market so as to ‘test the market’ without having to fork out the £400 or so fee.
CGT being raised from 18-40% especially on property (2nd homes and Buy to Let) is also likely to produce a rush of homes coming on the market this year so as to beat it’s introduction tipped for April 2011 as to introduce it in this tax year would be difficult.
Savills and Capital economics ( and others) who have been bearish of UK property for some while think the market will fall back in value once the above kick in.
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Another wound to the Euro machine.
http://www.telegraph.co.uk/finance/economics/7780124/Fitch-downgrades-Spains-credit-rating.html
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@jp1 wrote:
Another wound to the Euro machine.
http://www.telegraph.co.uk/finance/economics/7780124/Fitch-downgrades-Spains-credit-rating.html
Good article to post, but it wasn’t actually all negative.
Jeeze, every country is facing cuts and austerity measures, and Spain looks like it is trying to deal with its, but what kills me, is that all the debt that is washing around is “Bank Debt” or so it seems, and those sonofabitches… well they back making huge profits and paying themselves massive bonuses.
Downgrading Spain to AA+ looks like a sensible move, but also they do recognise its positive actions.
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@Chris McCarthy wrote:
Jeeze, every country is facing cuts and austerity measures, and Spain looks like it is trying to deal with its…….
Exactly, that is why there is a greater probablity of a second recession. The cuts facing spain will put more downward pressure on property prices. 5% reduction in salaries for a starter, increased IVA, higher taxes etc, it’s just sort of self-fueling the crash. Second homes and investment properties will be the first to be cut by indebted owners. I am not so sure the effect will be so great in countries where the majority of the housing stock is primarily homes for living, as it’s a home.
Mirror the austerity measures across UK, Greece, Ireland, Spain, Italy, Iceland and a whole host of other countries and it’s odds on for another recession.
It’s not a Spain bashing post, just highlighting the problems in Spain are going to cause significant problems for the Euro and EMU and potentially cause panic in the financial markets.
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@jp1 wrote:
It’s not a Spain bashing post, just highlighting the problems in Spain are going to cause significant problems for the Euro and EMU and potentially cause panic in the financial markets.
I didn’t think it was Spain bashing, I did think it was a good article and post.
And it looks like tomorrow, we going to have another big fall on the markets as Spain’s downgrading was announced after the markets shut on Friday no?
And another knock to the Euro, but maybe not so much to Sterling.
And then we see does the whole think catch fire like Greece did in more ways than one.
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