Sharpe's Opinion
Monday, 23rd Feb, 2009
Liberal Conspiracy have a moment of clarity:
What bothers me though, is that people – politicians and the media mainly – view this recession as something that needs treating. When in fact, rather than being the disease, the financial crisis is the cure.
The recession is a market correction of a hugely over-inflated housing market (it will correct, and home values will/may return to a more realistic level of appreciation). The recession is a reaction to borrowing on a massive and wholly unsustainable scale. The recession is the global economy snapping back, as rampant growth surpassed the finite resources we have available.
Apart from conjuring up images of probably the best scene in The Matrix1 this post essentially echoes what I and others were saying way back when house prices were completely unaffordable, credit was ridiculously cheap and people were taking on exceptional risks (buy-to-let, for instance) without understanding what they were getting themselves into.
The fact that we all suffer for the insanity of the majority is something we have to live with. Trying to keep the unsustainable high prices of the past half-decade in place to protect the people who were in over their heads is well-meant madness. If even Liberal Conspiracy recognise that, why doesn’t Gordon Brown or David Cameron?
- _“Human beings are a disease, a cancer of this planet. You’re a plague and we, we are the cure.”_ [↩]
Comments
I’ll pass this on to my staff who have been on short-time working since October. I wonder what they’ll make of it…fade to staff room:
Neo: See the house prices are coming down.
Trin: Yeah, so have our wages.
Neo: Should we tell the tax people we don’t work more than 30 hours a week now?
Trin: What, and lose our Working Tax Credits as well? You kidding?
Neo: Why are we bothering to turn up for work?
Trin: Well, it was all our fault in the first place, according to Oracle.
Neo: I thought it was the Americans?
Trin: Here, I’ll plug you back in.
I fully realise it’s not a politically pleasant position, but it’s the truth, dammit. (curiously my spell checker doesn’t like ‘damnit’ but it’s happy with ‘dammit’. Am I wierd preferring the ‘n’?) The people who bought buy-to-let properties this time last year were in the wrong market at the wrong time – and that’s the long and short of it. This house price crash will return the market to sensible levels, which they might just manage to retain for the next 10-15 years. The previous growth was unsustainable and it’s an ugly truth.
I agree that the economy spiralling further downwards than it needs to would be bad, but I don’t think the Great Depression is coming. There’s still a lot of wealth about, more reason to be a consumerist than ever before and plenty of pent-up demand just waiting for reasonable house prices. And once they start to level up they’ll probably bounce pretty well – people are putting off buying a house, not shying away from the idea altogether. If the banks can be kick-started into lending some money again we could still come out okay. I’m not sure we’re dead in the water just yet. (cf. “Why Popular Opinion is Always Wrong” 
)
Tiz you hire some pretty cool people – could I have Neo’s autograph? Big fan.
It is very hard to be told “it’s tough”, and the politicos know it. It is also somewhat dangerous to let the economy fold of its own accord in case there really is a risk of a downward spiral a la Great Depression.
Blue Eyes
February 23, 2009 at 4:33 pm