You must have those rose tinted gl$%^& on again.

There was nothing good in that article for the economy.

I am all for repaying debt and reducing the debt uptake... but I am under no illussion that this will put the economy into stagnation for at least 10 years...

unfortunately to add to the problem we have politicians who refuse to allow us to reduce our debt and have decided to gorge the country on it on our behalf.

Even at these low levels there is still a net increase in mortgage lending, therefore no lessons learned.

JDR

Let me check ...

Good news for the economy (with some direct implications)

1. Increase in no. of mortgages continue process of normalisation in housing market

2. Personal debt, which has been called "too high", almost universally, has been reduced by a record amount.

Going forwards I see this as yet more evidence of a big retail-spend over Christmas. People were overpaying debt down in anticipation of not doing so during xmas -

That is my reading of that. And that is good for the economy.

3. HP rises improve the LTV of banks books, meaning were getting closer to being allowed to M2M again. Surely you must be happy about that?

4. Same also sees fewer trapped by negative equity, allowing greater mobility and increased transaction volumes.

Sales of property do give people liquid funds and provide tax revenue.

5. Penfold says that growth may be buoyant, even if the recovery isn't that fast.

Bad news on this page:

...

1) Pound gained 0.2 against the USD - cripes
2) Consumer confidence dipped -oh no
3) An unknowable level of future unemployment will have an impact proportional to the volume of unemployment.
4) People are reluctant to take on new unsecured debt right now - complaining about this looks like complaining about dieters not eating cake. There is a pretty good reason why they're not eating cake, and I don't see it as a bad thing.

But, overall, I can see what you mean. I wish I was dead.

"1. Increase in no. of mortgages continue process of normalisation in housing market"

Miles away still and now looking unlikely to return to normal.(80k+)
A new normal might be needed.(60k)


"2. Personal debt, which has been called "too high", almost universally, has been reduced by a record amount.
Going forwards I see this as yet more evidence of a big retail-spend over Christmas. People were overpaying debt down in anticipation of not doing so during xmas -
That is my reading of that. And that is good for the economy."

I am looking long term (10 years). You are looking in the next month.

If the process of deleveraging and shunning of debt continues at current pace then we will have a "lost decade".

The evidence is all there. Debt reduction. M4 (exc. int ofc) mom deflation and only 2% YoY growth.

Again this is not bad. It is what is NEEDED. But not good for the economy.

It is the slow version of what all the Austrian types wanted to happen immediately.



"3. HP rises improve the LTV of banks books, meaning were getting closer to being allowed to M2M again. Surely you must be happy about that?"


No LTV has no impact on M2M.

The banks mark the value of the security (bonds, cdo, mbs etc etc) not the underlying house price or LTV.

LTV is just an indicator of their loan book and has little impact compared to loan performance.



"4. Same also sees fewer trapped by negative equity, allowing greater mobility and increased transaction volumes.
Sales of property do give people liquid funds and provide tax revenue."

Debatable. If someone hasn't sold yet then half a percent here and there is of little importance.


"5. Penfold says that growth may be buoyant, even if the recovery isn't that fast."

There will be a bounce no doubt. But it relies on other factors. People gearing up for the "turnaround"... but the turnaround might not happen

Overall Penfold is wrong. If Debt continues to contract and m4 along with it. We are in deflation.

He knows this and is most likely planning another 100b of QE next year if m4 continues to contract.


"But, overall, I can see what you mean. I wish I was dead."


Glad you agree after all that.

Death is a bit excessive though.

The choices are now looking clearer.

We can choose the lost decade or massive monetary inflation and national debt.

Sense will prevail and we will choose a lost decade.... I hope.

JDR

"Miles away still and now looking unlikely to return to normal.(80k+)
A new normal might be needed.(60k)
"

If it happens too fast at this stage then we will definitely overshoot and either go back into bubble, or have too many sales.

A slow release of pressure seems ideal ...

"I am looking long term (10 years). You are looking in the next month. "

One day at a time, sweet jebus ...

I see troubles during Q1 '10, but I do not see economic stagnation for a decade. You'll recall the borrowing has been at ultra low rates. It would not take a lot of inflation to corrode it significantly.

What are CDOs made of? I suppose valuing them was problematic in the first place ...

"LTV is just an indicator of their loan book and has little impact compared to loan performance."

It's the confidence ...

Half a % here or there adds up. Since March we have seen, what? 5-8% or so?

If that seems insignificant, how would it look if it was an additional fall of 5-8% instead?

I do not think that debt reduction will continue past christmas.

In fact I am pretty sure that by the end of February, banks will be on a lending spree. The BoE may even be charging to keep money on deposit.

Otherwise Grodon Brown will be wrestling bank CEOs to the ground and threatening to fart in their mouths.

It is a powerful argument.

Declan,

If you don't think debt reduction and(I assume) M4 contraction will happen beyond Xmas then I hope you are ready for the inevitable inflationary environment.

The only thing saving us from the doom that Mike and Car predict is the current contractions.

These contractions are just counterbalancing the gov. borrowing idiocy.

If the banks get back to a lending spree then expect 1% inflation per month... possibly more if investors start shunning GBP.

As for HP rises or falls. My opinion would be the same. Only difference being that the stats would be more in line with my opinion.

Well, I did predict here months ago, so no surprise to me at all. Just wait for the bust when rates have to go up.

With consumer debt falling, do tell what has happened to consumption? (Clue: it is falling).

Nothing unusual about Mortgages (and HPs) increasing as consumption drops. Those with debts including some with Mortgages are paying down debt, job insecurity means far less Credit Card spend that all represents a considerable drop in consumption. New Mortgage holders tend to be not too worried about their debt levels and property demand stalled for many months had to emerge. A good proportion of consumer spend in the UK is created from debt. Brits love image is another way to look at it .....