I started this blog in June 2007 asking these questions: Are we in a massive asset bubble that will blow up in our faces ??? - ANSWERED YES ! Is western and particularly British society on the verge of social collapse??? What are the best common sense long term investment strategies to keep you rich? When will consumption/debt bubble economics end and a real savings/production economy begin ???

Monday 24 September 2007

The banker predicting house prices to halve !

In recent days, several executives have privately warned me that they think this financial crisis will not go away, having grown out of more than a decade of irresponsible lending. They fear dire consequences for the broader economy.

One senior director at a FTSE bank actually wagered that, at some point over the next three years, UK house prices will have fallen by 50% from the level they are at now.

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Monday 17 September 2007

Inflation IS BACK !



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Northern Rock panic could harm Gordon Brown

Experts said the bank's troubles were likely to cause consumers to cut spending and could bring a sudden end to rises in house prices.

They also warned that the reputations of the Prime Minister and his Chancellor Alistair Darling were hanging in the balance in the weeks ahead, as it becomes clear that the banking crisis is having a far greater impact on the UK than expected.

A total of £2billion has now been withdrawn by worried customers from accounts at Northern Rock and insiders expect the high street bank to be sold within weeks.

Peter Spencer, economic adviser to the respected Ernst & Young Item Club, said he had slashed his forecast for the UK economy, adding that the crunch would cause a "general malaise" throughout the UK.

"The chickens are coming home to roost rather quicker than any of us had thought," he said. "What worries me is the effect on confidence. The consumer is very vulnerable and if things continue like this there could be a whole series of knock-on effects on the housing market, on high-street spending; the whole shebang."

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Tories blame Labour's 'decade of debt'

The Tories called on the Chancellor to reveal whether he had received any prior warnings about Northern Rock's position.

George Osborne, the shadow chancellor, also suggested soaring personal debt under a decade of Labour could be a key factor in the crisis.

Vince Cable, the Liberal Democrat Treasury spokesman and a former chief economist at Shell, joined the attacks by warning that Gordon Brown as Chancellor had presided over mounting personal debt in Britain, which now stood at £1.3trillion.

He said he had warned Mr Brown three years ago of the problems and said that now, one pound in every five of average household income was going to service debt.

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Greenspan alert on US house prices

US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.

In an interview ahead of the release on Monday of his widely-anticipated memoirs, the former chairman of the Federal Reserve said the decline in house prices “is going to be larger than most people expect”.

But Mr Greenspan said that his successors at the Fed – who meet on Tuesday to set interest rates – would have to be careful not to ease rates too aggressively, because the risk of an “inflationary resurgence” was greater now than when he was Fed chief.

Mr Greenspan said he would expect “as a minimum, large single-digit” percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was “in double digits”.

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Tuesday 11 September 2007

1.7 million households request help with debt

Requests for help from households overwhelmed with debts have soared by 20 per cent in the past year, figures from Citizens Advice show.

The organisation received 1.7 million different inquiries about how to deal with mounting debts in the year to April, a record. The debt caseload now makes up one third of all its work and the organisation has almost run out of trained debt advisers.

Problems with debts run up on credit card and store cards dominate, accounting for almost half of all debt inquiries. However, Citizens Advice said that there was also a sharp rise in problems over day-to-day living expenses. Inquiries on how to handle gas and electricity arrears were up by a third, while queries about council tax debt rose by a quarter.

Citizens Advice said that the surge in calls for help was evidence that the lengthy consumer boom was taking its toll. It fears that the banking credit crunch will mean even more households falling into severe debt.

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Economists warn of US house price slide

Americans should brace themselves for at least another year of plunging house prices, two leading Wall Street economists said yesterday.

The slump, they argue, is, at best, only halfway through its cycle, with the inventory of unsold homes continuing to rise.

Carl Weinberg, at High Frequency Economics, said yesterday: “We are nowhere near the bottom at all.”

Mr Weinberg identified two factors that could keep property prices falling: first, the rising number of unsold homes; and secondly, the fact that the number of sub-prime mortgages, which will reset at a higher interest rate, will not peak until the end of the year. It is expected that many of those borrowers will not be able to absorb the rise in repayments.

Kevin Logan, senior market economist at Dresdner Kleinwort in New York, said that the American housing slump - the worst for 16 years – is halfway through its cycle, or not even that, and that demand for property would continue to recede.

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