Fiscal Fisting

[lupestripe]

Current CPI rate of inflation - 4.4%
Current RPI rate of inflation - 5.5%
Current rate of interest on my savings - 2.9%

I can't help but feel that the prudent ones amongst us are suffering for the avarice and greed of everyone else. Whilst the value of my savings decreases so does the value of the debt of those who took out loans and mortgages they could ill-afford.

I have a student loan, whose value is also decreasing over time (which is the only positive at the moment) but the worst debt I have ever been in is an overdraft of £800. Consequently I do not benefit from the current economic conditions and the message appears to be to get yourself into eyeballs of debt as you will not suffer as much as those who are sensible.

In a country which has a mantra of property is king - the rise in house prices over the last decade resulted in many people over stretching themselves and this is now the main barrier preventing a rise in interest rates as it would force many people to default on their mortgage. So prudent people like me must suffer interest rates on our savings which are wiped out by the rate of inflation. I have no intention of buying a house any time soon.

Not even stocks and shares ISAs will be sufficient now nor accounts in which you lock your money for a number of years. Clearly I made the mistake of not spunking all my money on material goods - I now know for next time.

*In response to some of the comments below, I will further the above by saying many people with mortgages were merely responding to market conditions. They shouldn't have been offered mortgages that they had no realistic way of paying back and the blame here should largely be laid at the banks and the previous government's lack of regulation. However, it was clear this country was in a property bubble and taking on such mortgages was a decision that these people made and some responsibility should lie at their door. Despite this, I think it was more down to market conditions than greed, a comment I reserve for those who have high credit card and store card debt etc. I probably should have checked this post before posting it but my bus had just arrived then my phone battery died - as crap as an excuse as that is.

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Comments

[rustyfox.livejournal.com]

Also, concerning the "greed of everyone else" - what about the industry that got us into this situation?

I think it's much less simple than just blaming everyone who borrowed too much. I see it this way. When I was at school, money-management was not part of the curriculum. What to do in the real world was taught by ones family. At the risk of also generalising a little too far myself, I suspect most people were taught little beyond "you save some money, you get a mortgage, you buy a house, and you work to pay it off". A lesson from the day when houses were affordable, from a generation of people who bought often whopping big houses for almost pocket money today without expecting to make enormous returns, and a lesson from an age when lenders actually checked you could pay it off.

But I gather that stopped happening, and thinking back to news stories around the time this all went pear shaped, mortgage lenders were often only too happy to not even care to check - or even encourage lying on mortgage applications. Certainly there's an element of stupidity on behalf of the borrower in that scenario, but I can forgive some level of naivity if a bank is willing to lend huge sums of money.

Mostly, I blame the banks for lending far too much, which really means a much smaller group of human beings making crazy decisions than mortgage borrowers. Somehow I doubt those individuals suffered much personal hardship though.

Obviously there's more stuff gone on than just that, from my experience last year it seems that buying a house to live in was almost an unheard of idea - everyone I talked to, literally everyone assumed I was just another buy-to-let investor. It was freaky, so I also suspect a smaller pool of very wealthy people have seriously screwed with our housing market with enormous property portfolios, driving up prices for everyone else. Another reason why I find it difficult to lay much blame on people who just wanted a home - just like virtually all of our parents afforded themselves. I doubt they had to compete much with property tycoons intent on making serious money from every day homes.

[lupestripe.livejournal.com]

I think the greed of the banks and a lack of government regulation are the main problems but I also think that individuals do need to take responsibility for getting themselves into mortgages that they could never afford to pay off. I agree they should never have been offered these mortgages in the first place and I don't think these individuals were greedy, but I also think that these people didn't think the decision through properly.

Despite this, I also agree with what you say - a lot of people were responding to market conditions and this was hideously inflated at the time.

[stuart-otterson.livejournal.com]

Takes 2 to tango, the banks wanted to give these mortgages out and others wanted to take them.

[lupestripe.livejournal.com]

This is the main thrust of my argument. Where were you earlier? :P

[stuart-otterson.livejournal.com]

Oh you know me, fashionably late, got distracted by the pub and whatnot.

*tangos with pink mohawk you*

[lupestripe.livejournal.com]

Yeys for tangos! And pinkness!! *dances*

[rustyfox.livejournal.com]

Which as I've touched on is still a too simplistic and high-level assessment, although even then the fault would still at best be 50% the lender's, but it truly amazes me how quickly we forget that. I guess perhaps because we all need banks' services, but not those of complete strangers.

The entire system was corrupt. It doesn't much matter how truthful or fair or sensible individuals are if the system is broken, or whether they're borrowing money or investing money. Everyone looses.

Well, probably except for those deep inside the system, obviously. Indeed, the system got a phat bailout that we're all paying for.

[avon-deer.livejournal.com]

The entire system was corrupt. It doesn't much matter how truthful or fair or sensible individuals are if the system is broken, or whether they're borrowing money or investing money. Everyone looses.

You're getting more and more like me every day.

[rustyfox.livejournal.com]

Hmm, I guess moving out didn't save me then! :P

But yes it seems pretty obvious the system was corrupt and due to implode, and those running the show, who I consider for their enormous financial rewards and awesome responsibility bloody well should know better, are more responsible for the mess than Joe Bloggs is for taking advantage of the credit they offered. You can't throw away your money and then complain that it's the fault of those who took it when it's all gone. It's just a nonsense argument. If it wasn't offered so irresponsibly it wouldn't, nay, it couldn't have been taken so irresponsibly. Ergo the system screwed everyone, IMO.

(I gather this is more applicable in the US, although I've certainly read reports of UK lenders convincing borrowers they can pay back ridiculously huge mortgages too)

[stuart-otterson.livejournal.com]

People asked for money and complained they were given it. Flipping it on it's head.

Plenty of us are innocent, but we're just collateral damage of other people's irresponsibility. Borrowing is an evil necessity, but we know the risks and sometimes we're going to get burned.

Sometimes society just has to admit that we as a collective didn't do enough together to make excessive borrowing a taboo. I'm ready to hold up my hands and accept my share of the blame and learn from this experience. Next time I see a friend living beyond their means I'll make clear I disapprove rather than say nothing, least I'll have played my part.

[lupestripe.livejournal.com]

Although I think some people were coerced into taking out mortgages they couldn't afford, whilst others were blatantly ill-advised by the banks, the point is that many people didn't have to take on these mortgages at all. Surely some responsibility must lie here too?