As the Guardian notes this morning:
Nearly 300,000 debt judgments were filed against individuals in English and Welsh county courts in the first three months of 2017, the highest quarterly figure for more than 10 years.
Figures from the Registry Trust show a 35% rise compared with the first quarter of last year in county court judgments (CCJs) against borrowers who found themselves unable to pay their debts.
The evidence that the UK is heading for a nasty downturn grows by the day. And people will be voting to make it worse.
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We have over 1.5 trillion of private debt. This is the ‘real’ debt and the interlinked asset bubbles that are the millstone of the economy and that destroys communities, lives and ultimately the environment.
If the media focused on this and not on national Debt (which is not ‘real’ debt) then we might have a bit of light enter the discourse.
Labour has plans to loosen this issue up but instead the medai harps on about ‘costing’ and ‘affordability’ with the usual howls of ‘venuzuela/Brazil/Zimbabwe/Weimar’ despite the utter irrelevance of those false comparisons.
When May, in an act of gross economic illiteracy (good ole PPE!) said Corby would ‘bankrupt’ the economy, ahe was delivering an Alice in Wonderland statement that inverted reality. The bankruptcy is all around is with the level of private debt and we know where it will end.
Perhaps we need another banking collapse or maybe a few more cycles of the same before the sleeping sickness ends.
Apologies if this is a stupid question, but why couldn’t inflation spiral out of control? It nearly did in the 1970s. Inflation and devaluation would wipe out sterling-denominated debts, but they have other consequences too.
Or to put it another way, I buy the argument that it is very cheap for the government to borrow now (at rates that are arguably negative) so it should borrow to invest. And that almost every UK government has increased public borrowings, and that is to be expected and almost necessary. But sentiment can change. If we become accustomed to continued borrowing, how do we achieve a soft transition when the debt becomes less cheap?
I’m not trying to make a cheap point. I’d just like someone to explain why it can’t happen here.
The limit, as I have said time and again, is full employment
Then inflation can happen
In some ways I am like you if there’s cheap money readily available what happens when workers and companies start asking for a bit more. Will that not lead to inflation even though some will be unemployed. I can see until you reach full capacity then inflation should not occur but this is all theoretical. In the 70s Britain didn’t experience inflation until OPEC increased the price of oil, companies passed this onto consumers and workers sort increased wages. It was only after the IMF insisted we cut public spending and allow mass unemployment did inflation come under control. So why I can agree with the idea inflation won’t occur until we reach full capacity have you considered external shocks one possibility after a hard Brexit would be a lack of skilled labour
I wish j had the time to correct all that – including the almost non-existent IMF role
But I haven’t
Apologies if am making you repeat yourself: you appear to be saying we have nothing to worry about, until we have full employment. Why is that?
Surely we have had inflation in the past at times when unemployment was not zero? And didn’t I just read that UK unemployment is at the lowest level since 1975?
One of the drivers to voting for the wrong party is something I have seen growing over the years and that is that this sort of thing used to be seen as shameful but these days just seems to be accepted as part of modern life.
A sure sign that people are more accepting of debt induced penury than ever before? A tacit acceptance of low wages? It’s a shame because we do a lot better than this.
I think you nay be right
PSR, I think you have touched upon the psychopathology of debt here. Perhaps it is a bit like ‘the fear of freedom'(Fromm) where people feel a sense of security in their peonage and fear change.
It might also be, that after 40 years, it has become the defining reality such that their minds can’t entertain an alternative. There might be an admixture of low self-esteem as well as wealth and celebrity culture has hammered people into feeling like underlings and untermenschen and a weird psychological security is derived from this.
Being treated badly is then the expectation and a return to the pre-war mental state of thinking that the wealthy are one’s ‘betters.’ I must say , I am continuously struck by the cringing, cowardly servility of many in the present period and utter willingness to unquestioningly imbibe the foul ‘media soup.’
Dumbing down of the press since the 80’s is part of the cause and a sort of ‘crap-from-China’ fuelled cheap materialism that just about allows the poor to keep consuming. It does feel like the last gasp of capitalism to me and last gasps aren’t pleasant to live through -one must keep one’s sights set on the vision of something better at some point in the future. It doesn’t look as if we are yet approaching the threshold of change.
It is indeed, I fear, a perversely British and Irish anomoly in a European sense (I’ll leave the USA out of it).
Here in the Netherlands, where I’ve lived for more than 20 years, and elsewhere in Western Europe, they seem to have a Calvinistic disdain of personal debt. Most shopping in NL is done via a PIN machine that allows you to transfer the money direct from your current account to the retailer in question, and most inline shopping is done via online payment software that also come directly from your current account.
Ergo – no ready money = no shopping.
There are credit cards here, just not as prevalent, and of course bank overdrafts and retailer borrowing schemes (Hire Purchase) mean that there is some personal debt – but not the levels that w see in the UKI
And the place is all the better for it
I, too, live in the Netherlands and it’s noticeable that the economy runs very differently when compared to what we have in the United Kingdom. A great many places don’t even ALLOW credit card transactions; it’s Maestro, direct from your account, or it’s nothing.
Compared to Britain, where large swathes of consumption are based directly off the never-never, I must admit that I don’t see piles of people complaining that they don’t have the latest iPhone.
It might just be me.
I saw a very contented looking place yesterday afternoon in Utrecht
And a lot of rather old looking bikes, albeit ridden by rather cool looking young people
Not sure this Clavinistic view of the Netherlands bears too much scrutiny. The country has significant private debt and grotesque inequality:
‘The dramatic financial development of the Netherlands since the early 1990s exposes a dimension that clashes with the country’s international reputation (and its own self-image) as strongly egalitarian. Studies of inequality in the Netherlands in recent years show a remarkable divergence. What is striking is the enormous gap between income inequality (which is lower than the OECD average) and wealth inequality (which is among the highest in the OECD). This combination of a relatively egalitarian income distribution and an extremely unequal wealth distribution is a mark of the economic development that we have described above: a household sector that heavily indebted itself due to leveraged home values, only partially compensated by a redistributive welfare state erected on top of a productive services and manufacturing sector. The debt buildup preceding the crisis and the subsequent debt overhang have achieved something fairly unique among advanced economies–a disjuncture between income and wealth inequality, which in most countries are quite closely related.’ (http://www.privatedebtproject.org/view-articles.php?A-New-Dutch-Disease-Private-Debt-in-the-Netherlands-22)
Indeed, private debt levels are recorded, by Eurostat at 228.8% of GDP cpmpared to 160% in the UK.( consolidated private debt of Households, non-financial
institutions.)
As another resident of the Netherlands i think the lack of credit card Acceptance in supermarkets is more down to stingy supermarkets with no competition and a Dutch mentality of, “it’s not necessary so why bother.
That said i think the UK has a lot to learn from NL in terms of public planning and infrastructure. They’re much better at government here, probably because despite cuts it hasn’t been as brutally pared back in the UK, and also because the Dutch are obsessed with planning and systems. If Only the UK could trade customer service, racial integration, food and culture with Dutch infrastructure and planning, both sides would be a lot better off!!
I can do a lot better than this too – my typing is awful!!!
Sorry.
The self-satisfied and self-justifying, regardless of their most modest achievements in life are most unlikely to look at evidence. One long-term consequence that has not really made headlines is infectious disease. No passport or visa required by pathogens, they are real democrats, refusing to distinguish according to social or economic status. We already have a more severe TB problem than a number of countries that are at the other end of the world economic league. As antibiotics lose their edge over the next decades, watch this one bit too.
The little glow of hope which came from the wonderful manifesto was fading over the weekend. Came to the same conclusion as gloomy partner that Labour would only have been blamed for the coming crash – and before the need for capital controls was established. When you’re our age 5 years goes very fast.
John Quilliam
Simon Cohen; if PPE refers to St Theresa’s degree, I am sure that I have read that she has a second in Geography. (To go with Osborne’s second in History.)
I too am sure geography was her qualification.
That’ll mean she’ll know where Europe is and we’re not in it…
@Andrew
So what if it did cause inflation? Would 10 years of 5% inflation be a bad thing if wages kept up? The problem we have is debt.
Partial write downs, helicopter money and an extended period of inflation and growth is one way out, world war three is another way out.
Or we can sit here twiddling our thumbs stagnating for 25+ years like the Japanese are doing – but without their export led industry to keep us busy and keep the cash coming in.
The deficit that matters most is the trade deficit.
Corbyn has had the best part of two years to make this clear, to prepare the ground and change the discourse so people would not now be asking “how will we pay for it?”
Sure, 5% inflation for 10 years would not be so bad, and better than the stagnation we have seen for the best past of a decade, but 15% inflation would not be so good. So how do you hit the sweet spot?
Sorry for the triple post but what worries me is the talk of the markets hitting record highs. There has to be a crash imminent, surely?
That Guardian analysis was interesting in that the amount of debt subject to CCJs was coming down, but the numbers of individuals subject to CCJs was going up. This could be a good thing for them as they are prevented from taking on extra debt, unlike a government which should be prevented from not taking on extra debt.
If I’ve been reading this blog correctly.
Your logic is convoluted
If wealth disparities are increasing in the Netherlands but credit card usage is low, then what is driving this seems to be (once again) the property market.
I agree that when you go there it does seems shall we say more organised and well kept compared to many parts of Britain today so I am surprised to read Simon’s account of wealth disparity above.
But this is not the only ‘progressive’ European State that seems to have undergone some form of reversal.
As you may know, I have recently read Streecks ‘How will capitalism end?’ and he talks about Sweden (pp. 136- 139) as being a ‘consolidation state’ these days (committed to reducing state ‘debt’ by using the usual dodgy ideas (austerity) used over here). According to Streeck public investment is at its lowest ever and unemployment has been ‘stabilised’ at 8%!!
I was shocked to read this – but we progressives still refer to Sweden and its model of social democracy as a gold standard in this country. It seems that we should be a little more careful about whom we wish to emulate as they may have emulated us! The Sweden we all looked up to seems to have gone. For good.