I’m a Pundit

US Treasury Secretary Henry Paulson today announced that he could see the end of the US Credit Crunch being in the very near future.  This has raised a lot of skepticism from economists and pundists around the world who ask the question, should someone with such an obtuse view of the US economy really be in charge of it?

Currently the US economy, along with the UK and several other EU countries is under a period of normalization to bring living costs back into line with wages.

Henery Paulson seems blissfully unaware of this fact as he tried to stall the depression recently with a government rebate to his country.  If he thinks a hundred or so dollars is going to stop the increasng number of bankruptcies he really is in trouble.

He mentions the recovery of several lending agencies, however he does not point out that the collapse of these was due to ‘loss of faith’ that saw the Northern Rock Bank Nationalised in the UK in 2007.  The credit agencies will still suffer as people in the countries become poorer and find it increasingly difficult to maintain a lifestyle they hope for without becoming heavily in debt.

written by Oli \\ tags: America, Credit Crunch, Debt, Economy, US, USA

The credit crunch has been a major part of the UK press recently. Due to the recent rise in interest rates the newspapers have suddenly took on a doom and gloom look on the UK Housing and Consumer Market.

Now first of this was predicted several years ago by many of us,  with many peoples earnings not being enough to buy.  But te real fact of the matter is that when people are having to borrow 8 x their earnings to buy a house a 0.5% interest increase is not going to make a huge amount of difference, it is the multiplier, not the interest rate, that is preventing first time buyers from investing at the moment.

On the BBC website today I saw the following quote,

“But 2009 is particularly difficult to predict at the moment as the credit crunch may last for two to three years.

“But this in turn may lead the Bank of England to cut interest rates sharply, which may help stimulate the market, especially as there is now pent up demand from would-be first time buyers.”

Now to me this looks like yet another pile of bullshite from the big boys. Now that the Public has become aware of the fact that people are having trouble affording houses, and there is no longer a ‘boom’ to cash in on there is little posibility of these companies promoting housing as a growing market.  Personally I believe we will be looking at a minimum of a 20-30% drop in housing prices (Enough to get to the 5x earnings barrier at least) before things start to settle, though this may take 3-4 years.

I particularly like the part where this representative states that  “there is now pent up demand from would-be first time buyers.” Of course there is a pent up demand for first time buyers.  The problem is that first time buyers are looking at around 8 to 10 x their annual income before tax to afford their first house.  It was not even fourty years ago that a single person could go out, get a basic job on just over minimum wage and still get a house at no more than 3x yearly earnings.  The social idea that you need to have a partner to buy a house is now quite ironicaly becoming reality after it was the topic of so many jokes in the mid 90’s.

As someone waiting to get in on the housing market and with very little debt I am personally dead on eager for this housing crash, recession and equalisation that has been making the rich richer and the poor poorer.

written by Oli \\ tags: Debt, England, Housing, Recession