To build on debt is to build on sand

While many families are struggling to survive in these times of austerity, the Tudor Whelans are unusual in that they used to enjoy a life of luxury.

Home was an £800,000 six-bedroom house with views across the Lancashire countryside. They drove a top-of-the-range Audi and Range Rover and their daughters went to private schools where fees cost up to £12,000 a year.

The family owned five horses ...

The reason why they are now impoverished appears to be that their vast business empire, when it existed, was built on debt.

Many people buy houses by taking out a mortgage, and many people get into financial difficulties as a result.  In many cases I am inclined to be sympathetic, but of course most people in Britain would not be able to buy a house without taking on debt.  Likewise, many people who start up businesses do so with borrowed money, but that is very different from trying to enlarge an already successful business by taking on yet more debt.

The Tudor Whelans did not need to build up anywhere like as much debt as they did.  Why on earth would any sane couple with debts buy a six-bedroom home for themselves and their two daughters? Why would anyone in their right mind buy expensive cars on credit?  Of course I do not know that the cars were bought on credit, but they were certainly bought at a time when the Tudor Whelans owed a lot of money.

The poet and politician Hilaire Belloc argued that rich people are morally obliged to give employment to the working classes.  I firmly believe that rich people are morally obliged to live their lives free from debt.  In fact I believe that we are all morally obliged to live our lives free from debt if we can.

The Tudor Whelans should have bought a three-bedroom house, and driven modest cars.  Their daughters should have gone to state schools from the outset, and a gerbil or a hamster would have been far less expensive than five horses.  At some point they should have stopped borrowing money to fund their business ventures, and set about the serious business of reducing their debt burden.

If they had gone down that route, then they might still have the three-bedroom house, and the modest cars, and the gerbil.  People who borrow money beyond what is reasonably necessary are a disgrace to their country.

A very British holocaust

If a dictator in a foreign country were to have thirty thousand people machine-gunned to death, the establishment would almost certainly portray it as a holocaust, or something along those lines.

The United Kingdom kills on average around thirty thousand elderly people every winter by making them freeze to death. I call that a holocaust.

The British government is tackling this holocaust by helping NHS hospitals to prepare to treat the victims of freezing weather, but maybe it would make more sense for people not to have to freeze in the first place.

Related previous posts include:

The next big freeze

Energy sector fat cats

The story of King Ed

People need to get real

Sometimes it is hard to avoid coming across as lacking in sympathy.  It is reported today that a Mumsnet survey indicates that many women feel that having a child harms their career, and it is also reported that the government is selling off £900m in student loans debt.  Apparently a lot of graduates fear that this will result in them being hounded for outstanding payments by private companies.

Regarding women in the workplace, Britain has persistently very high levels of unemployment.  In fact I am not sure that unemployment has been below the million mark since the 1970s, and even then the level of unemployment was much higher than in the 1960s.

People who are in work should therefore be grateful that they are lucky enough to be in work when so many people are not so lucky.  People who think that they are being unfairly held back in the workplace are welcome to complain, but would do well to reflect that they could be a lot worse off.

If you are not unemployed and miserable right now, then you could be before long.

As for graduates worried about debt, I feel compelled to point out that they are all volunteers.  Not one of them was forced to go to university, and therefore each one of them chose to burden themselves with graduate debt.  Of course they could refuse to vote in elections except for a political party which has pledged to cancel all graduate debt, but will they?  Does such a party even exist?

Evil Tories, communist LibDems

The Daily Mail is reporting that the Liberal Democrats are not happy about a Tory MP and government minister speaking out about the Pakistani community:

Qassim Afzal, the Lib Dem chairman of the party's Friends of Pakistan group, criticised what he called Mr Grieve's "loose language".

He told BBC Radio 5Live: 'I'm profoundly disturbed at a statement from such a senior Conservative MP against the British Pakistani community.

'This doesn't help bring communities together.'

Maybe the Liberal Democrats should judge the comments on the basis of their truth rather than on the basis of whether or not they help bring communities together.

It is unsurprising to see the communist Liberal Democrats showing contempt for the truth, but we must remember that the Tories are not exactly known for their love of the truth.  After all, a Conservative government led by the evil communist Margaret Thatcher tried to have a man jailed because he dared to expose their lies.

The present day Conservative Party is at the moment trying to persuade the government of Iran to stop enriching uranium.  Maybe they should stop meddling in the affairs of other countries, and start to pay more attention to their own failings.

Update: the Conservative Party has not abandoned communism after all.  Grieve has recanted his heresy.

Come to the Forest of Dean, dear Roma

The Minister for Immigration, Mark Harper, has been trying to pretend that Britain is not in fact about to be flooded by immigrants from Romania and Bulgaria.

 

Apparently his reasoning is that people in those countries who wish to migrate to the west will opt for Germany and Italy and Spain instead.  Perhaps he could tell that to the people who live near Marble Arch, who have to contend with homeless east European immigrants.  He could even try talking to people in the Page Hall area of Sheffield.

 

Personally I think it would be ill-judged of Bulgarian or Romanian immigrants to head for either Page Hall or Park Lane when they could instead set up camp in that beautiful area of Gloucestershire which lies between the River Severn and the Welsh border.  The local MP is called Mark Harper.  Let's see how he likes the impact of Britain's open borders on his home turf.

Fat cats and commies

Once again I find myself writing about fat cats and communism.  It is reported today that the fat cats are still very much in the business of putting themselves first, with directors of big companies enjoying huge pay rises while millions of people are struggling and some are even turning to food banks.

How exactly do these companies benefit from paying excessive salaries?  Are they guaranteed not to become insolvent?  Are they guaranteed never to break the law?  Are they guaranteed always to pay their creditors in good time?

When people are poor, it is only to be expected that they will vote for socialism.  Socialism basically means that the state intervenes to assist people who would be disadvantaged otherwise, and so even the Conservative Party can be seen as a socialist party - in spite of the fact that they do nothing to curb fat cat salaries.  The main problem with socialism is that it can so easily spill over into communism.

Of course the Conservatives - like Labour and the LibDems - are communists.  Together they are leading Britain into ever higher levels of public spending and ever decreasing levels of personal freedom.  People should not vote for this, but they do.

If the fat cats do not want Britain to become a communist country in the next few decades, they should immediately cut their salaries and pay larger salaries to all of their employees regardless of status.  That way the ordinary people would have less incentive to vote for socialism, and thereby risk adding petrol to the fire of communism.

House price inflation

The press are reporting a surge in house prices, and linking it with economic recovery.

Prices fluctuate with supply and demand.  Consider the price of something for which supply is fixed.  There are only so many people who can be accommodated within the Wembley Arena at any one time, and so ticket prices will be governed primarily by demand.  The only way a given act can increase the supply of tickets is either by playing more than one concert at a given venue, or else choosing a larger venue.  Demand for tickets is influenced by who is actually performing on a given occasion, and also by how much money people can afford to pay.

When times are hard, many people spend their money primarily on necessities.  When the economy is growing, people are more likely to spend money on luxuries such as concert tickets.  With more people wanting to buy tickets, the price can be expected to rise.

It is only to be expected that people are more likely to want to buy a house when the economy is doing well, and yet the difference is that the supply of houses can in theory increase to meet demand.  In reality though it is unlikely that supply will increase to meet demand, and that is why house prices rise.

Perhaps the greatest pressure on demand for housing is immigration.  Another pressure is caused by fat cat company directors or public sector managers whose obscene salaries allow them to buy two or more houses while millions of ordinary people struggle to afford just one house.

It is misleading therefore to present rising house prices as an indicator of economic wellbeing.

The best way to ensure that demand for housing does not exceed supply is to stop immigration at once.  Another helpful move would be to make it illegal for anyone to have more than one mortgage at any one time, and also to place a cap on the value of new mortgages.  If fat cats are going to buy more houses than they need, then they could at least do so by paying cash instead of taking out yet another mortgage.

Previous posts on the subject of housing and fat cats include:

Micro-life

Has immigration killed the middle class dream?

The cats stay fat

Energy sector fat cats

 

UKIP get some things right

Much as I despise UKIP, I believe in giving credit where it is due.  Its leader Nigel Farage has had the decency to point out that a Conservative government led by Margaret Thatcher closed many grammar schools.

He also notes that his party has correctly predicted the threat of opening our borders to yet more countries in eastern Europe:

I remember during the Eastleigh by-election when our candidate Diane James mentioned the risk of criminal gangs from these two countries.

She was attacked and had all kinds of names thrown at her including by the editor of the main local newspaper who wrote he would not going to devote any more time to her campaign.

UKIP is not however opposed to immigration, and also it has never said a kind word about any political party that is.  Pot, kettle, black.

Visit this link for more comments about UKIP.

The exaggerated threat of deflation

Some commentators are warning of a possible deflation in the American economy in the coming year.

Before I continue, please take slightly less than nine minutes to watch this video:

It is hard to be precise about the effects of deflation because it very rarely occurs.  In fact, I am not sure that Britain has ever experienced deflation - or at least not across the whole economy.

Let me repeat what I said in an earlier post:

Inflation is a trend rise in prices over a period of time, and also the decline in the value of money over the same period of time ... It is impossible to calculate the rate of inflation exactly, as we have to make assumptions which are not necessarily correct.

Likewise, deflation is a trend fall in prices over a period of time, and also the increase in the value of money over the same period of time.  It is impossible to calculate the rate of deflation exactly, as we have to make assumptions which are not necessarily correct.

Deflation in the USA has been linked to high levels of unemployment, but periods of inflation in many countries have been linked to economic misery.

The belief that deflation discourages people from buying is at best an exaggeration.  As it happens we can see deflation at work in some sectors of the economy, and it certainly does not discourage people from spending their money.  The latest computer game might cost thirty pounds on the day of its release, fifteen pounds six months later, and six pounds two years down the line - and yet sales are almost certainly going to be highest when it costs the most.

Many economists seem to think that inflation does not matter much if it is at a very low level, and yet we are expected to believe that deflation would be a disaster even at a very modest level.

The argument that deflation harms people with mortgages seems also to be at best an exaggeration.  The amount you repay on a mortgage fluctuates with the level of interest rates, and salaries do not always rise over time.  In addition, it is easy to envisage a scenario in which inflation can harm people with mortgages.

I currently believe that the doomsayers who warn about the dangers of deflation are for the most part people who know that it is no more of a danger than inflation, but who are obsessed with inflation.  When inflation is low - and it ought to be zero - they invent a danger of deflation so as to make us believe that we should overlook the dangers of inflation.

Money should neither rise nor fall in value.  It should remain stable at all times.  The doomsayers are therefore half right.  We do not want deflation, but neither do we want inflation.

This link lists some of my previous posts about the economy.

Gambling ruins lives

Liverpool City Council has demanded a ban on fixed odds betting terminals (FOBTs). Players can gamble up to £300 per minute on these machines.  FOBTs have been likened to crack cocaine.

A local councillor has commented that:

I’ve heard stories of ordinary people, doing ordinary jobs, who are going into the bookies on pay day and losing a whole month’s salary or wages in one session.

These machines are causing real problems in Liverpool. People are losing their jobs, their relationships are breaking down, they are losing their homes, turning to loan sharks or payday loan firms and even committing crimes because of gambling.

What I find ironic is that this is a Labour councillor speaking.  The last Labour government relaxed the gambling laws, despite being warned that doing so could cause misery.  This should surprise no one.  If you are Prime Minister, then you have an obvious incentive to pander to the whims of big business.

Some readers might be thinking that the party of government has an obvious incentive to look to the wellbeing of ordinary people.  The trouble with that point of view is that far too many ordinary people in this country cast their votes in elections for political parties which do not care about them.

This is not merely a failure of Labour government.  The present government has shown no inclination to take this matter seriously.

If your life has not yet been blighted by obsessive gambling, then maybe your turn will come in due course.  Then again, you might like to join a political party which actually cares about the people of Britain.

Previous posts about gambling include:
I hate gambling
Gamblers take a risk

Single mothers lose legal challenge

Three women who live in Greater London have failed in a legal challenge to the government's new benefits rules for lone parents.  The Daily Express reports that:

Ms Carrier [a solicitor acting for the claimants] said it was expected that the impact of the cap would be most acute in London because of the lack of affordable housing in the capital and high housing benefit costs.

I am not sufficiently well versed in the benefit reforms to be able to offer a detailed response, but I will accept the allegation that the difficulties it causes will indeed be most acute in Greater London.

It is fair to point out however that it is possible that all three claimants are immigrants.  One of them is known to be a Roma woman from Poland, and another is an Orthodox Jew.

Greater London is expensive, and it is expensive because it is crowded.  Part of the reason for its being crowded is the fact that it is home to millions of immigrants.  If Britain were to close its doors to more immigrants, then the cost of housing in London might not fall, but at the very least it might not rise much further.

As for the Polish claimant, if she does not like claiming benefits in this country, then she is welcome to return to Poland.

Sarah-Jane and the war on drugs

Britain remains as violent as ever.  Two teenage girls - Jasmine Allsop and Olivia Lewry - have been murdered on a night out in Gosport.  By contrast, Jessica Brown of Northampton has merely been punched in the face.  She was wearing a chicken costume while handing out flyers on her first day in a new job, and apparently the previous wearer of the said costumer was also assaulted.

If you vote Labour or Conservative, then do not pretend you care.  Successive Labour and Tory governments have allowed thugs to rule far too many of our streets.  They have also been soft on drugs.

Sarah-Jane Honeywell, formerly a CBeebies presenter, has admitted to a cocaine obsession which at its height saw her snorting twenty lines a night.  She has also claimed that cocaine use was commonplace when she entered the entertainment industry.

If you do not want any member of your family to develop a drug habit, then maybe you should join a political party whose policies include punishing all drug dealers with the death penalty.  Then again, maybe you are happy for your loved ones to snort cocaine, get punched in the face, or be murdered - in which case keep on voting for the evil Labour and Conservative parties.

Austerity versus democracy

A national newspaper today features a lengthy comment about François Hollande, the President of France.  It asserts that:

He would defy economic reality and, above all, he would attempt to stand up to Germany, and the austerity policies dictated by the Bundesbank on the whole of the crisis-hit eurozone. Once he took office, Hollande began to govern as though France had full economic sovereignty, and didn’t have to obey German-imposed rules about levels of debt and spending.

While I accept that Hollande has not governed well, I cannot help but admire his opposition to foreign rules.

Hollande is elected by the people of France, and should put loyalty to the people of France ahead of any loyalty to foreign upstarts.  Then again, people who do not believe in democracy cannot be expected to grasp that simple fact.