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Financial Markets, Subprime, & The Credit Crunch

Central banks around the world have been pumping trillions of US dollars into banking systems in an effort to keep money flowing as a result of the global financial crisis of 2008. Please use this forum to discuss the causes and implications of the current situation in the financial markets.

Note that various articles on the housing markets of the UK, USA and Australia are recorded at House Price Crash Discussion Forums
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little c
 19 Oct '17  17:11 : 0 recs

Universal credit (UC) is a technocratic solution to a human problem. Rolling up six benefits into one payment in a way that mirrors a monthly pay cheque appears unimpeachably sensible – on paper. The system is still supported in principle across the parties. But in practice too many claimants do not fit into its organised parameters. They come with historic debts, or without any savings, or knocked back by the unexpected loss of their job or a split from their partner. For all its flaws, the old system was baggier and more accommodating.

And there is a long history of new benefits coming laden with unintended consequences. The former work and pensions secretary Iain Duncan Smith, who designed UC, at least insisted that his system came in slowly, with built-in “firebreaks” to assess the success of implementation and the effectiveness of its design. But his successors have lost patience with testing, learning and rectifying, and now they are refusing to pause.

There is a kind of bizarre self-parody in a government that, when faced with soaring debt and rent arrears, concedes to Jeremy Corbyn’s call and makes the helpline free. David Gauke, the DWP secretary, made the announcement to MPs hours before a Commons debate that might have led to a government defeat if the Tories had not backed away from confrontation. It removes a grave injustice; but in the face of the human and political damage being wreaked by the decision to press ahead with the rollout, this is fiddling on a heroic scale.

Labour wins symbolic victory in vote on universal credit - as it happened
Motion to pause universal credit rollout passes with 299 votes in favour and 0 against after most Tory MPs abstain.

The problems with UC are now familiar: the built-in six-week delay before any payment is received means many claimants run up large debts. The Trussell Trust, an informal indicator of need, notes that demand for food parcels rises on average 16% where UC is rolled out, which is why the Labour MP Frank Field can warn that his area food bank is anticipating needing an extra 15 tonnes of supplies. Mr Gauke believes that promoting advance payments will mean that people are not thrown back on charity. But no more than 40% of the likely future entitlement can be claimed, and it must be repaid within the year. In an example of the clash between theory and practice, in some circumstances advances cannot be applied for face to face. Imagine, sitting opposite an adviser, being told that you must find a phone to ask for an advance – when IT malfunction and bureaucratic failure suggest that one in three new claimants waits more than six weeks, and some wait for more than three months. The delay is meant to be part of the process of preparing people for work: claimants who can’t manage are intended to get extra support with budgeting. But you can’t budget with nothing, nor with not enough.

And the problems don’t go away when the credit is paid. In Scotland, the administration has used its new powers over welfare to pay UC every two weeks rather than every four. It also allows landlords to receive rent directly from the benefits agency rather than the tenant. It is a practical way – although still not completely adequate – of easing the problems of rent arrears that escalate wherever the system has been introduced. But it is also an erosion of the founding principle of using the credit to mirror a pay cheque; and that may be one reason why the DWP is so adamantly refusing to bow to pressure from across the Commons to pause for a review.

There is another reason, too: the DWP budget has to deliver billions of pounds of cuts between now and 2020. These cuts will leave a family of four on UC as much as £2,000 worse off. They are turning an ambitious but worthwhile reform into what one MP called an act of deliberate cruelty. The government is fixed on a course of action that, by the next so-called firebreak in January, will have pitched hundreds of unsuspecting citizens who find themselves in need into the bleak world of Daniel Blake. It takes a government inured to self-harm to pursue a policy that will leave families to celebrate Christmas on the contents of a food parcel.
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little c
 19 Oct '17  17:11 : 0 recs

Universal credit (UC) is a technocratic solution to a human problem. Rolling up six benefits into one payment in a way that mirrors a monthly pay cheque appears unimpeachably sensible – on paper. The system is still supported in principle across the parties. But in practice too many claimants do not fit into its organised parameters. They come with historic debts, or without any savings, or knocked back by the unexpected loss of their job or a split from their partner. For all its flaws, the old system was baggier and more accommodating.

And there is a long history of new benefits coming laden with unintended consequences. The former work and pensions secretary Iain Duncan Smith, who designed UC, at least insisted that his system came in slowly, with built-in “firebreaks” to assess the success of implementation and the effectiveness of its design. But his successors have lost patience with testing, learning and rectifying, and now they are refusing to pause.

There is a kind of bizarre self-parody in a government that, when faced with soaring debt and rent arrears, concedes to Jeremy Corbyn’s call and makes the helpline free. David Gauke, the DWP secretary, made the announcement to MPs hours before a Commons debate that might have led to a government defeat if the Tories had not backed away from confrontation. It removes a grave injustice; but in the face of the human and political damage being wreaked by the decision to press ahead with the rollout, this is fiddling on a heroic scale.

Labour wins symbolic victory in vote on universal credit - as it happened
Motion to pause universal credit rollout passes with 299 votes in favour and 0 against after most Tory MPs abstain.

The problems with UC are now familiar: the built-in six-week delay before any payment is received means many claimants run up large debts. The Trussell Trust, an informal indicator of need, notes that demand for food parcels rises on average 16% where UC is rolled out, which is why the Labour MP Frank Field can warn that his area food bank is anticipating needing an extra 15 tonnes of supplies. Mr Gauke believes that promoting advance payments will mean that people are not thrown back on charity. But no more than 40% of the likely future entitlement can be claimed, and it must be repaid within the year. In an example of the clash between theory and practice, in some circumstances advances cannot be applied for face to face. Imagine, sitting opposite an adviser, being told that you must find a phone to ask for an advance – when IT malfunction and bureaucratic failure suggest that one in three new claimants waits more than six weeks, and some wait for more than three months. The delay is meant to be part of the process of preparing people for work: claimants who can’t manage are intended to get extra support with budgeting. But you can’t budget with nothing, nor with not enough.

And the problems don’t go away when the credit is paid. In Scotland, the administration has used its new powers over welfare to pay UC every two weeks rather than every four. It also allows landlords to receive rent directly from the benefits agency rather than the tenant. It is a practical way – although still not completely adequate – of easing the problems of rent arrears that escalate wherever the system has been introduced. But it is also an erosion of the founding principle of using the credit to mirror a pay cheque; and that may be one reason why the DWP is so adamantly refusing to bow to pressure from across the Commons to pause for a review.

There is another reason, too: the DWP budget has to deliver billions of pounds of cuts between now and 2020. These cuts will leave a family of four on UC as much as £2,000 worse off. They are turning an ambitious but worthwhile reform into what one MP called an act of deliberate cruelty. The government is fixed on a course of action that, by the next so-called firebreak in January, will have pitched hundreds of unsuspecting citizens who find themselves in need into the bleak world of Daniel Blake. It takes a government inured to self-harm to pursue a policy that will leave families to celebrate Christmas on the contents of a food parcel.
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little c
 17 Oct '17  05:47 : 0 recs : edited 1 time : last edit 17 Oct '17  05:49

Good morning to you all! I trust that all is well with all of you this October! Central banks around the world have been pumping trillions of US dollars into banking systems in an effort to keep money flowing as a result of the global financial crisis of 2008. Porn' asks us all to use this particular thread, topic or forum to discuss the causes and implications of the current situation in the financial markets.

Well, the cause is uncertainty and the implication is that riskier products will have to cost more in future. The financial markets have been surprisingly inefficient at identifying and pricing risk into global stock markets over more recent years! It could be because of a lack of audit, Slightly Optimistic, which means that no one ultimately knows what anything is worth!

With debt levels in the UK soaring, it is welcome indeed that Andrew Bailey, the chief executive of the Financial Conduct Authority, has gone public with his concerns about Britain’s reliance on credit. In particular, he has sounded a warning over what he says is a “pronounced” accumulation of debt among young adults. What he has said may surprise nobody; but it should alarm us all.

In the aftermath of the financial crisis, overall consumer debt levels in the UK declined as a consequence both of stricter lending criteria and general belt-tightening among nervous citizens. Now, with mortgages excluded, it has wormed its way over the £200bn mark, which puts it close to the pre-crash heights.

Fundamentally, of course, there is nothing intrinsically dangerous about credit, as Mr Bailey has noted in his remarks: it enables the economy to function by permitting regular flows of money. Yet plainly it becomes a concern if individuals are taking on debts they are not confident they can pay back. And that is all the more likely to occur when credit is being used to deal with the everyday cost of living, as it is for increasing numbers.

Last month a survey of 18- to 30-year-olds by the Young Women’s Trust concluded that nearly 25 per cent are perennially in debt, while close to half regularly have to borrow in order to make ends meet before their monthly pay cheque arrives. Tales abound of parents missing meals in order to ensure their children get enough to eat or walking long distances to avoid paying transport costs. By the age of 24, close to 40 per cent of individuals are in debt, according to the Money Advice Trust; a YouGov poll last year found one in 10 thought they would never repay what they owed.

Plainly there are a range of factors that have aligned to produce the present situation. Private sector rents are still on the up, while wages are stagnant; the cost of unsecured loans is high, yet interest on savings is nominal. Add into the mix the pressure borne by recent graduates who face the prospect of years repaying tuition fees and it is easy to see why young people are becoming disproportionately reliant on borrowing money to get by.

As Mr Bailey rightly notes, the concentration of indebtedness among younger people is part of a broader shift in the “generational pattern of wealth and income”. We have grown used to the notion of ever-improving living standards and of each generation enjoying, on average, higher incomes than their parents. This is no longer true. For one thing, millennials – those who were aged between one and 17 in 2000 – spend three times as much on housing as their grandparents, according to the Resolution Foundation. For another, earnings are frequently failing to keep up with inflation.
The pension gap is an additional problem, with many young people contributing little or nothing to their retirement pots. A YouGov study in January concluded that 40 per cent of 18- to 34-year olds had made no pension provision of their own at all. Many will wonder whether there will ever come a time in their lives when they can escape the use of debt to fund basic essentials such as food and heating.
  
For young people caught in never-ending cycles of credit, the affects can be profoundly negative, not only in respect of their material position but also with regard to their physical and mental health. That in turn can have an impact on individuals’ ability to hold down full-time employment, which merely exacerbates the potential need to take on more debt.

Ultimately, all this poses serious problems for British society as a whole, not only in terms of the potential cost of caring for those who may be incapacitated by illness, anxiety or homelessness, but because Britain’s economy already faces a desperately challenging future, even without mass reliance on credit. People who are constantly in debt are not spending their non-existent money on British products; individuals who rely on credit cards to get through the month are in no position to boost the UK as a centre for entrepreneurialism; young people who feel they have no hope are not likely to be drivers of a post-Brexit recovery.

It is imperative that the Government not only heeds Andrew Bailey’s warning but acts on it radically and soon. A housebuilding programme on a genuinely large scale is an obvious starting point, although the Prime Minister’s ambitions in that arena seem modest. Yet even that only addresses one element of the debt conundrum facing so many young people. At the moment they are paying the price of decisions made by a generation whose wealth and prospects they can barely dream of.

The Independent - Editorial - A post-Brexit recovery can never happen if we don't tackle debt among the young -
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little c
 15 Oct '17  10:28 : 0 recs

How much do I get paid for the job, President Jason? What sort of advice are you after?
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Lord Byron
 15 Oct '17  09:50 : 0 recs

President jason appoints c as special adviser on finance.
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little c
 14 Oct '17  00:50 : 0 recs : edited 2 times : last edit 14 Oct '17  00:51

As the credit crunch tightens its grip, banks cut back further on consumer lending after pressure from Mark Carney. Credit cards are harder to come by as banks tighten up their lending criteria under pressure from the Bank of England. Banks are tightening lending standards and making it harder for borrowers to get new credit cards or consumer loans, obeying instructions from the Bank of England to rein in what could become a dangerous household debt boom.

The availability of unsecured credit fell in the past three months at its fastest pace since 2009, and banks expect to cut back lending further towards the end of this year. Credit scoring criteria - when banks decide whether or not to lend to risky customers - is also becoming tougher for household loans in a way not seen since 2010. Growth in the proportion of credit card applications being refused by banks also hit an eight-year high, the Bank of England survey showed.

The length of interest-free balance transfers on credit cards also fell for the first time since the Bank of England began measuring that part of the market at the start of 2015. It comes after Mark Carney and his colleagues at the Bank of England have repeatedly warned banks that surging consumer credit may represent a risk to the financial sector and potentially to the wider economy. The aim is to encourage banks to make prudent lending decisions now, rather than waiting until a full-blown bubble is inflating, which could then lead to a painful crash in the sector. By contrast mortgage lending is still rising at a steady pace.

The availability of secured credit grew for the third consecutive quarter, the Bank of England’s figures showed, with lenders focusing on customers with a deposit or housing equity of at least 25pc of the value of their home. A net balance of 2pc of banks said house prices slipped in the past three months, but lenders expect prices to stay steady in the coming quarter. Banks became less willing to lend to those with smaller deposits, though mortgage lenders expect this to change in the coming three months as they increase lending once more to that end of the market. Use regions/landmarks to skip ahead to chart and navigate between data series. The availability of unsecured credit is falling at its fastest pace since the financial crisis..

The availability of unsecured credit is falling at itsfastest pace since the financial crisis Industry group UK Finance also said mortgage lending had increased in August as first-time buyers and home movers took out more loans. A total of 34,000 first-time buyers borrowed £5.7bn in the month - in cash terms a rise of 16pc compared with July and up 12pc on August 2016. At the same time movers borrowed £8.4bn, up 18pc on the month and 20pc on the year. August 2016’s numbers were dented in part by uncertainty following June’s Brexit referendum, so this year’s numbers reflect the market bouncing back from that political effect.

Buy-to-let investors borrowed £3.1bn and remortgagers £6.4bn, both down on the month and up modestly on the year. “Activity picked up in August, and recent resilience ensured that borrowing by home movers was at its highest since March 2016, when transactions were boosted by an imminent increase in stamp duty,” said the industry group’s head of mortgages policy June Deasy.“Over the last 12 months, the number of people remortaging has been higher than in any period since late 2009. With mortgage rates close to historic lows and the likelihood of a rise in official rates moving closer, the popularity of remortgaging looks set to continue.”
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little c
 10 Oct '17  05:47 : 0 recs : edited 1 time : last edit 10 Oct '17  05:48

Good morning to you all! I trust that all is well with all of you! Central banks around the world have been pumping trillions of US dollars into banking systems in an effort to keep money flowing as a result of the global financial crisis of 2008. Porn' asks us all to use this particular thread, topic or forum to discuss the causes and implications of the current situation in the financial markets.

Well, the cause is uncertainty and the implication is that riskier products will have to cost more in future. The financial markets have been surprisingly inefficient at identifying and pricing risk into global stock markets over more recent years! It could be because of a lack of audit, Slightly Optimistic, which means that no one ultimately knows what anything is worth!
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little c
 09 Oct '17  12:09 : 0 recs

What other tools do you use, Lord Byron?
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Lord Byron
 09 Oct '17  10:36 : 0 recs

Skype is an interesting tool.
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little c
 09 Oct '17  10:20 : 0 recs

Do you trade on Wall Street, Lord Byron?
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Lord Byron
 09 Oct '17  09:51 : 0 recs

Wall street
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little c
 09 Oct '17  00:40 : 0 recs

Plenty of debt is prime. Sovereign debt is largely prime! Plenty of debt is also subprime! Bricks and mortar have traditionally been regarded as a relatively safe bet, but I guess that it all depends upon the property, and of course, the lender! Can the lender afford to pay back the loan? If not, the loan itself is subprime!
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little c
 08 Oct '17  16:26 : 0 recs

Financial Markets run on the principle of market participation.
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little c
 08 Oct '17  15:02 : 0 recs

Chairman Slightly Optimistic!
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little c
 08 Oct '17  12:30 : 0 recs

Audit the United Nations Organisation!
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little c
 06 Oct '17  16:43 : 0 recs

And what exactly are you prepared to chair, Slightly Optimistic?
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Slightly Optimistic
 06 Oct '17  16:31 : 0 recs

I am prepared to take the chair, says little c.

Whimsy and distraction are now the last resorts.

Regarding his theft. In Gulliver's Travels , the Lilliputans regarded fraud as a greater crime than theft. The reasoning was that care and vigilance can protect a man's property from thieves. But honesty has no defence against cunning, that has little law and punishment against it.

Dangerous to audit publicmoney
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little c
 06 Oct '17  15:34 : 0 recs

Beloveds like Byron!
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Lord Byron
 06 Oct '17  15:29 : 0 recs

Btl tory voters
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Slightly Optimistic
 06 Oct '17  15:00 : 0 recs

For big C re Mark Carney:
Should he resign this cross-border post immediately because he is not allowed by a sovereign state to act independently.
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