Double dip correctly forecast - am I in the wrong job ?

It's official - we're in a double dip recession. I have been telling people for a long time that it's coming. I have been making forecasts correctly since 1995 . How do I do it and how come I am better than the "experts" ?  I use simple observations such as business start-up and buisness confidence , gleaned from speaking to my clients who are themselves accountants. Then I look around me and see what is going on in the real world. Simple but it works. always has done , always will do. Perhaps I should become a government forecaster ? On 2nd thoughts I think I'll give it a miss and stick to blogging.

Comments

ECB Ponzi Scheme - 4 months ago

JC | | Permalink

Agree - the overall direction is generally blindingly obvious to all except those making the decisions

Just look at another area - the ECB scheme to give banks access to as much cheap money (1%) as they want - the banks in turn buy suspect (rubbish) soverign debt yielding 5% and everyones happy.

Until PIGS bonds go the way of Greeces and their value is halved - 5% yield against 50% drop in asset value - not a good move and yet the bankers went ahead and made it despite knowing what happened to Greek bonds - eh?

Enter the IMF in the guise of a general top up all round without coming clean about the Eurozone being the ultimate destination when the .. hits the fan - which will be shortly.

So the UK has stumped up another £10bn on the pretext of not going towards the Euro when we all know that is precisely what will occur

Beggars belief

Time to currency trade EUR/GBP !

Flying Scotsman's picture

Double dip

Flying Scotsman | | Permalink

It's something of a Mexican stand-off . Policymakers are staring at voters and , each one scared witless of the next move. Interest rates can't go down but we all know the will come when they go up and it's game over for a lot of households.

Old Greying Accountant's picture

I always said ...    1 thanks

Old Greying Acc... | | Permalink

... it was madness to drop rates so low. Sure, there would have been pain, but a lot less and over a lot quicker than it will be now.

I still say that the economy Blair took over was rock solid, evidenced by the fact it managed to stay intact long enough for them to con the plebs into giving them a third term to completely finish it off, ably abetted by the gluttonous bankers!

 

Flying Scotsman's picture

Double dip and rates

Flying Scotsman | | Permalink

Just had a text from somebody reminding me I had forecast this 12 months ago. The fear of the unknown is clearly etched on people's minds.

I agree with you that Labour inherited a sound economy but they basically bribed the British public through the tax credit system. It was a poor idea and badly run system with errors right left and centre. Result - a credit boom and an entitlement based society 

Who is to blame for failure of the task, as Lord Sugar would ask ? The regulators were asleep on the job and their master was a professional economist, the Rt Hon member for Kirkcaldy & Cowdenbeath ! And to rub salt into the wound , the Labour government has heaped regulation upon regulation - for what ? To make running an SME a misery and make people feel secure that the captain was looking out for them. How apt that we debate this the week of the Titanic anniversary.

dbowleracca's picture

We (the public) must share some of the blame too    1 thanks

dbowleracca | | Permalink

I agree that the tax credit system ha a lot of faults, but it also encouraged people to work and helped a lot of families who were on the bread line.

I think the problem is we all enjoyed it while it lasted, cheap and easy credit, booming employment, lower taxes - but it turned out to be a big mess when the banks when belly up.

I would love to see a stricter and fairer benefit system, forcing those who can work to do so and if no private sector jobs are available getting them to do community based work such as cleaning parks, painting schools etc.

Then a fairer tax system - no tax or NIC on the first £10k of income and a flat 25% tax and 12% NIC thereafter (subject of course to the current cap on NIC) - leaving dividend income at the same rate and making savings income 20% only.

Corporations tax a flat 23% for all companies, regardless of size, but more focus on avoidance so you pay tax on activities in the UK based on their contribution to profits for any international groups - no shifting income to Ireland or wherever.

And I also think that all businesses should be VAT registered, regardless of turnover, to eliminate the well known manipulation that occurs when businesses get close to the registration threshold. It would make for a level playing field too and recoup some of the tax potentially lost by cutting tax rates.

The effect of this would be to encourage people to pay the right amount of tax - no point paying fees for avoidance when tax is only 25% although some will always want to pay less.

And hopefully the savings from tax will enable business owners to reinvest in growing their businesses

Lots more ideas, if GO wants to hear them!

and Pensioners .....

JC | | Permalink

@dbowleracca - agreed, but no mention of pensioners in the fairness stakes - perhaps they don't count

At the moment they seem to be carrying the brunt of the '.. all in it together ..'. The following needs to have solutions/be addressed

  • Long term commitment - only change rules for new entrants and not retrospectively for long term members
  • Sort out public sector pensions (and local council - don't agree with 30% of rates paying for their pensions when it should be spent on services). If the country cannot afford them then all future public sector pensions should be reduced for all new entrants with immediate effect to an affordable level
  • Women in their late 50's (birthday dependant) are grossly unfairly treated with disproportionate hike in pension age - so basically 60-65 gives the state an extra £35k at the expense of those nearly at retirement age
  • Artificially fixed interest rates to assist house owners who are over extended at the expense of savers. Why is everyone underwriting people who cannot afford their houses - let market forces sort out the matter with proper interest rates. This would also reduce house prices & allow 1st time buyers into the market
  • Interest rates also affect actuarial figures for annuities - now the lowest ever
  • Interest rates affect GAD rates forcing low pension income from pension funds
  • Pension GAD rates reduced from 120% to 100% - try taking a cut in your own income just on this front of 15%+ let alone the cumulative effect of all the other issues

But hey! who cares after all they are only pensioners and don't have an muscle or a union voice to 'blackmail' the country

Basically STOP UNDERWRITING THE FECKLESS and allow everyone else to get on with their life rather than constant government interference

I remember the 1990's with interest rates of 15% - try that level and watch the fall out!

Old Greying Accountant's picture

JC, I agree ...

Old Greying Acc... | | Permalink

... about the pensions.

I have always said and law changes that affect a 40 year savings strategy should only be for new products - it was previously so when PPP's replaced RAR's.

Pension funds are like oil tankers, they need plenty of time to change course, you cannot take a chunk out in the last 10 - 20% of the term and expect it to recover.

 

Flying Scotsman's picture

The Feckless

Flying Scotsman | | Permalink

Underwriting the feckless is a valid observation. We have gone from a society that earns its way and understands responsibility and civic pride to one that only knows of "rights" and "entitlements" .

People have a right to a 42 inch telly and 2 week sooperdooper holidays and their kids must have th elatest toys and bicycles and smartphones .

There is plenty of satire on the TV that is a pretty fair reflection of the state this country is in. It doesn't get better, by the wya, it slowly sinks lower and lower.

I think I could author a PhD thesis on why we are where we are and it won't all make for "pc" reading ....

 

 

Presumably Barclays, HSBC and numerous    1 thanks

justsotax | | Permalink

other financial organisations offering people loans/finance etc etc will feature in several chapters?.....The ease with which they will give people money without checking the individuals ability to pay....the way they have sold products like insurance which in the event don't actually pay if someone does lose their job....

 

Of course there are some very wealthy people who have benefited from this consumer driven market.....probably those who will benefit from the 5% drop in the top rate.  

 

As for the feckless....who are they.....the consumer who has no money but is allowed to drive off in the new car....the salesman who has managed to put together a deal to ensure he gets his bonus....or the Execs at the top who will do anything to grow the business, increase the share value and then of course take the big bonus (at any cost?)....

 

 

Flying Scotsman's picture

Feckless

Flying Scotsman | | Permalink

Funnily enough I watched BBC iPlayer earlier today , covering the credit spree on 1972 - 1974 , where wanted it all. These needs are probably hard-wired into the human condition.And yes, we all benefitted from the giveaway years of Labour , either directly or indirectly as a result of the spending. 

The execs pushing share price growth is one of the biggest paradoxes of the director's fiduciary duty. This is highlighted more than ever in Warren Buffett's biography which I am enjoying at the moment. But again , it stems from the "instant must have" nature that has pervaded the human race in developed and emerging economies. Long term vision , waiting for something....halcyon days 

Did it start with maggie and....    1 thanks

justsotax | | Permalink

....the sale of council houses at discounted prices.....

But does also bring us back to the main issue - if credit wasn't available the "instant must have'" situation wouldn't exist?

Old Greying Accountant's picture

I tend to agree ...    1 thanks

Old Greying Acc... | | Permalink

... with justso, whilst I think much of what Maggie did was good, the sale of council housing stock at knock down prices was sheer lunacy for many many reasons, and for a hard right pm was really a hard left socialist action, and gave a two fingered salute to those who had scrimped and saved to buy their own houses, and yes I think we still are disturbed by the ripples from that particular stone in the pond that is the UK economy! Cynically, it was a payment to buy votes, but in my mind the price of those votes was too high.

Flying Scotsman's picture

Double dip and council houses

Flying Scotsman | | Permalink

I don't think home ownership per se drove the credit fuelled "must have" position. If the rules for credit were not so loose the homes would still have been sold but they may not have had all the latest gadgets and new furniture inthem quite so quickly.

People are like kids in a sweet shop. Unless it is out of reach they will eat until they are sick.Only regulation or bitter experience can cure it. We used to have the former now it is the latter.

Old Greying Accountant's picture

What amazes me most ...

Old Greying Acc... | | Permalink

... is that those that had their fingers burned in the 1980's property bust, then went on and mortgaged themselves to the hilt to help their progeny buy property at unsustainable prices in the recent few years - so I tend to disagree with the bitter experience aversion theory.

My eggs are in the regulation basket, strict credit limits, minimum deposits, and punatitive stamp duty for second houses - I would be happy with 40% or 50% stamp duty for second homes if it stopped the buy to leters pricing young people out the property market.

Flying Scotsman's picture

Deja vu

Flying Scotsman | | Permalink

It is truly bizarre that people would go back for a 2nd round in the ring after being knocked out, but as we all know "this time it is different". Too right it was , but the end result was similar. I do know a number of property people who came back for more and were so much more cautious and survived this time round. Either they baled out as soon as there was profit or they were leveraged sensibly. I know one chap who refused to touch anything made of brick.

Where we are in agreement is over regulation. The key is to balance it correctly. I also firmly believe that the old fashioned banking arrangement whereby the decicion maker knew his customer  led to better decision making.

A far cry from the world of self-cert mortgages

 

Credit and credit ....

JC | | Permalink

Different forms of credit - mortgage .v. cards .v. payday etc.

Mortgage is probably the most benign of these, if only they had not offered 120% of asset value. Somewhere around 75% is probably a sensible level for both parties. Unfortunately the banks got to the point of treating mortgages like commodites and trading them, hence sub-prime

As far as the others go - there used to be a usuary law that was repealed in UK in 19th Centuary - but remained until 1980 in USA (Sharia has a form of this - no interest & wrapping it within capital)

Bring back the concept of usuary and place the onus on the lenders to assess the risk. So if Mastercard / Visa / Wonga etc. were limited to 12-15% (rather than Cards=25%, Wonga=2,500%) interest they would regulate themselves on the basis of risk/reward

As the ad says simples .......

Flying Scotsman's picture

Benign credit

Flying Scotsman | | Permalink

A mortgage is certainly benign in terms of the interest but for a homeowner with equity it can spell disaster, whereas somebody renting who can't afford to pay the credit card or is in negative equity , you simply up sticks and blow a raspberry at the lenders.

This is an area of bank write-offs that may yet to have its day. A lot of credit card banks are carrying duff debt. I have a friend who took out £100k on cards in the dotcom boom and bust to play the market. He still owes it all and eveyr year he gets a letter. somebody dreams that they will get paid back one day.

I have seen it over and over again as a debt counsellor.

Mind you the interest rate is a compensation for risk , so I do not lose sleep at advising people to walk away after being screwed for years on interest by the card issuer

The only difference between the firms you quoted and an illegal loan shark, apart fromthe law, is that the regulated ones don't have big dogs....

Student loan debt - next horror story in USA ...

JC | | Permalink

Is US student debt - about to top $1 trillion

'.. U.S. student loan debt surpassed credit card debt and auto loans for the first time last year and estimates for the total number of outstanding student loans range from $850 billion to $1 trillion. The Federal Reserve Bank of New York projects that at least 37 million Americans, or 15 percent of the population, are actively paying off student debt. About two-thirds of student loans are held by individuals under the age of 30 but the New York Fed has determined that people age 50 and older are carrying as much as $135 billion in student loan balances ..'

http://finance.yahoo.com/blogs/daily-ticker/student-loan-debt-ticking-time-bomb-deal-bills-143018212.html

Sounds like a winner - when will it hit the UK?

Flying Scotsman's picture

Student loan

Flying Scotsman | | Permalink

Actually there are ways to push off repayment. As far as I know one only commences paying back once earning hit a certain level. So you could work part time or ask the employer to keep you below the threshhold and when you are due for promotion you'll jump much higher because your notional starting rate is higher.

Win win for both of you

Alternatively - clear off ...

JC | | Permalink

To another country. Which means the UK looses out on two fronts - loan repayment & brain drain

Although brain drain is probably debateable now a days because some university courses have been debased to such an extent (life of beckham etc) that perhaps it would be a good thing if some of the Graduates went elsewhere because they would be someone elses problem if there was no work available in their chosen subject

Flying Scotsman's picture

Brain drain

Flying Scotsman | | Permalink

There are not many brains left to drain in this country

 

In the crusade to make everybody equal the Labour government trashed exam standards for A levels and degrees. Did people seriously believe that grades were improving because students were getting cleverer ? At one end there are endless reports that schools are failing but grades improve.

I no longer treat a degree seriously for a job candidate unless it is a 1st and in a proper subject. Even then they are handing out 1st class honours like confetti.

We now live in a society where everybody has to be the same as the next person. The British have always been a jealous bunch but now it is open and accpeted to begrudge the fact that we are not all equal. If people accpeted that I reckon mental illnesses would be so much less widespread.

Endless striving to have what others have and creates misery.

True wealth is to be satisfied with one's lot.

 

A little surprised that having picked out the

justsotax | | Permalink

feckless..that you then go on to suggest that where people are in debt that you would advise them to walk away from their responsibilites......surely this only encourage the instant must have to just repeat in 2-3 years time. 

 

Sure the interest rates for credit appear high but this is a commercial decision for the bank to make.....however unlike a loan shark...a bank does have responsibility and works within set rules....and therefore surely has a duty of care to people it gives credit to......

 

Unfortnately we cannot rewind time, so talking of a wasteful labour governments gets us nowhere.....what is important is the future plans....(if there are any!?) - perversely we actually want people spending money - yes some who may well be feckless.....

 

 

Flying Scotsman's picture

Walking away from debt

Flying Scotsman | | Permalink

For the avoidance of doubt let me state that I never advise people to run up debt with the intention of walking from their repsonsibility. I advocate livign within one's means . However ,when a desperate sould begs me for help , I have to prioritise their finances. When it is credit card debt it almost always has to give - feeding the kids and keeping a roof comes first. The fact the lender negotiate deals allowing people to renege means they have factored it into their interest charges. To me this is a fair deal . You take on the debt and they accept the risk. sometimes they price it right and sometimes they price it wrong. The interest rate is the price of the risk.

People like to know how we got here , so discussing policies of the past is a critical part of the post-mortem process.as you correctly state, we need people to spend but it is the how and where that is important.

Running an economy is like laying a carpet with a wee bump in it. You push it down and it pops up in another corner. It's how it is managed that counts because it is near impossible to have a perfect economy in isolation and when global factors come into being it is impossible.

What we need to know is - is this the era of near zero interest rates or will the standoff end in 12 months time ? Got spare cash - pay off your mortgage as fast as you can, save the holidays for next year.   

 

For sure the future is going to be difficult...

justsotax | | Permalink

but it won't just be the feckless who are affected should interest rates move whilst the economy continues to flat line....anybody who has had wages reduced, or is unfortunate enough to be made redundant will struggle.....given the rise in other costs (fuel etc).  The only question then is is that a price worth paying (if you have safe job it may well be....for the rest I am not so sure).....the feckless of course will no doubt happily walk away from their debt costing banks, businesses and of course the taxpayer..........ready to start again soon......

Risk assessment ....

JC | | Permalink

'.. The fact the lender negotiate deals allowing people to renege means they have factored it into their interest charges ..'

Yup thats about it - they mutualise the problem/debt over everyone

But that in turn throws up the issue of one interest rate fits all. In theory the interest rate should reflect the degree of risk and clearly using an extortionate rate to compensate for a proper assessment is the banks/cards way of failing to do their job

In fact banks probably no longer know how to competently assess risk - this is my idea of risk assessment EUR/USD earlier today

eurgbp

Don't forget that inflation also takes it's toll and especially when it is being deliberately managed as in instrument to bail out the country. Basically 4% inflation coupled with 0% interest means that savers are taking a severe hit of 6%-7%+ - so perhaps the answer is actually to borrow as much as possible because it's going to be worth less tomorrowv when you have to pay it back?

Just don't get burnt by not understanding the market!

 

Flying Scotsman's picture

Economy

Flying Scotsman | | Permalink

Problem with your question is that you are asking post de facto . The economic supertanker is in mid-turn - it's too late to change course . In any event the markets are happy with our austerity and that is the most crucial matter on the radar. Look at the countries where the markets are unhappy and it is worse. On an individual level there is a lot of pain and I don't dismiss that , but c'est la vie. Harsh but true

Flying Scotsman's picture

Risk assessment

Flying Scotsman | | Permalink

There is indeed a school of thought that agrees with you . Look at people who purchased their homes in the early 1970s . Once the inflation cleared 15 years later they had piffling mortgages and swollen wage packets. Thus allowing them to borrow again. But nobody actually knows where rates will go and now nobody can borrow. The message about understanding the markets is simply that the market is unpredictable and you can't plan to beat the market. I often believe that betting against the crowd is the way to go. One thing is for sure - when you go with the crowd it is harder to jump off the moving train. 

And if we all ran out to borrow and spend spend spend , demand for money goes up and so do interest rates. Our cycle starts all over again. Fascinating isn't it ?

Glad you can live with the thought ..    2 thanks

justsotax | | Permalink

thats it's a price worth paying.....perhaps you are fooled by the notion that we are all in it together....or perhaps that DC and his front bench have also felt the pain. But as usual it will be the foot soldiers who will pay.....cannon fodder for the middle and upper class who treat them as a statistic worth sacrificing.

Flying Scotsman's picture

A price worth paying

Flying Scotsman | | Permalink

People with more money are proportionally less badly hit . I think the middle classes hurt more badly or as badly as the those below them as they often have bigger commitments. Do you suggest that only the upper classes pay to bale out the country ? It wasn't them who went on the mad spending spree.

I  come from a working background with a prent who was a refugee. We did not go holidays and lived modestly but did not go "without". My father had no credit card until I was in my late teens and even then it was cleared every month.People around has had big cars and houses and went on holidays. We accepted our lot in life but I aspired. When I was more comfortably off I did not go mad I lived well within my means and now that the recession has arrived I am so glad that I did it.

People need to understand and internalise that some have more than others. 

Like I said....it is a price worth paying then?    1 thanks

justsotax | | Permalink

I am not suggesting you are wrong....leading a frugal life is good....but do you think when the council or banks are making people redundant they just pick out those who they feel have overspent....gone on too many holidays....bought that flash new car.....nope most will be ordinary families with the basic needs, a roof over their head....a car to get to work.....and suddenly in a situation where they cannot pay the mortgage (not many people can without a job) and cannot find a job.....

 

These type of policies and their effects are indiscriminant....indeed those who push their luck in regard to credit will probably be those with nothing to lose....happy to walk away from their debt.....those who already know what benefits they can get before finding their next credit victim....maybe that small business down the road who is desperate to get people through the door so he can pay his bills....and in a lapse of judgement gives credit to a customer......

 

 

 

Class ... outmoded view    1 thanks

JC | | Permalink

@justsotax - '.. cannon fodder for the middle and upper class ..'

There is definitely a divide in this country between the have and the have nots, however, one would have to question whether it is along historic class lines

Never forget that earning/income does not equate to class so we need to get away from this simplistic view - for instance Alan Sugar has a large income but by no possible interpretation could he be described as upper class; conversely there are those who could be regarded as upper class who are actually as poor as church mice

Neither are those who have been through the public school system necessarily any class at all (i.e. foreign nationals), and there are many parents from all walks of life who have done without in the hope of having their children better educated than via the state system. This disparity is the fault of the state system and it is no good targeting alternative schooling systems because the state has fallen down on the job; basically the money is being spent just failing in results - http://www.bbc.co.uk/news/uk-wales-12280492 - and cooking the books every year to show that pass results get better each year; even if it is statistically impossible

Cut it whichever way you want - politician .v. rest or us, company CEO circuit .v. pensioners/shareholders - these are the real divides and not some archaic class system which union leaders who are themselves highly privileged chose to air at every opportunity

Once we move away from this flawed mind-set and the British envy of anyone who does well then we will make progress

class may be the wrong word....    1 thanks

justsotax | | Permalink

shall i just say those in a more privileged position then....and yes within those positions i would quite happily include union leaders...who indeed seem to live on the same planet as DC...albeit  at the polar opposite side.  

 

I don't much care for politicians....and certainly not the 600 and odd professional politicians.  I am concerned that the current strategy our country is using to get out of this mess is not working......is their a plan B.....and hadn't we better start blowing the cobwebs off it if we have.  Hell i don't care whether there is a cross party concensus.....we just need to do something, as making a couple of 100,000 people bankrupt and teaching them a lesson about being prudent with their cash is not i fear going to suddenly inject growth into the country.

 

Flying Scotsman's picture

Worth paying ?

Flying Scotsman | | Permalink

We need a root and branch change to education and the understanding that aspiration is acceptable if you work for what you want. Trouble is that people saw working as a way to afford monthly credit card repayments.

As far as policies are concerned I woudl like to hear your way of avoiding the indiscriminate nature of rebalancing an economy

Flying Scotsman's picture

Envy

Flying Scotsman | | Permalink

Trouble is that the those who are green with envy are the last ones to admit it

Flying Scotsman's picture

Bankrupting the feckless

Flying Scotsman | | Permalink

Growth is indeed the best way out of a mess, but it isn't a matter of  "just add water and mix" .  To achieve growth it is not so easy and requires carrots, but I still believe that lessons need to be learnt to avoid repeat msitakes, and penalising the feckless(our old friends) is part of the equation ie the stick

And not cooking the books by shifting mortgages to repayment ...

JC | | Permalink

Interesting that we now have the banks being 'holier than thou' over mortgage lending requirements - i.e. repayment only, 25%-50% down payment etc.

and yet with existing repayment only mortgages where people cannot pay - THEY ARE BEING MOVED TO INTEREST ONLY to cut their payments. Essentially the banks are breaking their own rules/guidelines to cook the books, instead of facing reality

So the strategy is 'extend and pretend' in order to avoid repossessions and even if they do have to repossess, try to keep the house off the market to avoid crystallising the hit

In the same way as pension funds are expected to quantify their surplus/shortfall - banks should be obliged to do the same. They should obtain a loan to value assessment periodically and make any write-downs in their reporting

This would give a far clearer picture of the overall position rather than trying to avoid quantifying the shortfall by a head in the sand approach - very dishonest and fails to give a true picture

How long does one give those in negative equity before they cut their losses - and what happens if house prices drop in the future; it compounds the problems all round, when in fact there are 1st  time buyers waiting to get into the market at the right price

Historic debt in this area could prevent future growth in others

Not trying to defend banks (they are part of the cause)....

justsotax | | Permalink

but you can hardly blame them for resisting the temptation to repossess......if the individual can keep things going then the bank can try and wait it out until the market improves....would your business look to sell its assets at the lowest possible price, or try to maintain things until the price increases......

 

On the education side...i trust we will include the feckless bankers who in their wisdom decided that doing any kind of risk analysis on customers was just costly, and that they would prefer to spend their time coming up with various 'products' that could be sold alongside the mortgages/loans that they handed out.  

Overstating stock in a normal business ...

JC | | Permalink

'.. but you can hardly blame them for resisting the temptation to repossess ..'

If I run a normal business and carry stock.

What is my position if I deliberately & knowingly overvalue stock in order to affect my figures?

Furthermore, what is the position of my auditors if they 'collude' with me over this situation?

At what point does banks failing to disclose or make any attempt to determine bad debts become fraudulent so far as investors are concerned?

Agreed about flogging products to unsuspecting customers - of course one remedy would be to have a default fine of 10x the customer cost if these products were found to be unfair - not just returning the customers payment. On this basis imagine the fallout over PPI mis-selling

Flying Scotsman's picture

Banks

Flying Scotsman | | Permalink

So where are the regulators and the people checking the banks' lending books ?

One wonders how thorough the audits have been....

Trouble with regulators is summed up by a mortgage broker I  know who made a packet out

of self-certs.

"If you do not succeed with something , teach it,  and if you cannot manage as a teacher , become a regulator"

 

 

 

....but when does a bad debt become a bad debt...

justsotax | | Permalink

to my recollection when it is unlikely to be paid.....which is not the case if the individual continues to make payment (even if a little lower than expected).

 

In your analogy, initially you are surely valuing the stock based upon your best guess - that is that the stock may be nearing its best before date....but could still potentially command the value you have given it.....is an auditor going to be able to argue with a reasoned justification for the value?    

 

 

 

 

Old Greying Accountant's picture

A couple of points

Old Greying Acc... | | Permalink
  1. Thanks flying Scotsman for a good thread, and to everyone else for keeping it a robust exchange of views
  2. Going back to the last property bust, I never understood the repossessions, why not transfer the property and debt to the local authority and let the occupant stay on as tenant, with an option to buy back if circumstances improve - surely it has to be better all round?

As we own half the banks that seems like

justsotax | | Permalink

a great idea.....if only our leaders tried to think a little more laterally.....

Flying Scotsman's picture

Repossession

Flying Scotsman | | Permalink

Thanks "Old Greying" for your compliment . Looks like a sound idea in principle but I reckon the transfer of debt to the public would have certain newspapers incandescent with rage, righteous or not.

In terms of a bed debt definition , an auditor must surely be on alert when seeing the proprotion of debt that is in arrears of say 3 months or more. Closer inspection should at least call for a provision if not a write off

Old Greying Accountant's picture

I agree

Old Greying Acc... | | Permalink

[quote=Flying Scotsman]

"but I reckon the transfer of debt to the public would have certain newspapers incandescent with rage, righteous or not."

but until we grow up and do what is needed not what (hopefully!) wins votes we will never get anywhere. It is ludicrous that the state has to pay a far higher amount in benefit above the mortgage repayments needed, which just goes to line the pockets of the private landlords!

I vote for the Ahkh-Moorpork method of governance with Flying Scotsman as the Patrician!

House owners goals ...    1 thanks

JC | | Permalink

@Old Greying Acc... - Good idea but could be fraught with problems

I guess if people were asked why they bought a house in the first place the two prominent answers would be - to own ones home, to make a profit

Which raises the question of whether the taxpayer should be expected to underwrite the downside when the home owner would expect to keep the upside

Also what is the 'transfer price' - current value or original price and if the latter who is left holding the baby (if a loss)? Again buy back price would be pivotal - would it include 'opportunity cost' (interest) lost by maybe charging an uneconomic rent ... and so on ...

None of these is really a reason why it could not be done - just a challening task

Not entirely sure that LA's are the right wrapper, after all as I understood things wern't they the people charged with selling council houses & re-investing the proceeds into more modern housing stock? - how many actually did this to the full extent without finding other uses for the money, hence a current shortage coupled with an initial bad idea, compunds the situation?

Also, 'hush ones mouth' what about means testing those already in council houses & if they are on £100k+ invite them to go into the market place?

Perhaps a good place to start with this whole process would be MP's second homes paid for by the public purse. By all means let them have a second home but if the public make a contribution then all proceeds revert back to the country; and no retention of the home after they have left office

@jc - some good points....    1 thanks

justsotax | | Permalink

although listening to a talk in sometime ago i was shocked to hear a higher rate taxpayer applauding the fact that he was still in a council house....I was stunned (and obviously very wet behind the ears) - I thought council houses were for people in need.  So I agree we should start there....perhaps that would start moving the market a little too....

 

 

Flying Scotsman's picture

Housing    1 thanks

Flying Scotsman | | Permalink

The late Robert Maxwell lived in a council house I believe. Not sure if got housing benefit.

Housing benefit is a real gravy train for the landlords. the BIG question is what would happen to rents if it was withdrawn overnight ? There would be rioting but eventually the market would find its equilibrium.

Definitely agree about MP's accommodation. They should stay in a suites in a single building owned by the state.

As for me taking any office I have regularly turned town approaches by both main local parties to stand for council. I could also stand as an independent and control the council, wich is either hung or swinging by a single vote or so either way over past 25 years. I would win fairly easily as I am well known and have my fingers in a few communal pies. The reason I am not interested is because I have not got the time and chiefly because I have no desire to have the grubby press stick their nose into my private life. The last time I featured in the press it ended up with me going to PCC and demanding and getting a public apology  with wording chosen by me , which in itself was quite a feat. The press are vermin. They thrive on people's misery and they present things in such a way that the public make up their mind on a headline , but it is okay if you put it in inverted commas isn't it?

Old Greying Accountant's picture

Ah but ...

Old Greying Acc... | | Permalink

... if you were THE Patrician you wouldn't need to worry!

Thing is, to do something as mundane as driving you need to pass a test and have a licence.

To vote you don't even need to be able to write your own name!

Flying Scotsman's picture

Voting

Flying Scotsman | | Permalink

You can even vote using somebody else's name in certain constituencies  :-)

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I've been blogging on my website www.formationsdirect.com for some time with my non-PC view of the world of economics,business and other stuff. If you like to read the views of somebody who doesn't "toe the party line" you've come to the right place. Government cock-ups, financial turmoil , business scandals and people's behaviour - I've got something to say about it , whether you like it or not.