Thursday, 5 March 2009


As I see it......... by L. Berney



  • Average debt per household (including mortgages) -- £59,702
  • Average debt owing by each adult person (including mortgages) -- £30,500
  • Total debts, 2008 (personal and mortgages) -- £1,457 Billions
(a Billion is one thousand million -- 1,000,000,000)

Of which:
  • Total personal debts --  £233 Billions
  • Total mortgages -- £1,224 Billions
  • Total debts 5 years ago -- £1,100 Billions
  • Total debts 10 years ago -- £550 Billions
  • Total debts 15 years ago -- £400 Billions
  • Number of properties with mortgages -- 11.7 Millions
  • Average mortgage amount per property -- £104,000
In 2008 the Citizens Advice Bureaus dealt with -- 4,760 debt problems a day

  • Number of credit cards in circulation -- 71 Millions
  • Value of transactions in 2008 -- £124 Billions
  • Persons or firms declared bankrupt in 2008 – 300 a day -- over 100,000 in the year
  • Estimated for 2009 -- 400 a day – another 140,000 in the year
  • Property being bank re-possessed in 2008 -- 125 a day
  • Estimated for 2009 -- 200 a day
  • Average decrease in house prices in 2008 -- £102 a day
  • Average house price in February 2008 -- £147,000
  • A year ago --  £219,000 -- down 33%
  • Estimate of new cars to be registered in 2009 -- 1,720,000
  • Actual for 2007 -- 2,400,000 -- down 28% in 2 years

The total population of the UK is 61 Millions

Of the 61 Millions total:
  • In work -- 29.4 Millions
  • Unemployed seeking work -- 2.0 Millions
  • Of working age but not seeking work -- 7.9 Millions
  • Retired, and under 16s -- 21.7 Millions
  • Unemployment is now at -- 6.3% or 1 in 17 of the workforce
  • Unemployed total is currently increasing by -- 1,500 a day
  • Unemployed estimate total end-2009 -- 3,000,000 – that is 1 in 10 of the workforce
  • A year ago, £1 was worth €1.40 – today €1.10 – a fall of 21%
  • A year ago, £1 was worth $2.05 – today $1.42 – a fall of 31%
  • A year ago the FT100 Share Index stood at 5980 – today 3850 – a fall of 36%
  • Income for savers. A year ago, the Bank of England interest rate was 5% -- now 1%
  • In 2001, money deposited in banks approximately equaled money loaned out by banks
  • In 2008, money loaned out was £700 Billions more than the money deposited

  • In 2008, UK imports cost £46,097 Millions more than receipts from exports
  • 5 years ago, UK imports cost £25,995 Millions more than receipts from exports
  • 10 years ago, UK imports cost £6 801 Millions more than receipts from exports
  • 11 years ago, UK imports cost less than receipts from exports

As at February 2009, there is no evidence of the recession ending. On the contrary, the recession is deepening. Housing prices are still falling, bank re-possessions are increasing, unemployment is increasing, car sales are falling, bankruptcies are increasing, the value of the pound is going down, and the import/export trade gap is widening. In general, most people, rich and poor, are spending as little as possible and buying only necessities.

It has to be realized that the economy and the level of personal expenditure prevalent in 2007 was based on, indeed relied on, a very high level of business and personal debt. Events of the last 12 months have shown that debt level to be unsustainable – in 2008 the debt bubble burst. 

As the living standards of 2007 were achieved only through an unsustainable debt level, it is clear that the future economy and standard of living of the UK will inevitably have to be reduced to a lower and sustainable level.

For the debt burden to be kept within sustainable limits, the country must return to the prudent practices and regulations of the past. In my view, the following regulatory principles will have to be implemented.
  • Housing.    Mortgages will have to be limited to not more than 80% of a conservative valuation of the property, and the lender will have to ensure that the payment terms are within the purchasers means. This will probably result in an increase in rented property and a reduction in house-ownership.
  • Cars and large household items. “No deposit” offers will have to be illegal and the seller will be responsible to ensure that the payment conditions are within the purchaser’s means. Personal loans by banks will have to be severely restricted.
  • Consumer spending, smaller items. The concept of Credit Cards will have to be discontinued –Debit Cards only. Retailers will still be able to extend credit to their customers but only at their own risk.
  • Business loans. Regulations will have to be in force to restrict bank loans to businesses for essentials only; to eliminate purely speculative bank lending. Businesses seeking speculation funds will have to attract private, not bank funds. Alternatively, they will have to raise funds by sharing their equity.
To the question – “When will the recession end?” – the answer is (as I see it) that the recession will continue until the excess debt has been worked out of the economy and the amount of the nations debt has been reduced to a sustainable level. That, in my opinion, will not be in 2009 or in 2010. It might be in 2011, more likely to be in 2012.

To the question -- “When will things return to what they were in 2007?” – the answer is (as I see it) -- “They won’t – at least, not in the foreseeable future”.

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