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So………… it all started off with the banks being allowed to give credit ,offer loans and generally throw money with wild abandon at all sorts of people, without paying much attention to their incomes, over a prolonged period of time.
This, of course fuelled a spending spree that made both the end of the Thatcher years and the beginning of the present Labour government look very good.
For some insane reason which makes no sense to anyone outside of the banking industry, having lots of people borrowing money means that the populace are confident - the theory is that if they are borrowing, they must be able to pay back -mustn’t they?
When it became obvious that many were swimming completely out of their depths,the Banks then threw them a lifeline by allowing them to borrow against the equity of their homes.
According to the ads at the time, you could ‘clear all your debts and still have enough to buy ‘this’, with the camera panning to a rather large, brand new saloon car parked in the driveway.
The trouble with that theory, was that once people had cleared the credit cards and put the debt onto the mortgage - ‘into one low monthly payment’- just like Carol Vorderman beseeched them to do - they went shopping!
Like stoned teenagers raiding the fridge when they have the munchies, they embarked on a mad rampage of the high street stores that made Ivana Trump, Paris Hilton and Posh Spice look quite restrained.
If they had been made to rip up the credit cards, it wouldn’t have been as bad, but to do that would mean less revenue for the banks - and, as someone with the brain cell of an amoeba would know, Banks don’t make money from people in credit, they only make money from people in debt .
Now there are companies setting up, looking suspiciously like offshoots of the banks, who are offering to buy the whole house to release what little, if any, equity these people have got left - at current market value of course ! Which as everyone knows is a tad low at the moment.
So……….what’s next? When people have no credit left, cant pay back what they have borrowed and not only don’t own the house any more, but cant pay the rent either, then what?
Where does that leave the economy over the next 5-10 years?
And Gordon Brown is an economist!!allegedly!