ALL BLOG POSTS AND COMMENTS COPYRIGHT (C) 2003-2014 VOX DAY. ALL RIGHTS RESERVED. REPRODUCTION WITHOUT WRITTEN PERMISSION IS EXPRESSLY PROHIBITED.

Saturday, January 11, 2014

Desperately seeking debt

It's bad enough that the younger generation of Americans is being saddled with massive amounts of useless, permanent student loan debt. But this new concept of a multi-generational home mortage being broached in the UK is truly evil:
Forty-year mortgages that may take two generations to pay off could become the norm, ministers believe. Rising house prices will prompt more homebuyers to abandon traditional 25-year loans and opt for ever longer repayment terms, they say. Cabinet ministers who discussed claims of a new property ‘bubble’ this week believe a cultural shift is under way which means people are increasingly comfortable with extended loans.

They believe that in future householders may choose to pass on a house with an outstanding mortgage to their children, who will pay off the rest. ‘In Japan, the 40-year mortgage is the norm,’ said one Government source. ‘Paying it off is a two-generation job for many families. If house prices remain high, longer-term mortgages like those will become more acceptable to people here.’
Imitating Japan, which has been stuck in economic stagnation and the highest proportion of debt-to-GDP, strikes me as an appallingly bad idea. And make no mistake, this is a short-term solution to a problem that is the result of the large-scale immigration into the UK as well as Russians driving up the London property market.

First it took one income to buy a house. Now it takes two incomes. Soon it will take two generations, assuming the system doesn't collapse first. That which can't continue indefinitely won't.

Massive debt and native dispossession is one of the costs of free trade. But at least the indebted masses have the consolation of being able to buy cheap Korean flatscreens and poorly constructed clothes from China.

Labels:

50 Comments:

Anonymous PhillipGeorge(c)2014 January 11, 2014 5:10 AM  

Godonomics is another story Vox, but one thing it definitely included was the Shmita year of rest and the Jubilee year for the forgiveness of debts. 1929 to 2014 is just 85 years. I humbly suggest a Jubilee year in between those two dates would have reset a ticking clock.

Ps.
the Russian ship Akademik Shokalskiy is apparently due at The Bluff, New Zealand, January 14, 2014.
The Aurora Australis is due in Hobart, Jan 22, 2014.

The rescued Global Warmists would have gotten home sooner had they stayed with their ice bound ship. A fiction writer wouldn't have made this up.

ie. Even the decision to abandon ship was a poor logistical choice/ the evidence of altogether dud predictive capabilities w.r.t. to wind, weather, climate.

Blogger Krul January 11, 2014 5:23 AM  

Re: Free Trade,

You've pointed out before that FT is bad because it requires free worldwide movement of labor, not just goods, and the negative effects of excessive immigration are clear.

So what if somebody had a "Pseudo-Free Trade" position, that advocated free movement of goods, but also limitations on movement of labor (immigration restrictions to be determined by native populations).

I'm basically asking whether protectionism, tariffs and import restrictions and so forth, is a good economic strategy for a nation or not.

Anonymous Roundtine January 11, 2014 5:44 AM  

I think there should be a multigenerational
process to immigration.

A family can acquire wealth over generations and move itself up in social standing through generational wealth. But to price people out means you are just Singapore on steroids. Which is fine, but you should explain to the natives that 90 percent of them (their descendants) are going to be priced off the island.

Anonymous VD January 11, 2014 6:05 AM  

I'm basically asking whether protectionism, tariffs and import restrictions and so forth, is a good economic strategy for a nation or not.

Yes, it can be, depending upon the nation. The USA would greatly benefit from a rigidly protectionist regime. Japan and Nigeria would not.

Anonymous Stilicho January 11, 2014 6:36 AM  

A multi-generational mortgage sounds suspiciously like a permanent, inescapable, triple net lease. Can we expect to see the return of debtors' prisons and bills of attainder in the near future? Indentured servitude was generally limited to 7 years. Debt peonage is for life.

Anonymous Wetteranschauung January 11, 2014 6:40 AM  

I remember seeing 99 year loans in the UK back in the mid2000s and wondering the exact thing you posit above... except that it's more about dear "mum and dad" partying and clubbing during the first 25 years of the loan and then 74 years of "responsiblity"... or not.

A little Dalrymple gives the distinct impression of "not" and banks know this all too well.

Anonymous DJF January 11, 2014 6:43 AM  

I expect that the 30 year loan in the USA to go away. It was a product of the post WW2 economy where there was enough stability in income to justify it. Workers had the expectation of being able to keep a good paying job for 30 plus years and if they moved or changed jobs could expect to get one with equal or greater income. These days you are now just as likely to be downsized, outsourced, and giving back pay raises to just keep a job

There has been a systematic attack on such income stability for years in the name of free trade and open borders. If there is not enough people with steady enough incomes to support a 30 year loan then it will go away. Right now the FED cranking out money papers over this fact but without enough income then the high house prices that the 30 year mortgage supported also will disappear. If you have to change your employer 5 times, your career 4 times and your home 6 times then how can the 30 mortgage survive? The only reason why the 30 year loan still is widely available is that the government has taken it over, but with massive deficits how long can that keep happening?

The only people who have the steady income of prior years are government employees and which explains why the Washington DC housing market is one of the richest in the country. And how long can their high income be supported when the average worker pay is being cut?

Ever since the international financers have take over US economic policy they have traded access to the US in return for their access to foreign countries financial markets. The US market was the greatest in the world but decades of “free trade” and open borders has undermined the buying power and stability of that market

Anonymous Johnycomelately January 11, 2014 6:44 AM  

So it's the Russians buying up property in London while in Australia it's the Chinese.

Oddly, Australia doesn't even keep a registry of foreign ownership of housing so we have no idea how prevalent it is.

Though going to an auction that was held in Mandarin might give a clue.

Anonymous HongKongCharlie January 11, 2014 6:49 AM  

We are already seeing the return of debtors prison in the US.
HERE

HKC

Anonymous FrankNorman January 11, 2014 7:10 AM  

Vox, I don't think that liability for debts is something that normally passes to someone's heirs, at least under the type of legal system I'm familiar with.

If you die owing people more money than you have at the time of your death, your creditors get to divide your estate between them, but then that's that. They don't get to go looking for other people to pay the balance.

Anonymous p-dawg January 11, 2014 7:11 AM  

Translation: The bankers weren't satisfied with you buying them two houses while you buy one house so now they want three.

Anonymous VD January 11, 2014 7:48 AM  

I don't think that liability for debts is something that normally passes to someone's heirs, at least under the type of legal system I'm familiar with.

They're creating a new type of multi-party debt. That's the whole point, to pass the debt on rather than permit death to liquidate it. They're applying what they've learned from Disney and copyright law.

Anonymous Salt January 11, 2014 7:54 AM  

How will property indebted childtren handle estate / inheritance taxes? Currently, at least here in the US, one need only look at family farms to see. It's no win all the way down.

Anonymous trk January 11, 2014 7:55 AM  

the Rumpelstilskin loan package. 1200 EZ monthly payments so that your family can enjoy the home for generations.

Anonymous hygate January 11, 2014 7:58 AM  

So, any estimates on how long it will be before outright political opposition will be made illegal in the UK?

I'm talking outright outlawing the UKIP as a "criminal enterprise" not the subtler use of "hate speech" laws.

Anonymous Stilicho January 11, 2014 7:59 AM  

They're creating a new type of multi-party debt. That's the whole point, to pass the debt on rather than permit death to liquidate it. They're applying what they've learned from Disney and copyright law.

I did not see that in the linked article. Although, I would agree that the next step is likely to be a true multi-generational mortgage where the children are co-debtors or guarantors of the debt. Followed shortly by legislation that makes mortgage debt automatically inheritable and non-dischargeable in probate (current probate law in the U.S. provides for liquidation of insolvent estates in a manner similar to Chapter 7 Bankruptcy). Obituaries will be accompanied by notices form the bank, stating "We're sorry for your loss. Pay up."

Anonymous Stilicho January 11, 2014 8:05 AM  

How will property indebted childtren handle estate / inheritance taxes?

Sell it and pay taxes on the gains, if any. To be fair, most in this situation will not have sufficient assets to be subject to estate taxes under current federal limits ($% million exemption). Farmers are collectively some of the worst planners for future tax/financial contingencies you'll ever meet, so many of the horror stories you hear about family farms are all too true, but often preventable.

Anonymous Stilicho January 11, 2014 8:06 AM  

$5 million exemption

Anonymous DJF January 11, 2014 8:08 AM  

“”””hygate writes = So, any estimates on how long it will be before outright political opposition will be made illegal in the UK?”’’

They are not going to get rid of political opposition, there still will be a parliament and people will still get elected to it and others will be able to give speeches, its just that all power will be transferred to the EU or other international organizations

The EU already controls much of trade and the economy and most laws have something to do with these areas. Sure the parliaments write legislation and pass it but if it has to do with any of the already existing EU “competencies” then what is in the legislation is predetermined by the EU. The parliament is just going through the motions.

I read somewhere that at least 50% of the legislation going through the British parliament now is based on either EU or other international rules such as the WTO or UN and that percent is going to increase.

Anonymous PhillipGeorge(c)2014 January 11, 2014 8:24 AM  

http://www.bbc.co.uk/news/world-middle-east-25696601

Ariel Sharon died tonight. Rest in Peace.

21 days is now the long term economic outlook

Anonymous Cryan Ryan January 11, 2014 8:30 AM  

Gee. I feel out of place.

I helped a friend build a house, then his brother. Decided I could build my own.

Took me a few years to finish it. Never had a mortgage. Never had a car payment.

Darn I feel bad about how I've screwed over the X'ers and Millennials!!!

I asked my grandson if he planned to build a house, like his dad did. He said "huh?" and went back to tapping on his gadget.

Anonymous DonReynolds January 11, 2014 8:42 AM  

DJF......"The EU already controls much of trade and the economy and most laws have something to do with these areas. Sure the parliaments write legislation and pass it but if it has to do with any of the already existing EU “competencies” then what is in the legislation is predetermined by the EU. The parliament is just going through the motions."

We have the same thing here. Not just in Liberal states. I saw the same thing in Texas and Arkansas the past ten years. If you do not know what "Agenda 21" might be, you seriously need to do an internet search and familiarize yourself.
It is not a conspiracy theory. I went to a meeting of the regional transportation planning agency in Austin and was provided with the resolutions to put before my city council to turn over all land use, zoning and subdivision of land authority to the regional staff. I tossed it back to them and told them I was not even going to bother to ask. Here in Arkansas, one of the planning and development districts is one of the designated Agenda 21 agencies. No press coverage. No public debate. Nadda.

Blogger Nate January 11, 2014 8:45 AM  

Shut up boomer. You've none of the debt obsession of your pathetic generation... but you have all of the self centered navel gazing.

It's not about you.

Blogger J Curtis January 11, 2014 8:46 AM  

Football OT:

It will (almost definitely) be announced later today (at about 4 o'clock EST) that a former QB from my Alma Mater will become the sixth head coach over the last 95 years at Penn State University :)

Link

Anonymous DJF January 11, 2014 8:52 AM  

“”””DonReynolds writes = We have the same thing here”””

I agree, they don’t need thousand plus page trade agreements along with tens of thousands of pages of regulatory rules to engage in actual trade, they need it to control the economy and with control of the economy you control almost everything. The Congress then just follows the already agreed to rules in writing the laws they pass

Both the US and Britain are losing their sovereignty and independence, its just that Britain is going through an intermediate step of the EU.

OpenID simplytimothy January 11, 2014 8:55 AM  

We see the tactic that DonReynolds referred to quite a lot now. The tactic is the appearance of self-rule coupled with behind-the-scenes groundwork that presents the citizenry with a fait-accompli. The are doing it with Agenda-21, gun confiscation, immigration and privacy.

Anonymous DonReynolds January 11, 2014 8:57 AM  

Krul......"I'm basically asking whether protectionism, tariffs and import restrictions and so forth, is a good economic strategy for a nation or not."

Free trade does not require free movement of labor nor has it be a part of free trade agreements. Even most favored nation status does not ease immigration restrictions. Trade in goods and services without free movement of labor (or open borders) has been a fairly accurate description of American free trade for decades.
.
Can a country engage in merchantilism, restricting or limiting trade or taxing trade with tarrifs? Yes, of course. That was the (Alexander) Hamilton plan and the policy of the US government during most of its history. Up until 1913, taxes on imports were the bulk of the US Federal revenues, much of the rest being the sale of public land. Don't tell some of the Libertarians here, but it works fine......especially when trading with fools who pretend there is Free Trade. That is called the "beggar thy neighbor" policy of trade. Yes, it is merchantilistic and results in a positive balance of trade.

Anonymous DJF January 11, 2014 9:14 AM  

“”””DonReynolds writes = especially when trading with fools who pretend there is Free Trade.””’

Like the British prior to WW1 where even with access to the resources of the worlds largest empire was falling behind the US and Germany in economic power and even Russia was catching up fast.

Or the US of today where we have followed the international financers advice and given away access to the worlds greatest market in return for the financiers getting access to foreign countries financial system.

The US also followed their advice and became obsessed about international trade even though domestic trade has according to their own theories has the same economic value. But the international banks and corporations make money off increased international trade since they get a piece of the action on every dollar that goes through their sticky little fingers in international trade, something that does not happen when it involves domestic trade since regional and local financiers or the companies and individuals do the deals

The international financiers and their lackeys in academia and politics go on and on about the importance’s of increasing international trade, yet have you ever heard them advocating polices to increase domestic trade? They push international trade since that is where they make the most money. If they could arrange it they would have Idaho buy all its potatoes from Ireland and Ireland buy all its potatoes from Idaho just so they could make money off of each trade.

And the financiers nor the government like neighbors trading their home grown potatoes for tomatoes since none of them make money on that even though its certainly part of real free trade.

Anonymous VD January 11, 2014 9:35 AM  

Free trade does not require free movement of labor nor has it be a part of free trade agreements.

Yes, it does, Don. You're either lying or you're simply wrong. I presume the latter. The free movement of labor is absolutely an aspect of free trade, as both the USA and the EU practice within their borders, and if you do not support it, you do not support free trade.

You cannot honestly claim to support free trade and deny the free trade in services. It is impossible. Historically, this was seldom considered in trade agreements due to the difficulties of travel and communications.

Anonymous Hunsdon January 11, 2014 9:58 AM  

Subject to Eternal Re-Financing, or serf for short.

Anonymous Luke January 11, 2014 10:21 AM  

Back on topic, I think here was the possible source of inspiration for this multi-generational mortgage idea:

http://en.wikipedia.org/wiki/Consols

These are perpetual bonds the Brits used to (back when their currency was gold-backed) be into in a big way. The saying was "never sell consols". Once they debauched the currency, this resulted in (I read somewhere) consols losing an effective 97% of their value. The effective 42% haircut U.S. purchasers of Liberty Bonds got punished with during WWII was gentle (i.e., at least included lubricant) by comparison.

Everything else is opposite now -- celebrate rump romeos, while actual Christians are vilified; let in bone-in-nose cannibals as immigrants, while keeping out those from the soil of our ancestors, ad infinitum.. Switching multigenerational investment to debt fits right in with that.

Anonymous the woodsman January 11, 2014 10:35 AM  

We seem to be living in a bankster's wet dream. Permanent indebtedness due to loose money policy coupled with massive non-White immigration to stagnate wages. It is 100% clear that the bankster's need to be eliminated.

Blogger swiftfoxmark2 January 11, 2014 10:35 AM  

I just love how all of these useless economic experts and financial experts seem to think that this is a good idea. Because housing prices are always static.

Of course, they are if you factor them out of the CPI calculations.

Anonymous Will Best January 11, 2014 11:13 AM  

This makes sense. Depending on your state you are already liable for your parents medical expenses, why not their mortgage. At least with the mortgage you get to keep the house.

A sane person would point out that if debt is inherited and cannot be discharged then there is zero reason interest rates should exceed the CPI.

Blogger Tim January 11, 2014 11:41 AM  

"I asked my grandson if he planned to build a house, like his dad did. He said "huh?" and went back to tapping on his gadget."

I always find it amusing how often one generation criticizes the next as if they themselves were not, at least, partially responsible for how they turn out.

Its particularly amusing when someone criticizes their owns kids/ grand kids. If they don't turn out well, shouldn't their parent's get some of the blame?

Anonymous John Regan January 11, 2014 12:18 PM  

There's an argument to be made that peonage is the natural condition of most of humanity.

It is harder to live free than it is to submit to the typical forms of servitude. Slavery is always demoralizing and saps the will and spirit; but it is rarely outwardly cruel or harsh, although is always tends that way and will get there eventually, for a brief period at the end of things.

Then again, it's natural to prefer ease and comfort to difficulty.

The trick is drawing the line.

Anonymous Azimus January 11, 2014 12:23 PM  

VD: First it took one income to buy a house. Now it takes two incomes. Soon it will take two generations, assuming the system doesn't collapse first. That which can't continue indefinitely won't.

When kids my age were getting first loans for cars and what-not, they needed their parents to cosign the loan as a guarantee (guarantor?) of payment, because they did not trust kids to pay back a $4,000 loan for a 1989 For Taurus (used). Now they're trusting that mere children, or worse yet, children yet unborn, will have sufficient scruples to pay back a loan their parents took out? Is this not de facto having the children cosign for their parents' loan, the precise opposite of sanity?

Are these the same people who snicker at prior generations who bought stocks on margin 10% down? Who's insane now?

Anonymous Ferdtino January 11, 2014 1:23 PM  

Perhaps if i was one of these graduates with tremendous student loans and no chance of productive job, i might do as our little friends that fly across our border everyday. Change my identity! Reinvent myself! Why be Robert Dynsdale? Become Roberto Augustino! America will welcome you with everything you need for a new life and identity. And, the best thing is no debt of any kind and the Feds will give you stuff!

Anonymous Gx1080 January 11, 2014 1:44 PM  

Christ. Damning your own children to debt serfhood...only Boomers would come up with such an evil scheme. Is pretty much a sacrifice to Mammon.

Blogger RobertT January 11, 2014 1:47 PM  

This will not end well. It's not unlike the U.S. government's solution to economic malaise or the average CPA's approach to making it seem like he's looking out for your best interests. This proposal is to pile up more debt out in front of you, the U.S. government's solution is identical, the average CPA's is to pile up more tax liability out in front of you with timing differences, like IRA contributions. None of these will end well. They are just an easy solution to sloppy execution. These are the kind of things that can drag you under while your friends and neighbors are still floating the boat.

Anonymous WaterBoy January 11, 2014 2:01 PM  

Vox: "Soon it will take two generations, assuming the system doesn't collapse first."

But it apparently won't be many of the Millenials passing on that debt to their children -- at least not yet, since not many of them are even considering buying their own homes yet.

And it has little to do with styaing in the basement playing X-Box:

"Millennials are often mis-characterized as entitled, immature, and unwilling to grow up, and unfortunately, the relatively low percentage of home ownership among this generation does nothing to improve that reputation. But there are a number of factors contributing to the home ownership challenge among this demographic—none of which has to do with the supposed immaturity of an entire generation."

Educational debt, delaying families, and higher generational unemployment are all given as contributing factors.

Blogger Paul, Dammit! January 11, 2014 2:04 PM  

When I was working in Scotland, the next door neighbors were living in the same house that their ancestors built 700 years before. Every 100 years or so someone in the fam had to start saving for years to put on a new slate roof. Given that sort of longevity (they noted that the walls of the pig byre, which had become the driveway, was built before the birth of Chris), this would probably go down easier in rural areas in the UK, where the land doesn't change hands and isn't really owned, but leased in multi-generational agreements with the local lord.

Anonymous WaterBoy January 11, 2014 2:09 PM  

Gx1080: "only Boomers would come up with such an evil scheme. "

I don't think Boomers are the ones looking to do this, since they're busy implementing reverse mortgages on their existing homes to spend all the money and leave nothing behind. if this becomes prevalent, I think it's the subsequent generations who would most likely participate.

Anonymous kh123 January 11, 2014 3:44 PM  

"Is pretty much a sacrifice to Mammon."

But hey, they can at least go to the grave assured that they were never weally, weally wacist. And that they stuck it to The Man by using his system so as to collapse it in on itself.

Plus, they go out on an Eastern note by burning all of their money. So that's +3 for Team Keaton right there.

OpenID mattse001 January 11, 2014 4:13 PM  

Europe has always been more elitist, statist, classist and socialist than America so it doesn't surprise me they would try this. And yes, it is evil. It's obviously a form of indentured servitude meant to squeeze money out of the people.

OTOH, property taxes in America amount to almost the same thing. In a real sense, no one here actually ever "owns" property, since missing payment of taxes on property will result in its confiscation. It is perpetual rent, and immoral.

Anonymous FrankNorman January 11, 2014 4:34 PM  

They're creating a new type of multi-party debt. That's the whole point, to pass the debt on rather than permit death to liquidate it. They're applying what they've learned from Disney and copyright law.

But pass the debt on to who? Are only people with children going to be allowed to take out housing-loans, or something?

Blogger kurt9 January 11, 2014 4:49 PM  

And make no mistake, this is a short-term solution to a problem that is the result of the large-scale immigration into the UK as well as Russians driving up the London property market.

Not to mention that it will drive the fertility rate down even further, aside from the wealthy who can actually afford homes and the underclass who simply don't give a rat's ass. This is also like Japan, which has one of the world's lowest birthrates, in part because of expensive housing in places like Kanto and Kansai.

Anonymous WaterBoy January 11, 2014 4:56 PM  

FrankNorman: "But pass the debt on to who?"

Their next of kin, who will be responsible for settling the estate. If they wish to keep the family homestead, they will have to assume the mortgage for it (or refinance). If not, they can either sell it to recoup the equity (if any, after paying off the mortgage), or let the mortgage company repossess the property (and possibly come after the estate for the rest of the debt, if underwater).

"Are only people with children going to be allowed to take out housing-loans, or something?"

Doubtful. The "two-generations" is a de facto thing, since some of the first generation will likely either enter retirement or die before paying it off.

Really, the 40-year mortgage is extremely shortsighted, though. There's so much front-loading of interest that not much of the original principal will be paid off before the second generation gets it. On terms that long, one might as well just rent for life.

Blogger The Anti-Gnostic January 11, 2014 5:59 PM  

FrankNorman: "But pass the debt on to who?"

Their next of kin, who will be responsible for settling the estate. If they wish to keep the family homestead, they will have to assume the mortgage for it (or refinance). If not, they can either sell it to recoup the equity (if any, after paying off the mortgage), or let the mortgage company repossess the property (and possibly come after the estate for the rest of the debt, if underwater).


This is how it would work; they wouldn't be coming after the grandkids.

It is a sure sign of a dysfunctional, inefficient economy. Prices are rising out of most people's reach, margins are lower and lower, and everything is squeezed and massaged to keep up the appearance of decent living standards. A 40-yo mortgage and, IMO, a 30-yo mortgage is just paying rent to a bank. The state of building materials and workmanship these days, you'll be lucky to get 50 years of useful life out of a structure. How the eff is THAT supposed to work financially?

We'll be serfs eating beans and the folks at TED Talks will be telling everybody how grand those beans taste with imported cumin.

Anonymous aaaaturkey January 11, 2014 7:04 PM  

Hmm I remember Michael Hudson writing in his essays that soon 3 income mortgages will come into practice if things continue with FIRE sector dominance.

Incidentally has anyone read Hudson's book 'America's Protectionist Takeoff 1815-1914'?
To my mind the Steve Keen/Michael Hudson group seems to have the most accurate analysis of the current problems.

Post a Comment

NO ANONYMOUS COMMENTS. Anonymous comments will be deleted.

Links to this post:

Create a Link

<< Home

Newer Posts Older Posts