.

[Spectric]

all interst rates have been to low for too long so now when they start to rise people will complain.

People who are too young to have experienced the high interest rates have taken out big mortgages thinking that the low interest rates are normal and without thinking that they might just rise at some point in the future. To make maters worse many have not been paying more off that mortgage to reduce the debt whilst the rates were low and so are now facing some very hard times. On the other hand it might now at last be time for us savers to receive some rewards on our savings.

When I purchased a property many years ago when the prices were realistic I only borrowed roughly 1.25 times my annual income which rose fast enough so as I could clear my debt within seven years.

 

[Geoff_S]

Yes, I had a 16% mortgage back in the day. The thing is that although back then it was hard work, on the plus side it did come down. I remember fixing it at 10% back in 1995, at the time thinking it couldn’t possibly go any lower. Well, it did and when we finally paid the bloody thing off in 2008 we were paying just 5%.

Then it went down to 1.79% not that long after. Should’ve hung on, never mind.

But a point I would make is that what was easier in our time was adjusting to a constantly falling interest rate, yeh, not a problem really. So it doesn’t take that much imagination to understand the pain of it going up.

 

[clogs]

my electric bill has gone from just over 100euro's per month to nearly 80 for the same amount used....
hence going solar PV....stuff em....luckily we have the room and the sun....

 

[Spectric]

Were they really going - in a time of significant economic difficulty - to borrow money to pass to the richest part of our society as a tax cut?

They need to forget that word "the economy" and aim for "a decent living standard for all", where all actions taken deliver for everyone and not just high earners . To this end we should all be paying our fair share of taxation and tax avoidance needs to be re-worded as tax evasion so the huge leak of untaxed wealth out of the UK into tax havens like the Cayman islands is closed.

We are not completely broke unless the government continues to spend like we are a economic super power, they need to cut their cloth to suit the income and stop wasting money on projects like HS2 which will not benefit the majority.

 

[Jacob]

.....

Degrowth means society reducing its consumption - ........

Or in the case of climate change, having it reduced involuntarily.

Without redistribution of wealth, it is untenable. .......

Yes true but that is true of all successful societies. It's normal. This is why we have taxation. Taxation drives economies. You can't play the game of you haven't got the chips. As anybody who has ever played Monopoly will tell you!

 

[Jorny]

Here in Sweden we just suffered through one of the most stupid elections ever. No ideas, no visions no serious reforms. A lot of jabbering and cheap arguments about being tough on crime.

One thing that drove me nuts is the "debate" on the skyrocketing price of electricity in the southern parts of the country. The only thing that has been proposed are subsidies for the consumers. Being fairly far on the left side of politics I havet no problems with goverment interventions to protect people in need and regulating markets if need be. But now it is just about handling out money to everyone who is using a lot of electricity.

No discussion of personal responsibility (and remember I am a leftist!). A lot of the people complaining that they can't afford their energy bills somehow seem to afford an expensive boat, motor cycle, new car or yearly (or even two trips) trip abroad (and don't forget that they absolutely also have to go skiing in the mountains as well!).

No discussion of saving energy. A useful subsidy could be to help people using electricity to warm their house and hot water to get geothermal energy or a air-air heatpump, but no, the upper middle class must be able to continue exactly as before.


Sorry for the rant.

 

[flying haggis]

Out of interest, do you recall what the loan to salary ratio you had was?
I wonder how those who have borrowed 4 or 5 times their joint incomes will fare if the rates go that far up again.

Two times the higher salary plus one times the lower salary was what we were "allowed". And because we had borrowed such a "large" amount £18000 !!! we had to pay an additional 0.5%
No that is not a typo it was £18000 not £180000

 

[Jacob]

...... the upper middle class must be able to continue exactly as before.

Which is what most of the climate debate discussions and proposed solutions are about, so far.

 

[Jorny]

Or in the case of climate change, having it reduced involuntarily.

Yes true but that is true of all successful societies. It's normal. This is why we have taxation. Taxation drives economies. You can't play the game of you haven't got the chips.

"I hear people talking the language of participation and justice and equality and transparency. But then almost no one raises the real issue of tax avoidance. And of the rich just not paying their fair share. It feels like I’m at a firefighters conference and no one is allowed to speak about water"

- Rutger Bergman at Davos

 

[Jacob]

Two times the higher salary plus one times the lower salary was what we were "allowed". And because we had borrowed such a "large" amount £18000 !!! we had to pay an additional 0.5%
No that is not a typo it was £18000 not £180000

Yes that's what I remember. But my first house (1974) was only £3000 (not a typo!). It was a bit of a dump!
House price inflation was already well underway - the previous owner had only paid £500 three years earlier. It didn't start with Thatcher as everybody imagines but she gave it a mighty push.

 

[Phil Pascoe]

wait till the mortgage rate gets to 15%+ as i suffered from in the 80s , all interst rates have been to low for too long so now when they start to rise people will complain. people with mortgages have been laughing for years but savers have been suffering so ok its tough but now the boot is on the other foot for me i will be happy if savings rates go up

Yes. But her house would have been £18,000 instead of £180,000.

 

[Jacob]

"I hear people talking the language of participation and justice and equality and transparency. But then almost no one raises the real issue of tax avoidance. And of the rich just not paying their fair share. It feels like I’m at a firefighters conference and no one is allowed to speak about water"

- Rutger Bergman at Davos

Bregman.
2 excellent and very readable books. Rutger Bregman

 

[Phil Pascoe]

And of the rich just not paying their fair share. It feels like I’m at a firefighters conference and no one is allowed to speak about water"

- Rutger Bergman at Davos

Oh, the irony. Davos is full of rich people intent on not paying their share.

 

[Jacob]

Oh, the irony. Davos is full of rich people intent on not paying their share.

Which is what he was pointing out.

 

[Jorny]

A very good post, Terry - in the US and much of the west, a great deal of economic expansion and consumption has come not out of pure spontaneous growth, but realization that you can spur some expansion with borrowing.

As countries, we are all running around decrying any setbacks in standard of living that are generally society-wide, reduction in convenience and fiscal laziness. For some individuals, especially if they exercised convenience and fiscal laziness as an individual, things may be more dire.

But I can't imagine many folks gather the sameness between this and the neighbor who takes out a bunch of loans above and beyond their means and then throws a fit when they have to cut back, because they may have already been living at 1.5x the standard of that their income would afford. they had personal expansion by borrowing instead.

We absolutely lambaste the individual who falls into this category, but for some reason, think it has no consequences when all of society does it collectively.

It's not difficult. The only way borrowing can not affect standard of living is if it spurs so much growth that the growth itself pays back more than the borrowing cost. It never does - we just try to stay in front of the wave with real economic growth allowing more borrowing, but we are on the surfboard, the wave is getting bigger and closer.

Loans for consumptions (often what is basically toys) is an insanity that western society has turned in to an predatory industry.

Talking about fiscal laziness. Working as an urban planner I was shocked when I understood how streets, roads and infrastructure is financed in the US. Reading the rather conservative Chuck Marohn was a real eye opener that has influenced me a lot even though the whole system works very differently here.

 

[flying haggis]

Yes. But her house would have been £18,000 instead of £180,000.

what do they earn? when we got our mortgage we were on just over £5000 a year so just scraped in the allowed amount just as todays mortgagees do but we didnt have sky, phone contracts, car costs etc or have takeaways 3/4 times a week like so many today do and expect to do . and then when money gets tight what do they do cut down on non essentials, should do but many dont.
( i am not saying your daughter and partner are like that but others are)

 

[D_W]

Loans for consumptions (often what is basically toys) is an insanity that western society has turned in to an predatory industry.

Talking about fiscal laziness. Working as an urban planner I was shocked when I understood how streets, roads and infrastructure is financed in the US. Reading the rather conservative Chuck Marohn was a real eye opener that has influenced me a lot even though the whole system works very differently here.

What did you see - basically loans against assumed future increases in taxes due to road work? We have a lot of proposals here that are that type and also TIF (increment financing) where someone makes their case for getting a bunch of immediate money because the area will still get more total revenue even though most of the new revenue will go to fund the TIF (the giveaway to put in infrastructure instead of making the builder pay for it).

Much of the borrowing against the future for things that don't have value in the future is just marketed and people see advertising and literature often enough and start to confuse repeated advertisements for actual "that's what everyone is doing" standards.

It culminates in hearing stuff from time to time like resentful kids whose parents died and didn't have as much money as they said they did - because the kids are counting on the inheritance to cover debt and they themselves are already headed toward later life.

I worked with a lady early on whose parents spent all of their money, she had a higher paying job, and would talk about waiting for annual bonus to pay off credit cards. And then she mentioned something about her parents living in a gated community, being "bad at math" and they'd spent themselves out of money in their 80s . Not totally broke, but could no longer pay all of their own bills. They went back to their kids and made an appeal for money because they couldn't bear the thought of moving out of the gated community into a "Regular house". At the time, I guess the kids obliged.

Bubbly folks in person - everything was for show with the whole lot. "all fun all the time". I wonder what they were like in private - probably wasn't as much fun.

 

[Jorny]

Rememb

What did you see - basically loans against assumed future increases in taxes due to road work? We have a lot of proposals here that are that type and also TIF (increment financing) where someone makes their case for getting a bunch of immediate money because the area will still get more total revenue even though most of the new revenue will go to fund the TIF (the giveaway to put in infrastructure instead of making the builder pay for it).

Much of the borrowing against the future for things that don't have value in the future is just marketed and people see advertising and literature often enough and start to confuse repeated advertisements for actual "that's what everyone is doing" standards.

It culminates in hearing stuff from time to time like resentful kids whose parents died and didn't have as much money as they said they did - because the kids are counting on the inheritance to cover debt and they themselves are already headed toward later life.

I worked with a lady early on whose parents spent all of their money, she had a higher paying job, and would talk about waiting for annual bonus to pay off credit cards. And then she mentioned something about her parents living in a gated community, being "bad at math" and they'd spent themselves out of money in their 80s . Not totally broke, but could no longer pay all of their own bills. They went back to their kids and made an appeal for money because they couldn't bear the thought of moving out of the gated community into a "Regular house". At the time, I guess the kids obliged.

Bubbly folks in person - everything was for show with the whole lot. "all fun all the time". I wonder what they were like in private - probably wasn't as much fun.

Yes, basically. And also financing repairs of existing streets by selling land for new development.

 

[D_W]

Rememb


Yes, basically. And also financing repairs of existing streets by selling land for new development.

moving neighborhood streets is a problem. By moving, I mean what is a vibrant neighborhood will generally become out of style and will be inhabited by poor and retirees. but nobody wants to figure out how to prevent that from occurring and the relatively abundant land here creates a donut of increasing size. Outside the donut, not so great. In the center, not so great. But over time the donut's lines change, new development is done at the outer side and the group near the center ages.

I don't have a great answer for it.

it also has a lot to do with our enormous energy consumption. I live a whopping 6 miles from downtown and ride the bus, and am not green by any means, but I don't see the draw in doubling the house size and moving 3 -5 times as far away. It's just selling away too much of my future time.

The way schools are allocated for around here also creates some oddness - like a recent TIF proposal where I grew up, where nearly the entire cost of infrastructure was going to be taken up by the public in "increment financing" (issuing a bond and then using property taxes of the new development to pay off the bond). Very little net improvement in revenue would occur for a very long time, but the school would've gotten a little bit in taxes and the new development was 55+, so they expected few students. So they lobbied for it hard. For the community itself, it would've have amount to much and the risk of cost overruns was on everyone else.

I saw people I thought I had some respect for quickly figuring out how to change that. I guess they stood to gain financially somehow in it.

There's too much of that because there's also a huge aversion to increasing local taxes.

 

[Terry - Somerset]

For those old enough to remember the Beatles song "Taxman", the lyrics were wrong - "there's 1 for you 19 for me". The real rate of tax was 83% + 15% investment income surcharge - 98% in total.

The wealthy put a huge amount of effort into tax avoidance, and (I suspect) evasion. The "brain drain" denuded the UK of doctors, scientists, lawyers, etc who sought a better lifestyle and income overseas. Mrs Thatcher reduced the tax rate fairly rapidly to 40% and the tax take went up!

Some see taxation as a means of wealth redistribution - redistribution may pay a part in tax policy but as a goal in itself it clearly does not work.

Others see taxation policy as a means of encouraging investment, risk taking, entrepreneurial endeavour creating jobs and wealth.

There is a case for a balanced approach to taxation - but IMHO there is a better case for encouraging growth than redistribution that acts as a drag on progress.

The environmental impacts of growth do need to be addressed through taxation - redistributing wealth likely ensures further environmental degradation follows as those in receipt spend on damaging products and technologies.

Far better to use the tax system to reduce profligacy - the current high cost of energy may drive behaviours towards outcomes that minimise environmental damage. There is a case for supporting those in real need, but taxing carbon consumption rather than income has considerable merit.

How about a tax allowance of £25k and a carbon tax to balance - eg: petrol at £4 per litre, plastics carry a tax of (say) £10 per 100g etc. Behaviours would rapidly change!