This present crunch was caused by, IMO, gambling,at least in the U.K. anyway.
House/flat etc.prices rose at an incredible rate many times over and above inflation for any other goods or services.
The valuations were based not on what the properties were actually worth but on what potential buyers would be prepared to pay before they in turn sold them on for their own profit.
Much has been made of irresponsible lending by banks to private individuals(and of course construction companies)based not on their ability to pay back their loans but on the liklihood of their being able to quickly sell their properties at a profit.
But the guilt is not theirs alone because the people who took out the mortgages themselves were doing so on exactly the same premis.
Many of them knew that they didn’t have a hope in hell of paying back their loans for even a short period let alone over the full term.
We had a plethora of media stories about people who had lost their homes and I think that we were supposed to feel sorry for them.
Except that they weren’t buying to provide themselves with a home but were trying to make themselves some easy money.
We also had sob stories about how "First time buyers"couldn’t get a foot on the ladder because prices were too high.
What they meant was that others trying to make money had got there before them so that they needed more money themselves or bigger mortgages before they themselves could cash in on the property market.
Then of course when house prices DO drop we get all the complaints about negative equity.
I’m pretty heartless on that one aswell.
If you bought the house as a home it doesn’t matter that in value its worth less then what you paid for it.
Its still the home you thought was worth the price when you bought it.
If you wanted to make some money but failed in your objective then you’re in exactly the same position as a casino/racetrack gambler whos gambled and lost,except that they have nothing to show for their failed bet but you at least have a roof over your head.
I may be wrong on this so anyone feel free to correct me but in France for example buying a residential property is a much more laborius and drawn out process that discourages people from buying and selling properties to make a quick buck and as such keeps property valuations at a stable and more realistic level.
If this is indeed the case I think that theres a good case for adopting similar legislation in Britain.
Do away with all of the amateur real estate speculators and it can only be a good thing for the average person in the street.
Now that this has brought the banks down it means that loans or credit for legitimate purposes, as in helping companies expand and modernise are now thin on the ground if even available, and a lot more modest in size.
This can mean businesses downsizing,limiting new ventures or even going bust.
This results in job losses,reduced tax income for governments and increased welfare payments for the newly unemployed.
The sad thing is that those who weren’t industriously trying to get their snouts in the trough when certain parts of the economy was operating at superheated level are suffering as much as the perpetrators.
Dont get me wrong I’m all for capitalism and making yourself some money but I am totally against greed motivated stupidity.