Thursday, April 30, 2009

Spring has sprung, but what follows?

All around us, Nature is bursting out. Leaves are appearing from buds as Spring makes it mark.
Although many dispute the months of Spring, arguing for February, March and April, over March, April and May and vice versa, I do not think that the seasons are confined to a strict Calendar. They take it as it comes.

In the US, Obama says they are seeing the first “green shoots” of a recovery in the economy.
We are in the midst of what economists are calling the toughest recession to hit any country since the Great Depression(I kid you not!), but, unbelievable as it may seem to us from these depths, the housing market in the States has bottomed out and by all accounts, is actually recovering!
Prices there are not rising, but homes are selling faster, with more competition for the better homes.
The reasons for this are many, but one is that vendors have realised that to sell a house, it has to be marked down to about 60% of its peak value... or less.
Banks there are keener to lend to home buyers.
They see it as a method of spreading the risk.
They can have one big loan with a builder/developer, who cannot service it due to lack of buyers with finance.
Or, they can give mortgages to buyers, who are more likely to be able to service the debt, even if a small proportion of them fail!
Of course, the position regarding defaulting on loans in the States is different to here.
There, you can hand the keys back to the bank and other than a black mark against your credit rating that is the end of the matter.
There, the loan is non-recourse, guaranteed only by the property against which it is held.
Here, if your home is repossessed, the bank will sell it for what they can, but the balance of the debt will live with you as long as you do not pay it off.
It seems contradictory therefore, that now that the manure has hit the fan, the banks are looking for assistance from the Government (i.e. us taxpayers) in an effort to write down their debt, make it non-recourse.
That same courtesy will not be afforded to the unfortunates who lose a job and cannot service their mortgage.
Bad enough we had to guarantee all deposits, now they want us to buy all the bad debt from them!
No mention of paying back all the bonuses that were paid out while amassing all that bad debt.
Historically, Ireland followed America’s lead.
Whatever happened there usually happened here a few years later.
This time, we followed their descent into the mire within weeks.
If the housing market continues to improve Stateside, does anyone really think that things will improve here in the short-term?
Not without freeing up of credit, which our Government and banks between them have not all.
Not without total reform of the banking system. Maybe some of them have to fail?
Not without some at the top of that system being held responsible for their negligence and greed.
Not without some new thinking about this country and economy.
Maybe, not without a change of Government?
Local elections take place on the 5th of June.
This is not a time for apathy.
Usually local elections have little effect on the national arena.
This time might be different.
Things are on a knife-edge.
The smallest thing could have huge implications.
What do you want for this country? Think about it.
Ask questions when you are canvassed.
Then whatever your view, vote!
This time, it might matter.
We need to ensure that the people remain in control of the situation.
Not some cabal of faceless bankers, bureaucrats and politicians.
This is too serious.
With deference to the season, “Hope springs eternal.”

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