What goes up...

is often a lot of hot air. In my mind I soar like an eagle, but my friends say I waddle like a duck.

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Location: No Man's Land, Disputed Ground

Flights of Fancy on the Winds of Whimsy

Wednesday, March 19, 2008

And speaking of banks...

Little Petal has just come back from a trip to Newcastle. Now that she's back at work again she's been able to give her mother back some of the money she borrowed a while ago.

Little Petal's big sister took the money into the bank to pay it in. Her mother banks with Northern Rock. Just in case some of you don't know or don't care about British news, Northern Rock is the bank which folded last year as the first ripples of the sub-prime crisis spread across the big pond and lapped at our shores. Northern Rock was effectively nationalised as the only way to keep it both open and out of Richard Branson's hands. (Someone that successful is obviously an alarming prospect as an incoming banker, just as he was too honest a choice for the lottery management).

So, a customer walks into Northern Rock, and instead of wanting to withdraw all their savings and take them to a steadier bank, says that they want to pay some money in. And what happens? The Northern Rock bank says "I'm sorry, but that account has been frozen because it hasn't been accessed for a while. We'll have to re-activate it. This may take some time."

Let's just clarify what happened: a bank was saying that they couldn't accept money. Not they weren't going to lend it, but they couldn't see their way into receiving money. A bank was saying it was too difficult for them to take someone's money and put it in their safe. A bank said that? Even a piggy bank knows when to just shut up and take the money.

From what planet did they recruit the nationalisation managers? Bare weeks have elapsed since the emergency legislation was enacted to prevent the formation of Virgin Banking, and already the Northern Rock is showing all the hallmarks of the dear old nationalised British industry that caused them to become a byword for waste and inefficiency (I before E except after C).

LP's sister was not impressed. As soon as the account was re-activated she drew out all the money and opened a new account for Mother in the Alliance and Leicester, just over the road. I thought the whole idea of nationalising Northern Rock was to prevent just that sort of thing.

Is there anybody out there watching what's going on in this brave new world of ultra-modern reversionist socialism? And if so, are they just laughing?

I know, two posts in one day, but if you've noticed, I've been silent a whole fortnight. This is just catch-up time.

As safe as houses

This government of ours probably can't believe their luck. Not only have they been given the perfect excuse, but they've also been given the perfect scapegoat. Nobody loves the banks.

They've been (the government) presiding over a slowly cooking pot for these past few years. Houses just kept going up in value. In one sense, that wasn't a bad thing. It seemed to keep everybody happy; people improved their property, sold it, bought into something better, estate agents and property maintenance firms lived off the steady demand for sales and care, and the government lived off the taxes it took from everything involved with the housing market. Everybody was a winner.

Everybody who had a house, that is. Of course, it was a nightmare for those who didn't own one yet and whose incomes didn't allow them to raise the deposit and costs, let alone qualify them for a mortgage. The banks and building societies found ways around this with a range of clever deals that "leveraged" a relatively puny income into something powerful enough to get someone onto the property ladder. Of course, voices were still heard muttering about the paucity of affordable housing in rural areas, and the difficulty of getting new development sites that weren't on flood plains and yet didn't cut into any of the precious green belt.

It was obvious, to anybody who looked and thought about it, that it couldn't continue, but what government in their right minds would want to be the ones to put the brake on the rising prices so that young families could afford to own a home? It was a classic dilemma. If you didn't act to create affordable housing, a large chunk of the voting population would become disenchanted, possibly actually aggrieved. But if you did act, and caused the perceived value of existing houses to be reduced, an equally large chunk of the population would become disenchanted, perhaps even aggrieved. Both groups paid taxes, both groups could be expected to express their displeasure with the ballot-box. And so, the government chose to do nothing that would be perceived as drastic, while at the same time doing anything possible that might appear to be capable of filling the gap at the bottom of the ladder.

And suddenly, house prices are under threat. Not the slow percentage creep that has been reported over the past few months as the Bank of England played ever so gently on the financial keyboard a soothing lullaby called "Let's not borrow more than we ought". This is a big (predicted) "house prices must fall, and bigly so, because buyers can't afford them since the lenders won't provide the funds."

And it came in a rush, to those who hadn't been muttering for some time that this country was turning into Monopoly for real. Suddenly, the banks and building societies just aren't lending the sort of money they used to. No more 125% mortgages. No more cheap fixed-rate deals for a couple of years. They're actually scared of lending money to each other, let alone the public. They're even having to be bailed out and nationalised themselves.

And it's all their fault. There's no way you can blame the government for the banks own folly in lending money to people with a poor history of repaying loans. Nobody forced them to do it, or to then try packaging up some of the dodgy mortgages and selling the debt on to other banks. They alone brought about their downfall, all the while making almost the largest profits any industries in the country were capable of reporting.

And so, house prices are probably going to have to fall, rapidly, and by significant percentages. Not because of any government pressure to keep a certain amount of housing affordable enough for first-time buyers and key workers, but because the banks have sliced their balls into the long grass and are way off the fairway. The green is no longer in sight for them, or for any of us who are used to borrowing it.

And we're all going to blame them for it. Especially the government. That's what you get for letting free-marketeers play games with reality.

I saw a quote on a news site recently. "The only people who are going to be hurt by this crisis are those who've bought houses beyond their means".

That, to me, is everyone with a mortgage and no means of paying it off in the short-term. We are all going to have to suffer because of someone else's greed and stupidity.

Monday, March 03, 2008

To Choose, or not to choose

There was an advert recently discussing the unfairness of "Or" as opposed to "And". One means you have to choose, the other means you get both. I think Honda ran the advert. You have to admire their brass face, I don't think a major automotive manufacturer has ever built a slower F1 car with such an enormous budget. "We can go fast, or we can go slow". I forgot, they're selling the "And" clause over the "Or", aren't they? "We can go slow, and we can go slow".

Is having a choice always the best thing since sliced bread? Did we need Betamax and VHS? Since you couldn't use both at the same time, it was really a choice of one or the other.

But business seems to love the "And". Why? Let's take screws, for instance. Old-fashioned slot-head screws can be a real pain to use, because you have to keep centralising the screwdriver in the screw or it will slip out and gash something, usually a hand. So someone had the bright idea of making a screw with a pair of slots in the head, and a special bit to fit those slots, a cross-head bit, so that it centred in the screw and just stayed put.

And then someone else had the next bright idea. Let's make two competing types of cross-head screws, one called Phillips and the other called Posidrive. And let's make them subtly different, so that instead of having to have three of four different sizes of screwdriver to fit the different screw sizes, you need to have double that amount to cater for both Phillips and Posidrive screws.

"And," (there's that sodding word again), where they got really clever was, "let's make then almost visually indistinguishable from each other." So you can't say to yourself, "I'll have nothing more to do with that Phillips, (or Posidrive)", weed out half of the screwdrivers from your toolbox, and just concentrate on the job of getting the shelves up. "Or" is not an option. You can't get one type of screwdriver that will reliably work on both types of screw.

At least Betamax and VHS had the common sense to be different enough so that you couldn't get confused between them.

In an extreme moment, I admit I have just put in a couple of cross-head screws with a hammer. After finding that the wrong type of screwdriver had chewed up the cross to the point where the screw could be neither tightened nor removed by either type of screwdriver, what choice was there left?

It was fun doing it. I don't have a sign up when I'm working saying "Caution, men working", I have one which reads "This is a designated foul-language area."

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