International Writers Magazine:
for One Houses - Make Me an Offer
is a bubble? I looked up the meaning of the word the old fashion
way. I used the Oxford dictionary. This is, among other definitions
what it quotes: an air or gas-filled spherical cavity in a
liquid or a solidified liquid such as glass or amber. In other
words as Einstein would probably say: matter contained within
But the world leaders
are not using the word based on any physics theorem when they are referring
to the economic recession about to take over the globe. The bubble these
guys are referring to, particularly in the USA and Europe is of another
connotation. Its the final fall of the housing market, otherwise
referred to as the bursting of the housing bubble. We all
knew it was coming except those that could have stopped it. They were
too busy making millions of fictitious profits off the mainstream of
todays society, i.e. the John Does of this world; you and
It wasnt always like this.
I bought my first property when I was employed as a junior engineer
in the UK during the height of British Socialism. A guy called Harold
Wilson was running the show from Westminster whilst a young upstart
called Arthur Scargill was stirring up the trade unions that were calling
the shots amongst the workers. Daily strikes were the order
of the day. I was married, with two small children and working in downtown
London in the Holborn area. 45 minutes walk to the station, 20 more
into Liverpool St. and another 15 on the tube (metro or underground)
and at 08:45 sharp I was at my desk or the drawing board designing the
latest gadgetry that had to be built and sent out to one of the many
Arab states in the Gulf. No real trouble in those days. Oil was around
US$12 barrel, Khomeini was still brooding on how to get rid of the Shah
of Iran and the Yom Kippur War was just around the corner.
I was earning, after tax a full 110 pounds (US$220 at present prices!)
sterling per month that soon disappeared the day before the next pay
cheque. The breakdown was straightforward, routine and 100% socialist.
Most people employed in the UK during the sixties were earning the same.
It didnt matter whether you were a lawyer, doctor, dock worker
actually, and thanks to a bit of moonlighting, they were better
paid or a simple technical artist as I was in those days.
Dissection of my monthly pocket money was boring and routine. My wife
got 40 per month to feed the four of us, 20 went on travel to and from
work and 30 on the mortgage. The rest would simply vanish into thin
air from the odd pint at the local to petrol for the Mini to get us
to Spain for the summer break. The holiday bill was footed by my wifes
parents who lived in Fascist Spain. The only loans I had indulged in
was a pound monthly payment for 3 years for a new television set after
I had tried my hand at several second hand ones that kept blowing up.
And the mortgage of course! Most Englishmens home is his
castle as the saying goes and all those carrying a British passport
must have one. It was therefore quite natural to walk into a building
society, your latest pay cheque with you, and ask for a loan to buy
your own fortress. It was almost automatic.
Lets see now, would say the societys clerk.
110 a month is, pulling out the slide rule, 1320 per
annum. More calculations, there were no electronic portable calculators
in those days. Only adding machines! How much is the property?
4000 pounds, I answered. This time he had taken out the
rate book. Thirty quid a month for 20 years! I signed the
papers, left the office and trotted round the corner to the estate agent
to sign the other papers on the leased maisonette that was
to become my home for nearly 4 years.
So what the hell am I on about going back to the mid sixties in London?
Mortgages! It was the unwritten law that anyone applying for a loan
to buy a property in the United Kingdom, or anywhere else in the world
was based on the rule of thumb of 30% of earnings. Thats what
my monthly payment had worked out at. In other words, all banking and
other loan institutions would not hand out money beyond the capability
of the debtors living expenses that included his home payments.
Credit cards were non existent except for American Express and Dinners
Club and these were usually given to executives of large corporations
for travel and other company expenses. One could buy on credit such
items as television sets, as I did, cars, washing machines and other
one off life time durables necessary for the everyday livelihood
of married families. The shops usually divided the cost into monthly
instalments. Yet again, the purchasing power of the individual
based on his income was always under the microscope.
The result was that nobody could ever overspend their income and this
in turn controlled the supply and demand system of consumerism. The
price of housing was relatively stable for decades as was proven when
I sold my property almost 7 years later for 10000 pounds. It had more
than doubled, but then so had my salary.
Years later, in the mid 80s I was into buying my first home in
the USA. Once again the 30% margin came into play. By this time my salary
had gone up by more than 10 times and so had the housing market but
always maintaining that equilibrium that was necessary for home buyers
to spend the correct percentage of their earnings when purchasing their
home. Inflation and other reasons for cost-of-living rises did not influence
the sacred balance.
Suddenly the modern world takes a turn in consumer spending. By the
time the 90s arrived the West was showing signs of saturation.
Consumerism began to go berserk! You could no longer buy a car that
would last you 10 years, nor a washing machine that lasted 15. Why?
Too much competition! It all began with the privatisation of public
institutions such as telecommunications, power, railways and other services.
Newer and more modern products called services in
the past came on the scene. Cutting prices, constant renovation
and unfortunately, lowering of quality was the name of the game. Television
stations were not left behind. They, in turn grew like mushrooms forcing
programs to be judged by audience share which in turn were subsidised
by advertising. Result? Competition became so fierce that pricing and
innovation went hand in hand to such a degree that companies were being
formed, disbanded or merged at an alarming pace placing the whole modern
industrial world on a spiral to auto destruction. Sound like revolutionary
talk? Not necessarily. Just take a look at the reality of the world
There is a glut of everything. In order to gain customers companies
must bombard society with new products every day. For society to be
able to purchase these products they must have purchasing power. If
they have not got it, the banks would come to the rescue. They could!
The bastard system dropped interest rates, didnt they? The credit
card society was finally created!
Lets face it, the West its up to its eyeballs in debt and
there doesnt seem to be a way out of it. We buy everything on
credit and similar to other products the credit card industry
is just another industry that competes amongst itself. The trouble is
that in this whole circle of consumerism, society has forgotten that
you cannot squeeze blood out of a stone, as the saying goes.
Somewhere along the line, the bubble had to burst. And it
has! And how! We are in such a mess over credit that there seems no
end to the trouble. No need to go into the details of the housing market
in the USA, Europe or anywhere else in the world for that matter. We
all know that people are forsaking on their mortgage payments.
The main point is that overextension of consumer credit throughout the
western world has just got out of hand and as it has been going on for
years it will take years to resolve; that is, if it ever will!
Not surprised if the next step, as most products on supermarket shelves
show, well see signs outside the estate agents like these:
NEW HOUSING ESTATE
Buy one and get one free!
Offer open till beginning of WWIII
© James Skinner. April 2008.
There is a small fishing town tucked away in a miniscule bay on
the north Atlantic on the southern coast of Galicia, Spain, called Hio.
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