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The International Writers Magazine:

Two for One Houses - Make Me an Offer
James Skinner

‘What 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 other matter.’

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. It’s 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 today’s society, i.e. the John Doe’s of this world; you and me!

It wasn’t 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 didn’t 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 wife’s 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 Englishmen’s 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.
‘Let’s see now,’ would say the society’s 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. That’s 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 debtor’s 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 80’s 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 90’s 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 today.

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, didn’t they? The credit card society was finally created!

Let’s face it, the West it’s up to its eyeballs in debt and there doesn’t 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, we’ll see signs outside the estate agents like these:
Buy one and get one free!
Offer open till beginning of WWIII

© James Skinner. April 2008.

The Mule
James Skinner

‘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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