In recent days we have seen a progression from the sublime to the ridiculous, from the surreal to the existential. The whole package seems to me like a form of madness and makes it quite a challenging to try to comment on our industry and the economy in general. To use Victorian parlance, both the industry and the economy seem to be suffering from an attack of the vapours!
I have been banging the drum for months now about the troubles that beset us, the reasons for those troubles and what can be done about them. I have used metaphors such as earth tremors to illustrate the turbulent times we find ourselves in. On this occasion I feel as if I am observing events at a lunatic asylum.I can hardly believe what I am seeing.
We all know about the PIIGS (Portugal, Italy, Ireland, Greece and Spain), those countries which have been particularly unsuccessful in battling the economic downturn. This is not to exclude an additional I (Iceland) that has already bitten the dust. The PIIGS are definitely not flying now! They have had their snouts deep in the trough for a quite a while, indulging in greed, overspending and mismanagement of their economies. One by one they have succumbed to a nasty attack of general unrest, strikes, turmoil and bail outs.
In Europe, we have been through one of the longest periods of growth in recent history. Historians point out that the economic cycle seems often to follow a pattern of downturn and recession, followed by protectionism, inflation and then war, which reinvigorates ailing economies and returns them to economic growth and so on all over again.
Thank goodness that in this downturn, unlike in those of the past, discussion is currently taking place between the G20 countries to avoid repeating this destructive old cycle.
I know that I am probably speaking out of turn but I would sooner have some disruption, belt tightening and hurling of abuse rather than the hurling of shells and dropping of bombs. Even if things are economically harder than they were, we are still living in one of the most privileged societies and periods of history in the world. I look outside as I type this article and see that some things have got tougher. But the lights are still on, the streets are still swept, people are not lying dead in the gutter, there are no three-mile queues at soup kitchens and it seems that only Chichester has no Christmas lights!
That is not to say that I don’t care about the troubles that people are going through. If I didn’t care I wouldn’t take the time and trouble from an already busy week to write these articles, trying to make sense of the environment in which we find ourselves.
With all the problems that the Eurozone is currently experiencing, Eurosceptics must be laughing up their sleeves. Some are saying that the Euro may have to go and that Germany already has shed-loads of Deutschmarks printed. I cannot see disengagement happening and I can see no-one in their right mind in the smaller states voting for it. After all, you would have to be completely mad to be willing to buy a Greek government bond, let alone an Irish one! As if this isn’t bad enough, the Irish banks that I commented about in a previous article look as if they are all going to end up nationalized.
What is more, it seems somewhat rich that Germany, France and the Benelux countries are saying that they have a problem with bail-outs when they were the ones who arranged this currency union in the first place. It seems that they have forgotten about the terms of the agreement in spite of the fact that they, along with the European Central Bank, were responsible for the decision not to write into the currency mechanism a clause for defaulting economies or a fund for rescuing them.
Now for yet more madness! Take our current Housing minister, Grant Shapps. Probably nobody has heard of him, but the most invigorating thing he has said since he has been in the job is that the FSA’s Mortgage Market Review paper is a “step too far.”
He was speaking recently at the National House-Building Council conference, where he said that under current proposals he himself would be unable to get a mortgage. Would this be because the tenure of his employment is unlikely to continue? He could suffer a huge pay drop if he loses his ministry. Does he have a problem in trying to inform a lender which is his principal private residence? And, of course, with self cert going, he is completely stuffed!
On the Mortgage Market Review, something may be done if people like him actually stand up to be counted. As an industry we stood up and thought that what we said might be taken on board. However, in fact the consultation process seemed to bring to mind the apocryphal quote of Joseph Stalin, who is alleged to have said "It's not the people who vote that count. It's the people who count the votes." It would be good if The Council of Mortgage Lenders’ recent call for a political debate on the MMR was heeded and if the public got involved in that debate.
Many of today’s mortgagees will no longer qualify for a mortgage under the new rules and they won’t find that out until they come to move or remortgage. This situation will continue or further exacerbate the decline of the housing market.
To end my theme of general madness, in a recent mortgage journal I was reading about so-called “doomsayers” who enjoy accentuating the bad news and ignore any rays of sunshine. Whilst I enjoy a ray of sunshine as much as the next man, I would like to feel that I am not a doomsayer, but a realist. I have always believed that having knowledge takes away fear and that knowing the truth and being able to react to it is far better than being made fearful by whispers and rumours.
I imagine that all this madness makes as much sense to you as it does to me. However, I’m not overly concerned as I don my overcoat, put on my wellies and go and sit in the snow-covered garden wearing my fur hat, with a candle in each ear, plaiting fog and singing the Hallelujah chorus…