Brown's reign of error

ChrisD

An excellent analysis of Brown years, but again you do tend to blow your own trumpet to much.

"And in fairness to Brown, I didn’t hear too many Tories say “this is a bubble” or offer the above analysis"

Come off it Fraser, over the years I have heard many Conservatives warn of this credit bubble and the decline of real savings. But sadly as the media bought into the Greenspan and Brown myth no one was prepared to listen.
That is why the Matthew Parris article in yesterday's times was so damning for our political media. Just sometimes it really is the messenger who needs to take some of the blame.

Dave B

"I didn’t hear too many Tories say “this is a bubble” or offer the above analysis. "

I don't that's quite fair.

The Conservatives got a lot of flack for their 'inner tosser' campaign, to get people to re-consider their levels of personal debt back in 2006.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/11/23/usortit123.xml

And Mr Letwin was warning about the perils of excessive personal debt back in 2003

http://www.conservatives.com/tile.do?def=news.show.article.page&obj_id=81077

Ann

"One can (now) see five key mistakes" - oh, for goodness sake, some of us have been saying this for nearly 10 years. What IS it about this incompetent gang of useless amateurs that made journalists swoon in admiration at their feet?

Perry

A fine analysis Fraser.

All the puff and bluster in the world will never disguise that debt – is just that. And again, one feels for the innocents caught up in this nonsense.

One is bound to note that the old advice about being a borrower still holds true. I suppose one should turn away in embarrassment that the prim Mz. Prudence is caught in flagrante.

Cindy

Absolutely spot on, as usual, in your analysis Fraser. Point no.2 is the most important and I hope the Conservatives read this piece you have written and use this line of attack on the government.

Teesbridge

I hate to defend the Bogey Man, but surely the adoption of CPI was related to the fact that it tracked the EU preferred measure, which had always excluded mortgages because relatively few Europeans were owner-occupiers.

Whisper it, but I suspect this was a Blair-inspired antic to prepare the ground for the Euro.

Tiberius

A very good and damning analysis, Fraser, but I agree with other posters that the Tories did warn of this even if only because it was expected of them (Portillo and Letwin as Shadow Chancellors and Ken Clarks as a sage-in-general). The trouble is that from 1997 to 2005, not many people listened to the Tories. Some may come to rue the day they thought it a costless bit of fun.

bradders

The Conservatives certainly did warn about the problems with Browns fiscal policy especially a certain John Redwood and it is certainly true that nobody was listening. The Conservatives are guilty of being to soft and playing with a straight bat when they should have been sneering and cynical with this bad Government. But the biggest raspberry should go to the media who have been in thrall to this bad Government. And I just laugh at some of the stuff that is written (now) by the big press cheeses like Mathew D'ancona and Sue Cameron, they are more fickle than a Middlesbrough supporter. I hope that if I had been part of the press and media bubble I would still have spotted Blair and Brown as a couple of phonies in the same way as I did 15 years ago. And I am just an aircraft fitter who takes a passing interest in the comings and goings of politics.

Fraser Nelson

All, the Tories of course warned about high personal debt. But Brown/Balls would respond: "so what? That's the flip side of the asset boom." This is where Id like a Tory to have said "it's just a bubble, these asset values are not real." But they did not, as they didn't want to be seem as doom mongers. And even now, the same fear is holding them back from the kind of analysis which Vince Cable is now giving (see his excellent FT piece on Fri).

If any frontbench Tories did call the asset bubble by its name, I would be genuinely keen to be corrected on this score. My memory is of them deciding not to take on Brown over the economy because he was considered impregnable. Osborne has broken this trend, but I fear he's in danger of being outshone by Cable as he was over Northern Rock. Thats why I am especially looking forward to his speech at 10am tomorow.

Ian C

I wonder why anyone is surpised. The hallmark of a Labour Gov't was always one that led to a crisis and this, once more, was an accident waiting to happen. This regime managed to defer the day because it came to power in the days that deflation was more feared than inflation and Ken Clarke (and N Lamont) had finaly got sensible afer White Wednesday (sometime known as 'Black'). This was prolonged by the 'China Syndrome' and then 9/11 resulted in interest rates being kept too low while Asians exported their capital to those of us who sucked it in as fast as we could revalue assets to justify it. Regulators could not keep pace with the innovations and politicians, as ever, and political commentators with them, are always behind the curve. It is the nature of the beast so long as they are driven by agendas set by populist media with papers to sell, and not the real needs of a the nation. The structure of our politics and constitution means that this will be far more the case in the UK than ever will be in the US, where trouble may have originated but will be cleaned up far quicker. It's particularly endemic here.

Cynic

"And in fairness to Brown, I didn’t hear too many Tories say “this is a bubble” or offer the above analysis."

In addition, it was journalists in the money pages of the Telegraph, and others, telling people to transfer debt from one credit card to another that had 0% interest for balance transfers. And to remortgage with whichever lender had the cheapest going rate.

These are people who bought eggs until Currie said they had salmonella. Who bought beef until they heard it had BSE. And they took credit because, i.a., journalists said they should. How were they to know the bankers who were selling debt off as SIVs and CDOs had no real idea what they were doing.

If people thought their home was an ATM it's because the government, the banks and the media encouraged it. Now of course it's the consumer that's going to suffer for it.

Applegarth got his pay off. He got out just in time. I bet his money isn't with a UK bank.

Diablo

I remember people in negative equity in 1991, and about to lose their homes, blaming the Conservative government for all their woes - even though they were the ones who had decided to mortage themselves up to the hilt. And they still voted them back in 1992. (It wasn't just because of the Kinnock disaster in Sheffield!)

Could a similar thing happen in 2010? We need to be wary of the perfidiousness of the electorate.

ian islington

As one who, somewhat prosaically, drives a 6-year-old car that I own from a house that I own to a business that I own, all unencumbered by debt, I look forward to a little extra road space once the flash cars have been sold off to counterbalance the negative equity. There are far too many people who consider themselves to be middle-class but in fact don't have tuppence to their names once their debts are set against their diminishing assets. More fool them.

Fergus Pickering

I think, ian islington, that you have no debts because you are old. I too h\ve no debts because I am old. And in the fullness of time we will both shuffle off. And how much will we leave? All of it. All of it. Meanwhile our children are debt-ridden. It's life, you know.

Lola

The whole of Browns 'economics' have been built on spending capital. From the equity withdrawal in houses, the hikes in stamp duty, the raid on pension funds, the increase in prices that drives personal borrowing, to the spending of several billions paid out for 'endowment' compensation. All of it is capital. Gone forever in the great Brown maw of spending and inefficiency. His whole legacy is one giant mis-selling scandal. The man is a deceitful charlatan.

mark

I said it before during the "Great Period of Stability" - and I will say it again - transfering expenditure from Capital to Operating expense is a no-no in business - this is just the same as the

"re-mortgage to pay of the debts with one new lower patyment and even release funding for a holiday"

approach...............

- we all saw the ads at the time - was it only me who saw the complete madness?

But I am not sure we can lay 100% of the blame at the feet of the Dear leader for this period of collective madness...

ryan stephenson

It costs about £40,000 to build a Barratt 4 bed detached house. So with markup one would not expect it to sell for more than £80,000. Since such homes currently sell for £300,000 we can see that what we have is an assett bubble. It is caused by demand exceeding supply together with ample liquidity in the market. To avoid such bubbles forming you must either increase supply of housing or reduce the liquidity coming from banks. This government did neither, thus allowing the bubble to expand and subsequently burst. Assett bubbles are always obvious and Greenspand knew this but lied about it - Americans now understand this which is why he is so vilified there now - he has been found out. He created the US housing bubble on purpose to bail the US out of the 2001 recession before it happened. Gordon Brown did the same. Both will be crucified for it.

Scary Biscuis

To be fair to the Conservatives, they have been warning about tax-and-spend since forever. They have also been warning about the economy at least since 2000 when Brown abandoned their spending plans, thinking he could walk on water. Trouble is, nobody in the media wanted to listen.

mark

Ryan - you make a good point. It is even more scary here in the US. The houses are made in the same way essentially as we build garden sheds in the UK - bit more insulation, but basically the same. So even the "good" loans are against property that has very little intrinsic value.