Talking about wealth: what happens if the government took on the mortgage debt?

MaizieD

There is so much to unpick in AI's screed, but I would point out that it is banks that are responsible for house price inflation because the amount they can lend for a property purchase is not as restricted as Building Society loans were. Their 'loan' is newly created money, Building Socs lend depositor's funds.

A little conversation with my AI friend more or less confirms this.

Banks and Building Societies lend on secure commercial terms typically for residential homes. Nationwide is the second largest provider of loans, all rates are competitive according to the risk involved, banks are likely to take more risk than BSs.

One reason housing takes a very large amount of finance iX3 because of taxation policy all capital gain is tax free, house purchase is also VAT free so increasing the value of the house you own is best and safest investment you can make.

Combine that with housing shortage caused by government policy of allowing gross migration to increase the population faster than houses can be built.

Nationwide have just offered me a 5 yrs investment at 5% their mortgage rate is around 6.5% for a secure deal giving them a 1.5% margin plus costs of course. So potentially I and the many other small investors are the wealthy you are demonizing

Im sure the banks are offering similar investments

Seriously until the government get UK Population growth under control they have no chance of controlling house price inflation or the amount of money being borrowed for housing, or the wealth accumulated by the lenders

Perhaps the government should consider providing another National Bank (Remember the Girobank of the '70s?) Profits to the nation rather than to the wealthy...

There is so much to unpick in AI's screed, but I would point out that it is banks that are responsible for house price inflation because the amount they can lend for a property purchase is not as restricted as Building Society loans were. Their 'loan' is newly created money, Building Socs lend depositor's funds.

A little conversation with my AI friend more or less confirms this.

The median full time wage is £39,000 pa. 20% of that is just under £8,000 pa.

Could you live on that David?

Thats not my point, wherever you set the poverty line if you relate it to median wage it's not going to change.
We could set the poverty line at 25% and increase taxation to pay more benefits because that's the only way we are likely to improve the income of those that aren't able to earn enough.

our supposedly wealthy etc.

Whitewavemark2

So I’m working from the idea that, the worlds resources are finite. The vastly wealthy can’t possibly spend all that they are earning and so they are putting their vast wealth towards buying the world resources, which means there is less and less for the rest of the worlds population and standards of living are dropping year on year.

Ultimately resources are finite, but the human race is clever we will keep finding ways to use resources better, the planet probably cannot support the population we have now so population will fall to a point where it can be sustained.

The one overriding issue globally is population control, birth rate in white western states is falling but in many developing countries it is simply not on the agenda a taboo subject.

Climate change is another issue, unless we stop consuming the resources as we are it's going to continue, the UK is dishonest we are only reducing our emissions by importing more goods so we have no claim to be greener than even China.

David49

Or are you content with nearly 20% of the UK population libing below the poverty line?

Because we have a poverty line set at 20% of median wage it's never ever going to chandelier because as median wage rises so does that line. It's a stupid comparison, there has always got to be those in the lowest group, other countries have a serious disadvantaged abject poverty line set at below 5% in reality it's that group that needs more attention

The median full time wage is £39,000 pa. 20% of that is just under £8,000 pa.

Could you live on that David?

The statement that there will always be poor people really annoys me. Tolerating destitution because 'there will always be poor people' just isn't good enough. While I accept that that it is a truism I do think that even 'the poor' should be able to afford to feed, clothe and house themselves in or supposedly wealthy country.

(of course, they can't afford chandeliers. Where did that come from )

AI overview.

If the UK government absorbed the entire private mortgage debt (worth over £1.3 trillion), it would trigger a severe economic crisis. The national debt would double overnight, destroying international confidence in the pound, causing the currency to crash, and likely forcing the Bank of England to trigger hyperinflation.Economic & Financial CollapseMassive Tax Hikes: Absorbing £1.3 trillion in private liabilities onto the public balance sheet would require draconian increases in taxation and deep cuts to public services to service the interest.Banking Insolvency: Mortgages are the primary assets of commercial banks and building societies. Wiping these out or taking them over without compensating the lenders would collapse the banking sector, causing widespread bankruptcies and wiping out savings and pensions.Housing & Market ImplicationsMortgage Market Freeze: Banks would be highly reluctant to lend for future home purchases due to the precedent of debt being wiped or nationalized, effectively ending the UK’s modern mortgage lending industry.Unfair Wealth Distribution: A bailout disproportionately benefits wealthy homeowners and landlords at the expense of renters and taxpayers who have already paid off their homes.While absorbing the entire market is unfeasible, governments occasionally intervene on a smaller scale during housing crises. To explore how the state can assist with housing costs safely, look into existing safety nets like Shelter UK or the government's Support for Mortgage Interest (SMI) scheme for eligible homeowners.4 sitesThe truth about the UK's debt - Debt JusticeThe UK could also significantly increase tax revenue from richer people and companies, including through increased taxes on wealth...Debt JusticeWhat happens if BofE writes off its Govt Debt | AccountingWEB25 Sept 2020 — This has been mentioned here before and it would have exactly the same inflationary effect (or possibly worse) as if the governmen...AccountingWEBWhat would happen in the UK if the government wiped ...{"passageText":"Funding and Fiscal Responsibility: The government would have to use taxpayers\u0027 money to fund a mortgage

change

So I’m working from the idea that, the worlds resources are finite. The vastly wealthy can’t possibly spend all that they are earning and so they are putting their vast wealth towards buying the world resources, which means there is less and less for the rest of the worlds population and standards of living are dropping year on year.

keepingquiet

MaizieD

That appears to have been the original function of Fannie Mae and Freddie Mack in the USA?

en.wikipedia.org/wiki/Fannie_Mae

And that led to the financial crash we are still suffering from...why don't the government just invest in some new housing that people can rent (maybe eventually buy)- now there's a radical idea!

Why don’t they do both

Or are you content with nearly 20% of the UK population libing below the poverty line?

Because we have a poverty line set at 20% of median wage it's never ever going to chandelier because as median wage rises so does that line. It's a stupid comparison, there has always got to be those in the lowest group, other countries have a serious disadvantaged abject poverty line set at below 5% in reality it's that group that needs more attention

MaizieD

It wasn't Fannie Mae that led to the crash, it was the deregulation of finance and reckless mortgage lending (FM isn't the only provider of mortgages in the US)

Fair enough, but maybe it was the begining of the exposure as to what had previously been hidden.

In the UK it was the collapse of Northern Rock.

Strange how it was the government (ie the state) that had to jump in and rescue the de-regulated banks isn't it?

Have they paid the governemt back yet?

So there isn’t really an actual difference between bank money creation and government money creation David? After all, if you’re using efficiency as a criterion it wasn’t government money creation that precipitated the Global Financial Crisis, it was banks’ reckless money creation… 🤔

MaizieD

^The government would have to borrow/create money to do it increasing the national debt , I don't think that's a realistic prospect.

Banks create money when they make a loan, What is the difference?

The government has to do it transparently everyone can see the national debt is rising, banks are lending to make money they take a margin for profit.

The government could lend for profit but nobody would believe they would do it efficiently, in terms of priorities bringing railways and utilities back into government control is more important. Except for first time buyers home owners get a pretty good deal now.

If they really wanted to help home buyers there are plenty of other ways

eazybee

More state control.

In view of the fact that less state control, which has been the story of the last 45 years, seems to have brought the UK to its knees, I don’t see your problem with this.

Or are you content with nearly 20% of the UK population libing below the poverty line? With the NHS becoming increasingly privatised while people wait weeks for doctors appointments, hours in A & E, treated in hospital corridors, pull their own teeth out because they can’t get NHS dental treatment and can’t afford to pay for private treatment? With actual water supplies running out in parts of the country during a heatwave because privatised water companies preferred to devote their profits to paying their CEOs and shareholders rather than improving the infrastructure? With victims of crime having to wait years for the perpetrators of that crime to come to court because the state has systematically cut funding over 45 years on the premise that state funding was being wasted and could be spent more efficiently? The same applying to all our remaining public sector provision…

Yup, less state control has been a huge success. I completely understand people’s fear of more state control

Im confused. So, if an elderly, wealthy couple wanted to move to a bungalow they could sell their big home to a new young family with three children and the government would pay the elders for the home? Increasing the taxes for everyone?

I am interested in your thoughts, but dont have all my brain power.

More state control.

It wasn't Fannie Mae that led to the crash, it was the deregulation of finance and reckless mortgage lending (FM isn't the only provider of mortgages in the US)

MaizieD

That appears to have been the original function of Fannie Mae and Freddie Mack in the USA?

en.wikipedia.org/wiki/Fannie_Mae

And that led to the financial crash we are still suffering from...why don't the government just invest in some new housing that people can rent (maybe eventually buy)- now there's a radical idea!

^The government would have to borrow/create money to do it increasing the national debt , I don't think that's a realistic prospect.

Banks create money when they make a loan, What is the difference?

That appears to have been the original function of Fannie Mae and Freddie Mack in the USA?

en.wikipedia.org/wiki/Fannie_Mae

So the government would be funding the house purchase and you would pay capital and interest yearly.

The government would have to borrow/create money to do it increasing the national debt , I don't think that's a realistic prospect.

Sorry you're poorly.

How do you think this would prevent the wealthy from hoovering up the wealth?

At the moment the profit made on a mortgage goes to the bank which lent the money for it. The only exceptions being building societies which do lend out savers' funds and profits finance more loans (I think that's how they work) whereas banks just create new money when they make the loan. Bank profits, of course, go to cover costs and to shareholders, who are indeed most likely to be the wealthy.

Sorry, I'm thinking out loud, that would be a way they accumulate more wealth... I see your logic.

I think it would be a very radical move

No the relationship between mortgagee and provider would be different. One the debt is cleared the house will be wholly owned by the mortgagee.

I’m approaching this from trying to prevent the very wealthy hoovering up the wealth. This way it would stay in the taxpayers hands.