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How does the "credit binge" end?

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ModernMicawber
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How does the "credit binge" end?

#34201

Postby ModernMicawber » February 24th, 2017, 11:13 am

Been reading some concerned articles in the media about "unsustainable" household borrowing, through credit cards, car loans, and even mortgages.

If the "binge" really is "unsustainable", what happens at the bitter end? I have limited experience of 08/09, having been absent overseas, so I've been pondering what this might look like in practice.

Being a parsimonious sort, I hardly have any debts at all, but is it possible that I'm the fool? Is the correct course of action to remortgage to 90%, max the credit card, and hope for some kind of moral-hazard-ridden government intervention?

And what about those of us with assets? To what extent would government act to tax said assets in order to forgive the debts of those citizens who have iPhones on monthly contracts?

And finally, how might one profit from such a "bitter end", assuming there's one in the offing. Nothing more exciting than linkers?

UncleEbenezer
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Re: How does the "credit binge" end?

#34355

Postby UncleEbenezer » February 24th, 2017, 11:59 pm

ModernMicawber wrote:Been reading some concerned articles in the media about "unsustainable" household borrowing, through credit cards, car loans, and even mortgages.

If the "binge" really is "unsustainable", what happens at the bitter end? I have limited experience of 08/09, having been absent overseas, so I've been pondering what this might look like in practice.

It's never exactly the same. But models exist around the world, from Greece to Zimbabwe to the Weimar Republic.
Being a parsimonious sort, I hardly have any debts at all, but is it possible that I'm the fool? Is the correct course of action to remortgage to 90%, max the credit card, and hope for some kind of moral-hazard-ridden government intervention?

I guess that depends on your appetite for risk, and how badly stressed out you'd be by little things like bankruptcy.
And what about those of us with assets? To what extent would government act to tax said assets in order to forgive the debts of those citizens who have iPhones on monthly contracts?

I used to wonder that. Now I've seen: it's inflation through money-printing. First houses, then annuities (the Big Two lifetime financial goals): prices shot up into the stratosphere, leaving anyone who had hoped to buy such a thing stuffed. Your £100k used to be worth something, now they've confiscated not the money but its value.
And finally, how might one profit from such a "bitter end", assuming there's one in the offing. Nothing more exciting than linkers?

Go short currency, and leveraged assets. Easier said than done, of course, since that's expensive and you could run out of stake money before you get to cash in. I guess that's why hedge fund managers get away with taking such hefty fees.


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