A £1.000.000 house, but no job, and can’t pay the utilities
Martin Wolf warns correctly “Buyers beware of Britain’s absurd property trap” October 11.
Indeed, it would seem that the dream of politicians, government officials and bank regulators is for all us to be able to feel rich, sitting there in our houses. But unfortunately though the way they go about it will make us sit there without a job, and without being able to pay the utility bills.
But the trap is not solely related to houses, but to all assets that are perceived as “absolutely safe”, because those are the assets a bank is allowed to finance with little capital, which means lot of leverage, which means huge risk-adjusted returns on equity.
But Bbank financing to “The Risky”, the medium and small businesses, the entrepreneurs and start-ups… that is of course a NO! NO! NO!
During the IMF and World Bank meetings in Washington this week we hear more and more about the scarcity of safe assets. Of course, it can’t be any other way. If you do not take a risk on risky assets, how on earth are you to produce the safe?
Indeed, it would seem that the dream of politicians, government officials and bank regulators is for all us to be able to feel rich, sitting there in our houses. But unfortunately though the way they go about it will make us sit there without a job, and without being able to pay the utility bills.
But the trap is not solely related to houses, but to all assets that are perceived as “absolutely safe”, because those are the assets a bank is allowed to finance with little capital, which means lot of leverage, which means huge risk-adjusted returns on equity.
But Bbank financing to “The Risky”, the medium and small businesses, the entrepreneurs and start-ups… that is of course a NO! NO! NO!
During the IMF and World Bank meetings in Washington this week we hear more and more about the scarcity of safe assets. Of course, it can’t be any other way. If you do not take a risk on risky assets, how on earth are you to produce the safe?
Posts
