The Debt Swamp
I've just read a staggering piece of news, and like most really important news, it was buried in the financial pages of the paper – The Sunday Independent. The article is about the wealth of ordinary people (us!) and has some scary conclusions. I'll quote bits of the article and add comments....

"The average Briton is getting wealthier. But...he or she is short of cash and increasingly reliant on the value of his or her home to shore up creaking finances....These are the conclusions of an extensive study into the British consumer by computer giant IBM, published tomorrow. It paints a picture of a large group of people who are increasingly vulnerable to a property price crash. The IBM study, which was based on data from income tax returns collated by the Inland Revenue, concludes that the average Briton has a net wealth of £82,400."

My first question is why is it that a private corporation gets access to our tax returns, but I guess that another issue. So far it does not sound to bad as the average net wealth (that remaining after all deductions) looks pretty healthy. But reading on it starts to get scary....

"However, IBM discovered that the entire increase is down to higher house prices and that the average amount of 'liquid wealth', cash or investments, has actually fallen and only really represents a quarter of people's net worth."

So we're not actually getting wealthy as all of the £82,400 comes from the house price bubble, which even if it does not burst, is virtual wealth you can't unlock, unless you intend to step off the property ladder or use it to get more debt.

"The rise in house prices is showing no sign of abating. Figures released by the Halifax, the UK's largest mortgage lender, show that prices increased by 2.2 per cent during March, making an annual increase of 18.5 per cent and putting the average cost of a home in Britain at £151,467, the first time it has ever exceeded the £150,000 barrier."

In 2002 the average house price in Bristol was £105,000. A Halifax survey of 2003 put it at £175,996. Are these figures an indicator of a bubble ripe for collapse? The New Palgrave Dictionary of Economics defines a financial bubble as; "...a sharp rise in the price of an asset or a range of assets in a continuous process, with the initial rise generating expectations of further rises..." This seems to fit my theory; prices are rising fast because there is an expectation/fear of further rises: i.e. Get on the ladder now, before you are left behind. This fear is justified according to this IBM research:

"...there is a large group of people who are being excluded from all this. It seems that Britons with a net worth of less than £50,000, which covers more than half of the population, many of whom do not own their own homes, are seeing their wealth grow much more slowly than the propertied classes. He sees these people getting increasingly into debt, and because this debt is largely unsecured, they have to pay higher rates."

So the poor are being taxed by capitalism because, well, they are poor. No wonder so many of us are so scared not to get a foot on the property ladder, it is natural for humans to look for stability. But what the report says is that even when on the ladder, you're not safe:

"The conclusions of the report show an asset-rich, cash-poor society that is increasingly having to work longer because people do not have the available income for retirement despite their apparent wealth."

Wow. This was not the way it was supposed to be. The rising tide of capital was supposes to make us float, not drown us. The headline for this article should have been: It's official – Capitalism Isn't Working. But it wasn't. This is serious stuff – our society is drowning in a sea of debt while global warming, accelerated by our debt-creating consumer lifestyles is literally drowning the world. Yet our politicians squabble over trivia and the population is pushed by a media who obsess over celebrity. This is not good.

Things could be done to help – at least in the short term – by the council. An example might be to build lots of affordable housing, so the pressure is taken out the price bubble – and yet here in Bristol the powers-that-be are still pushing for the building of more and more luxury flats that will only further push-up the prices and further exacerbate the problem.

The housing time bomb is still ticking – and we're letting them add more semtex to the pile.