UK heading way of Japan in 1990’s?

The UK economy has been fuelled for several years by increasing debt secured on the rising value of house prices. Many UK residents have loans and mortgages as much as or exceeding the present market value of their house. The Bank of England may be involved in a conspiracy with the UK Gordon Brown government to keep the deepening debt problem out of the public eye.

With the buy to let market on a downward slide as property portfolios lose value and interest rates rise, a ten per cent drop in house prices would trigger an economic crash on a scale seen by Japan in the 1990s. Banks would have to ask lenders to increase the security held with them, most lenders would be unable to do so.

The similarities between the UK economy and Japan in the 1990’s are striking in this respect. Japan’s decade of recession was triggered by exactly the same phenomenon as is currently taking place in the UK. UK property prices are way overvalued, and debt is secured on these unsustainable house and property values.

The UK economy is sailing close to the wind, and could go into recession almost overnight. I hope it doesn’t, current business models and practice are based on having substantial debt (using other people’s money for business expansion), but the chickens of this mountain of debt have to come home to roost at some stage.

This article published by www.conspiracyreview.com ©2008.