What People Do To Get By

by Mitch Feierstein about 11 years 10 months ago

These are sad times. Evidence is constantly accumulating of the damage being done to people’s pay checks by the recession. (And we are of course in that recession now, not waiting for one to come along.)

Hi. I'm a banker and I'm here to help.

Hi. I'm a banker and I'm here to help.

The latest item in this long hall of infamy is this data, reported by the FT, that a million Britons have resorted to taking out payday loans to help with the cost of housing. Those loans are horrendously high-interest – and those Britons aren’t stupid. They know those loans are expensive. The only reason they take them out is that the alternative may be homelessness. The FT reports the Chief Executive of the homeless charity Shelter as saying:

“Turning to short-term pay day loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and can lead to eviction or repossession and ultimately homelessness.”

He’s right. Of course he is. And everything in this picture is wrong. In particular:

1) Property prices are way too high in the UK, at least one third overvalued and probably more.
2) The rate of building is way too low, certainly 100,000 units lower than is necessary and the gap is probably twice that size.
3) It is outrageous that poor Britons are forced to take expensive loans.
4) And it is worse than outrageous that the overpaid and reckless bankers who provoked the recession should be profiting by extending high-interest loans to the people they have most injured when the government loans them money near zero.

There are movements afoot by MPs to restrict the high-interest payday-loan industry. But they have the wrong target. Those loans arise from necessity. They might actually drop a lifeline to some of those who use them. The real problem is with the shortage of housing, the price of housing – and the bandits who destroyed the economy with impunity.