Has Quantitive Easing Helped Ordinary Families?
The insolvency service have released figures for the third quarter of 2009 showing that 35,242 individuals became insolvent in this period which is a rise of 28% on the same period in 2008.
These figures represent 18,347 bankruptcies (up 20.9%), 12,390 Individual Voluntary Arrangements (up 27.4%) and 4,505 Debt Relief Orders which were introduced this year.
Many of these cases will be the main breadwinner for a family so the number of people personally affected by these proceedings is likely to be at least double the 35,242 individuals mentioned.
All these families will have been devastated by what has happened and in many cases will have struggled for some considerable time to maintain the repayments on the home they were buying thinking they were improving their lives and the future for their children.
Many of these families will now be dependent on the state and the local authority to rehouse them and help them move on with their lives which will cost the local authority money and reduce the number of homes available for other people who need housing.
Goodness only knows how many other families are hanging on by their fingertips as they struggle to keep up with repayments on mortgages or rent and debts they have accumulated when things were easier.
In some ways those made bankrupt are the lucky ones since they will no longer suffer the stress and depression brought on by frequent phone calls and letters from debt collectors demanding immediate payment of the outstanding amounts and sometimes the whole debt. They will not have to suffer from constant worries about how to find the money to pay their debts while the finance companies and banks make life ever harder by with the addition of charges and fees added to the debt and increases in interest rates.
There are many reasons why people fall over the edge and become swamped by their debts. Few people take out debts with the intention of not paying but circumstances can change and suddenly what seemed simple to manage in the past can become an overwhelming debt burden. Once you slip over that fine line between managing your debts and missing a payment things can snowball out of control very quickly.
The way the financial companies operate means that as soon as you miss a repayment you are likely to suffer additional penalties and a possible rise in interest rates which makes it harder to meet the repayments the following month and more charges are added, more payments are missed and you find yourself on a slippery slope that is very hard to get off unless you can suddenly find a significant amount of cash to get back on track.
These figures for insolvencies are released in the same week we have heard that the government have decided to invest a further £33.5bn into RBS. This figure equates to, approximately, an additional £558 for every man, woman and child in the UK. This week we also heard that the Bank of England is to make an additional £25 Billion available under the quantative easing scheme and this is an addition to the £150 Billion already produced out of thin air equal to something like £2,500 for every man, woman and child in the country.
Remember that this is for every single person so for a typical family of two adults and two children this is £10,000 from the quantative easing and a further £2,000 for the additional investment in RBS.
We should surely question whether this is the best use of this money. While many thousands, perhaps millions, of people around the UK are struggling to survive their own financial credit crunch the government have chosen to put this money into the hands of the financial companies.
The sums of money involved would lift many families out of debt completely and if they were able to clear their debt burden many people would require less, and perhaps no, support from the local authorities and the state.
We are told that the economy thrived on people consuming and buying goods and the majority of that was funded on credit but now people are struggling to pay the debts incurred and cannot afford to start spending again even if they wanted to. The result of that is that while the financial industry in the city benefits from all this additional money sloshing around the system, our high streets are a depressing display of empty stores and large and small businesses are struggling to find customers and pay their own bills.
There are questions to be answered about whether we should have a society so dependent on consumer spending and debt and we may need to rethink our behavior in the future but for now millions of people are struggling and get little help while banks and the stock market are enjoying a recovery.
If instead of boosting the bankers bonuses and helping the stock market enjoy a remarkable rise, given the state of the economy in general, the money had been made available as a financial bond given to each taxpayer and only able to be used for financial payments many people would have been lifted out of debt for the first time in many years and other people could have invested the bond in a pension or other saving scheme which would benefit them and their families now and by reducing the costs of pensions and support in the future benefited the country.
All these repayments and savings would have benefited the financial industry by reducing risky debt that might otherwise never be repaid and boosted the reserves of the banks but it would also have helped countless UK families.
It is hard to see why big business gets so much assistance while the ordinary workers and families, who are said to be so important to our economy, get ignored and left to their own devices. Let us hope that the figures for the next quarter of insolvencies do not continue the rising trend but there seems little likelihood of any support for individuals and families. It looks like we will all just have to manage as best we can.
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