Just Getting On With It

Do you remember the old adage, “Always look before you leap”? It seems lots of people have never heard of it, or else don't understand it, or else, as with many things, believe it only applies to someone else. Its an adage that has significance for me, as I've set out in the past. 

When I was younger, I was a bit of a daredevil. At the youth club, I used to do head first forward rolls off three stacked tables on to a single table. But, I was always confident of being able to do it safely, because, from the age of six, I had trained in judo, and learned how to fall safely, including doing such forward rolls from having been thrown over someone's shoulder. So, safe in that confidence, I was able to just get on with it. I had looked before I leapt. 

But, I have also previously described another situation where that was not the case. On my next to last day at school, I was playing for the school rugby team against an old rival school, who we had never beaten, and in the closing minutes of the game, I collected the ball, and ran towards their touch line, head down, knowing there was only one defender in my path. Seconds later, seeing the line, I instinctively dived, only, as I then looked up, to realise that I was diving across the 5 yard line, not their touch line. I had failed to look before I leapt. We never did win against them. 

Twenty years ago, banks across the globe, seeing asset prices rising rapidly, and seemingly incessantly, thought that they could not resist jumping on to that bandwagon. They lent more and more money to borrowers, so that where previously they would only give mortgages up to 2.5 times household income, they began to give mortgages of up to six, seven and even ten times income. When that was not enough to be able to compete with other banks and building societies, they began to even give sizeable cash backs to people who switched their mortgages from elsewhere, and began to not even bother asking people to verify the household incomes they were claiming to have. In the US, it meant that banks and other mortgage lenders began to lend large amounts of money to people who had no identifiable sources of income, the so called NINJA mortgages. 

That was the start of the subprime mortgage crisis in the US. Other financial institutions then began to buy up packages of these subprime mortgages, in what were called mortgage backed securities, without any knowledge of the viability of the actual mortgages that constituted these packages. They were leaping into such activity without having looked at what they were leaping into, how high they were leaping from, or what lay beneath them. They only thought about how much money they were going to make, and without any concern for any possible downside. “What the hell”, they thought about any risk, “Let's just get on with it”. By 2007, as that leap brought them crashing down towards their destination, they saw, too late, just how dangerous that leap had been. 

As the US sub-prime crisis began to unfold, it led to a global credit crunch. UK banks like Northern Rock, no longer bothering to attract savers, as they offered next to nothing to them as savings rates, still decided to leap into this environment by offering 125% mortgages to borrowers, in the expectation that nothing could possibly go wrong, and as house prices continued to rise, they would always get their money back. Until, of course, they didn't, and as the credit crunch unfolded, Northern Rock could not borrow to finance its lending, and as house prices dropped suddenly by 20%, the thought struck them that they might not get back the money they had lent to borrowers to buy vastly overpriced houses either. When the remaining savers they had decided to get their money out, while they could, it started the kind of bank run not seen for more than a century, and the bank's fate was sealed, with it going bust within weeks. 

Of course, it was not that surprising that banks like Northern Rock engaged in such reckless activity, because for the previous thirty years, governments and central banks had encouraged the idea that wealth could be generated simply out of thin air by perpetually inflating asset prices such as for houses, shares, and bonds, and whenever reality imposed on that, with repeated asset price crashes, the state and central bank had intervened to reflate them. Indeed, after the financial system came to the brink of collapse in 2008, as that process of reckless lending, collateralised on astronomically inflated asset prices, came face to face with reality, governments and central banks did so again. The banks' share and bondholders were bailed out with taxpayers money, oceans of liquidity was printed, as part of QE, so that central banks could buy up bonds, to push up their prices, which then also pushes up the prices of shares and property once more. They did so, whilst imposing austerity on economies, both to divert taxes to bailing out the rich, and so as to keep interest rates down, to the same end. 

In the same way, homebuyers had been encouraged to jump in head first, on the basis of a delusion that house prices can only ever go up, and that if they fall someone will bail them out too. It's like the situation I have described, in the past, in relation to builders building houses in flood plains, and people being daft enough to buy them, without considering the risk of doing so, because they have come to believe that nothing can ever go wrong, and if it does, someone will bail them out for their failure to do any basic consideration of risks before making important decisions. The same is true about all those people who bought leasehold properties rather than freehold properties, and now want someone to bail them out for that decision. 

In a society that has inflated paper wealth based upon speculation, and the need for that speculation to become ever more reckless, it was necessary to create an environment in which people would take these reckless decisions, to fail to look before they leapt, in order that they would keep making ever more reckless decisions, in the mistaken belief that there would only ever be an upside, and that someone would always be there to bail them out when things went wrong. Of course, as 2008 showed, the more that continues the more dramatic things are when they do go wrong, and the harder it becomes to find someone who can do the bailing out. 

To go back to another personal experience, in 2010, we'd decided to move to Spain. I'd decided to sell our house, thereby burning our boats, before buying a Spanish house. Its probably the single worst decision I have ever made. It was a case of not looking before I leapt, and contrasts with my usual strategic guidelines of never moving from a more secure position to a less secure position. As I described, at the time, having had an accident on the way to our destination, we were left homeless, having sold our existing house, for more than a month, which gave greater depth to my sympathy, as a socialist, for the homeless. I had made the mistake of not considering the potential risks, of not looking before I leapt, in the desire to just get on with moving. 

So, when I hear people responding to Brexit with the comment “Just get on with it”, it fills me with foreboding. It's clear that 90% of the people who make that comment have absolutely no idea what it is they are asking the government to “Get on with”! Not surprisingly, because the government itself has no idea what it is that it should get on with, and Labour, in trying to be all things to all men, rather than standing proudly on a clear principled position only adds to that confusion. It's not surprising that people talk about Just Getting On With It, to make a huge, reckless leap in the dark, even though they have no idea, how far the drop is, what rocks, reefs or shark infested waters lie beneath, because for decades they have been brainwashed into the idea that they can take such reckless leaps, confident in the belief that someone else will bail them out. 

The trouble is with Brexit, there is no one who is going to bail out Britain for its reckless, and damaging leap into the abyss. It will be millions of ordinary British workers who will be dashed upon the rocks of Brexit, and left picking up the pieces for decades to come.