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Why this recession isn't the same as 2008

joelherbert-wright

Commentators and Economists have been saying that we have been through situations like this before with high inflation rates and a recession.


I would argue that this is not entirely true. We have been through a time with a high inflation rate and falling prices in the 1970s, when there was an oil crisis. The main issue that people are not taking into account is the debt to income ratio and the costs of housing. For example, between 1990 and 2007 the costs of housing went up 3.5x in value (50k to 178k, land registry, 2022)

In addition to this, wages have not increased past the 2007 level, and we are working longer hours for less pay that in 2007.


So, house prices are costing more, while wages haven't recovered, especially when you add in COVID issues and the recent issues with strikes by civil servants. When you add this to the zero hour contracts brought into play by companies such as Deliveroo and Just Eat, it's getting harder for employees to ensure they have regular income, which is what the purchase of a property relies on (banks like to manage risk).


We have a big problem in our midst, where prices of housing have kept increasing over time, a massive dip in 2007/2008, but wages haven't reached the level they were at in 2007, and working conditions and rules have been relaxed. This makes it more difficult, almost impossible for them to get on the housing ladder.


This, in my opinion are the reasons why this recession is like one we haven't seen before, with more people are work than ever before and the lowest unemployment rate, and high inflation at 11% at the same time, and a massive debt to income ratio, with wages not rising fast enough. We're on trouble.


This issue cannot be solved by the Banks Of England increasing borrowing costs, nor can it be solved by landlords selling their properties or putting their rent up, it can only be solved by building more housing and governments spending more in the right areas .


Thanks for reading,

Anthony Wright


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