Graphs at a glance: How re-mortgaging covered up the theft of Britain's growing wealth in the boom, and helped cause the bust.

In Douglas Adams’ excellent Hitchhiker’s Guide To The Galaxy series there is a scene where an animal, the Ameglian Major cow, has been bred to want to be eaten. It meanders around the restaurant and persuades diners to partake of pieces of itself:

'Good evening', it lowed and sat back heavily on its haunches, 'I am the main Dish of the Day. May I interest you in the parts of my body?'

'Something off the shoulder perhaps?' suggested the animal, 'Braised in a white wine sauce?'

The Ameglian cow had been persuaded to feel good about being eaten. Once the diners had decided to feed on its rare steaks the animal

staggered to its feet. It gave a mellow gurgle. 'A very wise choice, sir, if I may say so. Very good,' it said, 'I'll just nip off and shoot myself.'

An equivalent scam was pulled off on us ripped-off Britons in the years leading to the Credit Crisis that kicked off in 2008. Britons were persuaded to turn their assets into spending money, consuming themselves. Banks offered cash and other companies selling anything from cars to cupboards offered easy credit. Whatever was necessary was provided to get Britons to consume more.

A favourite path into debt was “Housing Equity Withdrawal” (HEW): the process of converting housing assets into spending money. Frequently done by increasing the mortgage on your house.

Data from the Bank of England shows how HEW boomed in the years of the Labour government leading up to the Credit Crisis:

Particularly after the Conservatives deregulated financial services in 1986 ordinary Britons have been regarded as fresh meat. First by the banks, and then by every other sector: energy; transport; supermarkets etc striving to keep their bonuses up with the banks. The conundrum for these companies was how to extract bigger profits. To do this Britons needed to spend more, but the companies didn't want to have to pay higher salaries to the hoi-polloi to give them the money to spend. The salaries of 90% of Britons have stagnated for decades.

http://topincomes.g-mond.parisschoolofeconomics.eu/#Database:

In order to provide Britons with more money to spend, to generate the profits to feed top executives their puffed up pay and bonuses, Britons were persuaded to eat themselves. To be precise, they were persuaded to consume their own assets. A report by the Centre for Research on Socio-Cultural Change (part of the University of Manchester and the Open University) observed:

"the remarkable result is that under Mrs Thatcher from 1979-90, just as under Tony Blair from 1997-2007, the real value of Housing Equity Withdrawal is larger than the real value of GDP growth"

The economic growth in GDP was snatched from the 90%, whose incomes had stagnated. The 90% were persuaded to borrow on their own assets.

2013 Signs Of Economic Recovery

There are those who blame ordinary Britons for recklessly taking credit. These critics forget that it was highly qualified bankers pushing the loans watched by government regulators. 

The ripped-off Britons' biggest mistake was to trust those qualifications and trust those regulators. The ripped-off Britons made the mistake of believing the nonsense spewed to justify excessive pay: that the reason bankers are paid so much is because they are brilliantly competent at being bankers. They believed that if the brilliant banker assessed the risk and decided to offer the loan, then the loan was not unduly risky.

The Governor of the Bank of England at the time, Mervyn King, was very clear that ordinary Britons were not responsible for the crisis:

"The price of this financial crisis is being borne by people who absolutely did not cause it…..Now is the period when the cost is being paid, I'm surprised that the degree of public anger has not been greater than it has."

Mervyn King, at the time Governor of the Bank of England, in evidence to the UK Parliament’s Treasury Select Committee, March 2011.