Finance-led growth is fragile and is dependent on increasing debt to sustain economic activity. Mortgages underpin the system, but as households face flooding risks and economic pressures, the reliance on future borrowing can lead to inevitable crashes, as history has shown, underscoring a fundamentally unsustainable model.
The 2007-08 financial crisis was caused by aggressive lending and securitization practices that obscured risks, leading to widespread defaults and a global recession.
The implications of financialisation spread across the UK housing market and broader economy. The shift from productive activities to profit-driven financial practices has destabilized traditional banking, leading to increased dependence on consumer debt and profit extraction from wages, while contributing to stagnant productivity growth.
What happens when flooding risks affecting UK housing end up impacting the financial system’s reliance on mortgages as a savings vehicle? Banks have the unique ability to create money through issuing debt, fundamentally transforming loans into financial assets with multiple ownership claims. This profit-driven model enables extensive capital generation, significantly impacting households and the broader economy.
Speaking at St Polycarp’s, February 23 2025. Acts 14:1-20 – Paul and Barnabas in Iconium and Lystra
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