Sunday, 10 June 2012

Olympic Debt

I remember the moment, where I was and what I was doing, when who would host the Olympic games was announced. I recall punching the air in triumph when the announcer declared ‘London’.

I was at work, just a normal day at the office, on what was otherwise an unremarkable day. But winning the Olympic bid changed my perspective of the future.

Not everyone was happy about it. I heard complaints about how expensive it would become. I heard about how much strain the Olympics would place on the tax payer in general. I heard people whinging about what a waste of money it was and that we, the little people, would get nothing from it.

…And then the credit crunch happened.

The debt crisis that we had all so merrily participated in had finally tripped over itself in spectacular fashion. No one stopped to think about how expensive it would become. No one cared about how much strain the austerity measures that would have to follow would place on the tax payer in general. No one complained before it affected them personally.

The reason I was so pleased about London winning the Olympic bid was not through any enthusiasm for sport, or patriotism, or some strange collective fervour in support of increased business and trade. The UK Government, like any Government, would have been pleased with winning the bid for all of the above except sport. The athletes would have been pleased for the promotion of sport. The everyday UK citizens who were so pleased about the Olympics were soon discovered that any chance of actually seeing it live was going to be a lottery and they would have little choice between watching the 100 meters final and the handgun qualifiers.

The reason I was so pleased about London winning the Olympic bid was because my house would increase in value. That was it. I had plans to move out of London and wherever the Olympics had been held in the past, one of the major effects was an increase in house price. The average house price increase was about 55%. Los Angeles was only 16% and Athens was a whopping 185% but as far as I was concerned, any increase that made buying a house outside London cheaper for me was a bonus. So around 2011 might be a good time to sell up.

…And then the credit crunch happened.

With the Olympics only a few weeks away, I am still in London. Interestingly, houses in London are holding their value while in other areas they have fallen and may just be starting to rise around the Olympic area. But the effect of the debt crisis also crushed the property market by making it all but impossible to get decent mortgages (especially 100% mortgages for first time buyers). Those of working age are insecure about their jobs and are less likely to consider moving house. There is an overwhelming osmosis of protectionism that spreads from the pensioner watching the pennies of a state pension to the banks; reluctant to lend to each other or to small business. Growth needs people to spend money but it just isn’t happening.

In the years between the announcement of the London Olympics to the opening of the games itself, I can imagine that – like me – the perspective of individuals would have changed greatly.

In hindsight, and in consideration of the debt crisis that threatens to engulf all of Europe and possibly the world, I remain please that London won the Olympic bid. Not because of the value of my house, which has no value at all if there are no buyers able to offer the asking price, but because I would rather there be the potential for tourism, new business and increased trade filling up the treasury coffers at a time when all of the above may be scarce in years to come.

Had the Olympics been awarded to Paris, as splendid as I am sure it would have been, the little Island of the UK would have been marginalised consequentially because all travel would stop at France; opportunities for business, tourism and trade terminating at the coastline of mainland Europe. The UK, like an impenetrable castle surrounded by an enormous moat, would have become geographically excluded. We would be as an entity not invited to the party, sitting ostracised in an empty room next door with a curled up cheese sandwich for company and listening without pleasure to the distant music.

Because of the Olympics in London, there has been an artificial increase in jobs but, never the less, those jobs pay money and the way out of any recession is for people to spend money. If there had been no Olympics in London, it is fair to say that there would be fewer jobs in the UK and less money spent. So when the Olympic party is over, the UK may have held back the full force of austerity for just a little while longer than it would have without it.

But the party must end, and so far my mundane astrological observations (I won’t call them predictions) about the global economy and how deeply the recession is likely to get has been more accurate than all the politicians, economists and experts in the financial world (see the start of my article series on the Barbault Scale). The debt crisis we find ourselves in swamps any quibbles about the expense of the Olympic games, but I believe it is going to take a Herculean effort to solve the problems that lie ahead.


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