This moronic mortgage scheme can only end in tears

Regular readers will know how we feel about the UK government's increasingly desperate attempts to prop up house prices in order to keep our banks looking vaguely solvent.

They will also know how we feel about the proposed Help to Buy scheme which effectively forces the taxpayer to partially underwrite the mortgages of people who wouldn't ordinarily be able to borrow money at all. It is the kind of thing that can only end in tears.

We aren't exactly alone in our views on this, but I thought you all might enjoy the views of Socit Gnrale's Albert Edwards. He makes the point pretty forcefully in a recent piece of research (which was supposed to be on another topic entirely).

What makes him most angry, he says, is that "burdening our children with more debt (on top of their student loans) to buy ridiculously expensive houses is seen as a solution to the problem of excessively expensive housing" when "lack of purchasing power should contribute to house prices declining or stagnating (relative to incomes), hence becoming affordable once again."

Think, he says, about why houses are too expensive in the UK. The answer is "too much debt. So what is George Osborne's solution for first time buyers unable to afford housing? Why, arrange for a government guaranteed scheme to burden our young people with even more debt!"

Why, asks Edwards, don't we call this policy what it really is, "namely the indentured servitude of our young people"?

Andrew Bridgen at Fathom Consulting gave one of the best comments on this so far a few weeks ago when he said that "Help to Buy is a reckless scheme that uses public money to incentivise the banks to lend precisely to those individuals who should not be offered credit. Had we been asked to design a policy that would guarantee maximum damage to the UK's long-term growth prospects and its fragile credit rating, this would be it."

Edwards thinks this doesn't go far enough, given the utter disregard of this policy to both the market and the wellbeing of the UK population.

This is his final word on the subject: "I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business." It even "ranks above some of Alan Greenspan's very worst blunders."

This is strong stuff. It is also almost impossible to disagree with.