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Evening Standard: Zombie Commercial Property Loans: "Why pretending protects the banks"

Link to web site

"Lenders dare not disclose the true value of [commercial property] assets, for fear of the consequences.

"... Nobody wants to rock the boat. Pretending helps the banks. But it is extending the recovery of the commercial property market. 

"... There has also been a dramatic increase in the cost of financing commercial property deals in the last six months.

"Since 2008 interest charges have soared by 56% - and fee costs by 25%. At the same time the amount the bank is willing to advance has dropped from 80% to 60% of what they judge the building to be worth."

Link to Evening Standard
"We must avoid the lost decade that still blights Japan"

"Earlier this week Business Secretary Vince Cable was asked if something similar [to the Japanese 'lost decade'] could happen here — being Vince, he said it could. The similarities are disconcerting.

"For a time the British also thought they had cracked it as we surged to prosperity on a debt-fuelled finance-driven bubble of easy credit and soaring house prices. Gordon Brown told us, correctly and often, that never before had the UK enjoyed such a long period of uninterrupted growth.

"But it burst in 2008, and since then we have struggled with the legacy. Much, though by no means all, of Britain is crushed under a mountain of debt, with bust banks, crippled companies and under-water households all keeping the wolves at bay thanks to rock-bottom interest rates but actually going nowhere and with no way of escape other than bankruptcy.

"These are the zombie households and zombie companies which the outgoing Bank of England Governor, Sir Mervyn King, said he was so worried about late last month, and which are a huge drag on the bits of the economy which would otherwise have the capacity to grow."

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