Spinning out of control in the U.K.

The advertisement from Visa Signature enumerating "Things to do while you're still alive" took on special significance after hearing the story of John Brandrick.

The fact that the ad was inside the current issue of the London-based weekly The Economist made it even more special.


The list is apparently so long that an entire website has been setup for its maintenance - Visa Signature Living - a site that Mr. Brandrick likely visited over the last year, though he apparently didn't need a credit card.

You see, according to an even longer list of recent reports, John Brandrick is the Brit who's been in the news after spending his entire life savings under the mistaken impression that he was about to die. Now that the doctors have significantly upgraded his condition, what would otherwise be cause for celebration has prompted a lawsuit.

Sky News explains:

John Brandrick, from Newquay, Cornwall, was told he had pancreatic cancer two years ago after scans revealed a 7cm tumour.

The 62-year-old said he was told by doctors at the Royal Cornwall Hospital in Treliske that he only had a short time left to live.

So he quit his job and stopped paying his mortgage, instead splashing out on a lavish lifestyle of hotels, restaurants and holidays.

Then the hospital told him that he was actually suffering from non-fatal pancreatitis.

Mr Brandrick said that in the year he thought he was dying he spent everything and now he faces losing his house.

He told Sky News: "I'm really pleased I've got a second chance in life. But if you haven't got any money - it was my fault, I spent it all - they should pay something back.

This all seems to be a sign of the times in the U.K. and in much of the rest of the world for that matter. He did think he was going to die and this is 2007 - a period in time that future historians will surely delight in chronicling.

He was Gazumped

A new word was learned earlier today - "Gazumping" - and wouldn't you know it, Wikipedia has an entry for it. It has something to do with losing out on the purchase of a house, and in the U.K., losing out on the purchase of a house means losing money.

Bloomberg reported a sharp increase in the use of the word in the greater London area. The distance between Newqay and London is not known, nor if Mr. Brandrick was ever gazumped, but one Richard Stansfield was ... twice ... for the same house.

It cost Richard Stansfield 2,000 pounds ($4,000) to prepare the paperwork to buy a four-bedroom townhouse in south London's Balham neighborhood. When the seller got a better offer, the deal was lost, and so was Stansfield's money.

Suddenly, the rival bidder pulled out and the house again appeared within his grasp for 595,000 pounds. As the 43-year-old television producer finalized his finances, he lost out once again to a buyer who was offering cash.

Stansfield is a victim of what's known in the U.K. as "gazumping,'' where someone swoops in with a higher offer at the last minute and breaks the home purchase deal. The practice highlights the challenge of finding a home in London, where surging prices and a shortage of properties is triggering a ruthless contest to close deals.

"I couldn't believe this could happen to me on the same house, not once but twice,'' said Stansfield. "Prices are rising so fast that people who probably started out decent have found themselves willing to gazump others."

Well, just like rising prices, the gazumping won't continue forever, though there may be higher prices and much more gazumping before the trend reverses.

One key ingredient in a possible trend reversal is the interest rate policy of the Bank of England now that they have exceeded their inflation target and critics fear rising prices are now spinning out of control.

Consumer prices that is - as in the U.S., the central bank in the U.K. doesn't follow housing prices that closely, cheering on rising asset prices just like American central bankers.

Thursday's policy announcement from the BOE is widely expected to see interest rates rise with more increases scheduled for summertime and some now fear a housing crash may result. According to this commentary at Guardian Unlimited, it may come soon.

House prices are now six times average incomes - 20 per cent higher than before the calamity of the early 1990s - and forcing ever higher amounts of mortgage and bank lending, which, in turn, push up inflation. Three weeks ago, the governor of the Bank of England, the intellectually self-confident Mervyn King, wrote to the Chancellor to explain why inflation had broken through the 3 per cent upper limit of the range within which he and the bank are charged to keep it. The loss of face was played down, explained as largely a technical hitch. The fall in energy prices has yet to feed through into price inflation is the story; as it does, inflation will fall back towards 2 per cent. There may be another small rise in interest rates to 5.5 per cent this Thursday, but that will be worst of it. Everybody can relax.

But there is a deeper-seated concern within the bank and rightly so. Its own forecasts acknowledge that over 2008 and 2009, there is a considerable risk that inflation could rise above 3 per cent and carry on rising, and for very similar reasons that inflation got out of hand in the late 1980s. No economy anywhere with reasonably full employment can allow bank lending to grow at 14 or 15 per cent a year as it is in Britain at the moment and expect inflation to remain at 2 per cent. Demand soars above any probable supply, earnings growth picks up and imports balloon. Either lending is forced lower by higher interest rates or inflation accelerates.

Confidence in the bank may not increase after seeing what is also in the front section of this week's Economist.


Any takers? The benefits package is supposed to be excellent.