Dopamine

As others say, this has the whiff of theatre. Predicting the Middle East feels like a fools errand. Key actors know the choreography. When the choreography breaks down - that’s when it gets really dicey. We’ll know that has happened by the absence of telegraphing in the media.

It was the usual Putin routine. Let’s hope that the usual useful idiots don’t get much airspace. This is a state that has no opposition and no real debate. It’s not something to ever aspire to. I’m expecting lots of whataboutery when those defending the west’s interests point this out. Just like we used to rightly say to the communist fifth column - if you like Russia that much, go and live there. I’ll take my chances with the west and NATO. All the way, every time. And I’d die rather than living under the yolk of dictatorship, whether communist or nationalist.

Absolutely true. Something you’d expect a politician to understand in anything approaching a functional democracy.

War/s will be the main global story next year. It makes economic predictions very difficult because, among other reasons, war is inherently chaotic. House prices may become a peripheral concern.

HMRC should be careful what it wishes for as that money may be involved in staving off greater state expenditure elsewhere eg benefits. People are already taxed enough. Yet another assault on the working and middle classes of this country. Most of this side hustle money isn’t hoarded - increasingly people need it to live.

12 months ago I would have said you were right. Unsure now. The economy has been way, way more resilient than I anticipated. I'm normally reasonably accurate (over about 30 years, but that might be hindsight bias I admit) so I'm scratching around for explanations - the main one being that my learned heuristics are now misaligned with reality and that something basic has changed. Based on the assumption that I am / have been wrong, I'd now be surprised if we saw a big slide in nominal house prices, and I know that that conclusion doesn't make sense given the traditionally predictive metrics.

I am amazed by how little financial distress I see in my everyday life. I know people from a lot of different income strata. None of them are really struggling or if they are they are keeping it well hidden, or have been given too many credit lines. By struggling I mean having to sell the house, forego all holidays, cut back on food, not afford bills etc. My direct experience was one reason why I didn't think that we'd go into recession at the tail end of 22 when all the metrics should have accurately predicted a recession. There was too much visible spending happening. I think that the online world that now sits behind the real world has given people a lot of opportunity to make extra cash. I sometimes wonder a lot of the 'normality' we see around the place is grey economy money - ebay sales, other online grey sales activities, facebook marketplace etc. Obviously that can't last if that is what is happening. Even then I'd struggle to see the impact on the whole economy, but I'm stumped. Either way there must be a lot of drivers against any major capitulation in asset values because they aren't under as much pressure as predicted. Doom and gloom is a reasonable hypothesis based on the metrics but reality isn't playing ball. At the moment. A comparator might be the early 80s recession - mass unemployment and deep recession alongside rising nominal house prices. Who knows.

tangible assets - property, anything in hand of value basically. Plus some types of liquid assets. I’m not saying there won’t be a downturn. I think there will be, but I’d not be surprised if we don’t enter technical recession either. I've seen the metrics you refer to. I’m saying that I think the nominal downside for UK house prices will be limited, recession or not.

Yes I’d say it’s off about 5% and some people are no doubt getting deals but it’s not enough of a buyers market yet to justify participating . FTBs are the ones getting shafted as the low end hasn’t shifted much at all. Those pinning their hopes on some kind of serious economic collapse as a driver of a crash will be disappointed because in such an event all illiquid markets would grind to a halt. Asset holders are king in such scenarios, not market aspirants. And as we was yesterday’s trend, trying it again would result in more rapid inflation, and trying something else would no doubt be more fundamental and cause asset holders to prefer to hold rather than swap for currency of uncertain future value. Both don’t suggest a huge nominal crash. Let’s see. All markets are broken, as is money itself.

South Wales. The market stability I’m referring to is the evidence of stable nominal house prices. A declining economy doesn’t inevitably depress prices in all assets. I also suspect we are in a recession. I don’t think the kind of recession we’ll have will take more than 10% off house prices (and I’d be surprised if a further 10% comes off them).

Prices haven’t crashed at all this year. Lower end properties near me are selling within weeks. I thought we’d be about 7.5-10% down by now. I was wrong. I now think the largest part of this “crash” will be in real prices. Maybe a few percent more off, nominal, but no more than 10% peak to trough. I think I underestimated wage inflation. It’s been a big driver of market stability imo. Perhaps a recession will send things a different way but I can’t see a big crash happening now, even if we have a recession. I care neither way. I’m just interested in the insanity of UK housing prices.

Has anyone statistically explored the relationship between HPI and the BoE credit conditions survey? (eg a regression model). The availability of secured credit is an obvious driver of HPs, alongside the willingness to spend capital to buy the asset at a given price. Informally one thing I'm noticing is houses selling at auction at prices consistent with beliefs that you can still make a profit if you do them up (one unmortgageable example that needed about £70K work on it going for an amount taking it, with the £70K added, to within 10% of a nicely refurbed house for sale on the same street). I thought that was nuts, but belief drives markets as much as facts. Concretely, beliefs make market facts.

One or more of any of these are possibilities: Capital controls Limitations on private gold / PM ownership. Compulsory conversion of asset holdings to gilt holdings Emergency haircuts on high value GBP accounts Emergency stamp duty holidays on property Emergency stamp duty hikes on other assets For a fictional account of dollar collapse for doom junkies, 'The Mandibles' by Lionel Shriver is pretty good. However all of the above are in reality unlikely as the easiest way out of a systemic financial mess is war, and, oh look.... I don't think this is conspiracy, it's just humans. If the dollar does "collapse" it'll be badged as something else - something 'new' and done for the benefit of the masses, as that's just what governments do. The pound on the other hand - would it surprise me if we joined a new Western currency union and were using a 1:1 pegged British "dollar" in ten years time? No. 1eur=1gbp=1usd would serve some interests well but it would involve the UK accepting that compared to the US, we're poor. However, important not to overlook the high probability of the 'buggering on' solution. This is where things just meander for many many years, never quite reaching the apogee of collapse. This is the British way, god bless us.

The interesting thing about this HPC is the unknown extent to which currency degradation and inflation are impacting on it. Lots thought this would happen last time, and it did to an extent as money printing put a floor under price falls. Arguably the 'deflation' of the GFC was inflation for the masses. Money printing put a floor under asset prices - the real value of people's labour has since declined. This is the age old dialectic between capital and labour. Where we are now - inflation rampant, labour value lower as compared to assets, and the UK in particular poorer in global terms by 20% due to currency degradation and, to top it off, the dollar as the currency benchmark declining against assets / goods - well - it's f*****. No wonder there's a war. It was very predictable after a pandemic, but this particular soup of an already degraded market system, plus pandemic is a new concoction. Nobody has a clue what to do, nobody is really in control and we'll see where the car steers as passengers in reality.

Nobody knows what will happen. The only thing we do know is that the UK is financially in a massive hole and that the young will eventually stop tolerating the shitty hand they have been dealt. It's hard to predict because none of us have encountered this particular flavour of ****** up before. The middle class will as always be expected to do the heavy lifting. A helpful frame for where we are is 'End Times' by Peter Turchin. What we are seeing now in his view is the overproduction of elites, intraelite conflict and popular immiseration. What a mess.