[frederico]

EvilEdna, on 17 March 2012 - 07:12 AM, said:

Thanks for that - really cracked me up. What do they take us for? God it makes me mad.

I think articles such as this (I haven't read it), give more of an idea of how you should view the authors knowledge rather than your own.


I once read part of the nationwide house price report thingy, written by their chief economist or someone (6 figure salary at least). I can honestly say that I have an awful lot more knowledge and experience of the housing market and economy than he did.

The OBR report is another one, what you have to realize, is that these people really do not have a clue, but get to pontificate by knowing more than their peers and sounding confident.

[Grrrr I'm a tiger]

bmf, on 16 March 2012 - 10:36 PM, said:

My apologies. I should have written more.

I just found the article to be typical of pro-housing "wealth" in that it argues it's ok to have very high debt because the housing "wealth" balances this out. The argument made seems to ignore the fact that the BoE have been printing like lunatics to keep rates low to avoid a housing crash which will then make UK banks insolvent. It also ignores the inflationary effect of QE, an effect which is certainly putting a drag on any recovery.

The assumption that housing will be sold on at these prices is IMHO a pipe-dream. Therefore the losses are real even if we avoid a nominal loss through a soft default which we pay for through inflation and devaluation of savings.



Not real wealth if we are counting remortgaging or equity.



Spain and Greece couldn't print their way out, but printing isn't a free lunch.



No real wealth is generated in this loop. Except for compound interest payments to banks.



Slipped in at the end. No kidding.

I do find Flanders to be very light on her feet when it comes to criticising Labour's policies.

I'm heartened to see most of the comments with positive votes are slating high house prices.

Some good points.


Collateralised lending against property is the main source of the money supply. Unfortunately that money tends to get concentrated in few hands without other steps to address it like taxation or inflation.

So the bank prints to fill the hole in the money supply to the broader economy. The low rates or even inflation engendered, only serve to keep collateral values up (their intention). So if you are rich, where would you put your money? In 'cash' which the BoE is attacking by its policies or in 'collateral' which the Bank tries to float.

Yet the issue is the concentration...and the Bank's actions only make it worse.

[erranta]

juvenal, on 17 March 2012 - 12:05 AM, said:

Good 'un...

Nah - 'corny'
(cos they is force fed - like the illuminati-Masonic cult force feed us with crap in all media)

All those trio of persons mentioned passed through the NWO recruitment and brainwashing centre of Oxford Uni

Nim-zowitsch (Jewish speaking chess grand master - one of best ever book read by 99% of other grand master chess players)
Nim-by
NIM - O.E. niman “take” (cf. O.Fris. nima, M.Du. nemen, Ger. nehmen, Goth. niman; see nimble).
The native word, replaced by Scandinavian-derived take and out of use from c.1500 except in slang sense of “to steal,” which endured into 19c.
etc
Applies to The City and their black 'n Whites (MET/Corporation of London) monopolistic, gaming, stealing, 'boards'
~(OX= tic,tac, toe - spot 'tactic' as in police tactics = TTT Mason TAO
(yorky rite = puddings (> = fire of london = 'pudding' lane > esther " Sausages")

[bmf]

erranta, on 17 March 2012 - 09:33 AM, said:

Nah - 'corny'
(cos they is force fed - like the illuminati-Masonic cult force feed us with crap in all media)

All those trio of persons mentioned passed through the NWO recruitment and brainwashing centre of Oxford Uni

Nim-zowitsch (Jewish speaking chess grand master - one of best ever book read by 99% of other grand master chess players)
Nim-by
NIM - O.E. niman “take” (cf. O.Fris. nima, M.Du. nemen, Ger. nehmen, Goth. niman; see nimble).
The native word, replaced by Scandinavian-derived take and out of use from c.1500 except in slang sense of “to steal,” which endured into 19c.
etc
Applies to The City and their black 'n Whites (MET/Corporation of London) monopolistic, gaming, stealing, 'boards'
~(OX= tic,tac, toe - spot 'tactic' as in police tactics = TTT Mason TAO
(yorky rite = puddings (> = fire of london = 'pudding' lane > esther " Sausages")

Again, no idea what erranta means. But I would pick up on the PPE side. It must be embarrassing for Oxford. So many PPE graduates who are intellectually sub-standard. Flander's article is a real muddle. A GCSE essay after an interview with someone from the BoE. Milliband is incoherent. Clearly you can be very average and still get through Oxford. This is damaging. It makes me question Oxbridge candidates. Are they smart or another PPE like graduate?

[Bloo Loo]

"Here's another interesting fact: the median loan-to-value ratio on a new mortgage didn't go up during the "boom" years - in fact, for most of the 1990s and noughties it was falling.

That's consistent with the idea that rising house prices caused bigger mortgages - not the other way around. According to Broadbent, there isn't even much evidence that "mortgage withdrawal" - loans taken out on the basis of rising property values, were used to fund extra consumption.

Not everyone will buy these arguments."

WTF has LOAN TO VALUE to do with affordability?

didnt her very own BBC report in 2003 that LIAR LOANS were required to even get a loan?

Mortgages werent affordable then, so people were "forced" to lie and lenders to definitely lie to investors...and when the lying became embarrasing, they dropped costs, income criteria and even how many strangers could "enjoy" their purchase with amazing financial "products"...right up to 125% loans, 100% IO and buy with a friend/builder/Government.

and just what did people do with their MEWS?

Buy the arguments?...they are not even arguments to buy.

[cheeznbreed]

Bloo Loo, on 17 March 2012 - 09:57 AM, said:

"Here's another interesting fact: the median loan-to-value ratio on a new mortgage didn't go up during the "boom" years - in fact, for most of the 1990s and noughties it was falling.

That's consistent with the idea that rising house prices caused bigger mortgages - not the other way around. According to Broadbent, there isn't even much evidence that "mortgage withdrawal" - loans taken out on the basis of rising property values, were used to fund extra consumption.

Not everyone will buy these arguments."

WTF has LOAN TO VALUE to do with affordability?

didnt her very own BBC report in 2003 that LIAR LOANS were required to even get a loan?

Mortgages werent affordable then, so people were "forced" to lie and lenders to definitely lie to investors...and when the lying became embarrasing, they dropped costs, income criteria and even how many strangers could "enjoy" their purchase with amazing financial "products"...right up to 125% loans, 100% IO and buy with a friend/builder/Government.

and just what did people do with their MEWS?

Buy the arguments?...they are not even arguments to buy.

Interesting you and I highlighted the same passage, which I thought is near unequalled in stupidity and ignorance, even by the sanctified standards of the MSM. Unbelievable that this sort of rubbish can see the light of day in a 'serious' news source, nevermind published by a senior member of staff within the organisation.

It is often said, but I would not expect this level of fundamental misunderstanding from high school children.

[rantnrave]

frederico, on 17 March 2012 - 08:19 AM, said:

I think articles such as this (I haven't read it), give more of an idea of how you should view the authors knowledge rather than your own.


I once read part of the nationwide house price report thingy, written by their chief economist or someone (6 figure salary at least). I can honestly say that I have an awful lot more knowledge and experience of the housing market and economy than he did.

The OBR report is another one, what you have to realize, is that these people really do not have a clue, but get to pontificate by knowing more than their peers and sounding confident.

Agreed. When someone's starting point is that today's house prices are reasonable, you know that any economics they spout is going to be drivel.

[Josieful]

Stephanie Flanders has a very poor track record and is lucky to still have a job. Some of her gems have been

"There are no signs of inflation"

"Greece will get nowhere near default"

"I expect petrol prices to fall heavily in 2012"

The only decent part of her blogs -which are very rare these days, how many holidays can you have?- are the comments section and some of the comments which have the most votes on this post are very good and I recommend them to readers and not the blog itself.

[bmf]

Josieful, on 17 March 2012 - 10:58 AM, said:

Stephanie Flanders has a very poor track record and is lucky to still have a job. Some of her gems have been

"There are no signs of inflation"

"Greece will get nowhere near default"

"I expect petrol prices to fall heavily in 2012"

The only decent part of her blogs -which are very rare these days, how many holidays can you have?- are the comments section and some of the comments which have the most votes on this post are very good and I recommend them to readers and not the blog itself.

Agree on the comments. I posted this in large part because of them. I found it interesting that people are voting up items that follow HPC sentiment. I recall posting things on bbc blogs about 3 years ago and getting attacked by rabid lefties that Labour was great and the state should spend more and that there were no problems. How times change. Too little too late though really, for the UK. And even then people who post in forums are many times more politically "active" than the average UK subject.

[(Blizzard)]

Bloo Loo, on 17 March 2012 - 09:57 AM, said:

"Here's another interesting fact: the median loan-to-value ratio on a new mortgage didn't go up during the "boom" years - in fact, for most of the 1990s and noughties it was falling.

That's consistent with the idea that rising house prices caused bigger mortgages - not the other way around. According to Broadbent, there isn't even much evidence that "mortgage withdrawal" - loans taken out on the basis of rising property values, were used to fund extra consumption.

Not everyone will buy these arguments."

...

To be honest, I think the article is beyond parody if you read it as intended.

However, this part is interesting because it's really an argument that it was the housing market that caused the problems.

They are dead wrong that the rising value of houses somehow makes debts easier to pay.

At best rising house prices are a zero sum game. People at one end of the chain get money which has to be earned by the people going in.

In reality, the distorted incentives this creates penalise productive activity and reward unproductive activity, so you get less of the former and more of the latter, which destroys the economy. You also have other second round effects such as reduced labour mobility, higher prices for everything that uses land anywhere in it's supply chain (which is everything), and a reduction in foreign investment .

Rising house prices make it harder to pay off debts, not easier. They might make a few individuals richer, but that money is a transfer from other people in the economy and the second order effects make the economy as a whole and most people in it, poorer.

I have always been of the opinion that some of the national debt reflected these losses caused by the housing market, and some reflected losses due to the banking industry (which is another, less transparent form of rent-seeking).

However they claim that this debt was primarily created by the increases in house prices which might be true but is not mainstream opinion.

This post has been edited by (Blizzard): 17 March 2012 - 11:25 AM

[ChairmanOfTheBored]

(Blizzard), on 17 March 2012 - 01:09 AM, said:

Well they've done really amazing things in the last decade, right, amazing things. They've done nothing, and, er, it's amazing, and it's made us all rich, right.
...

Right? Look it's economics, it's really really complicated. You wouldn't understand.

Way back in the day there was a great Harry Enfield/Paul Whitehouse sketch with two drunk blokes sitting at a pub in a crap boozer repeatedly saying, "My house, is is my 'ouse, but my home, is my 'ome", over the fadeout you get some fake BBC credits and a voiceover saying "If you would like the free empty cigarette packet with the word bum written on it that accompanies this series, send a self addressed envelope to BBC Television Centre..."

People are trying to revise what happened. What happened in the UK is that the banks borrowed short and lent long. The US property bubble burst and the liquidity in the wholesale funding market that had allowed UK banks to borrow short disappeared and hence UK banks were insolvent. The house price collapse that then started up would have demonstrated that aside from the issue of being insolvent they were also going to quickly make such enormous accounting losses that they would be clearly, even on the casual inspection, nothing but a big net liability without the ability to generate any profits.

To play devil's advocate you could argue, on the behalf of some over leveraged home owner, that as there was a spread between the effective interest rate that the banks paid to fund all this lending and the rates that they lent at, the home owner could have reasonably assumed that the bank were doing something to deal with this borrow short/lend long risk, and not just passing all the difference on to employees and shareholders.

The Flander's piece is disgraceful, an attempt to hand around the blame on the basis that "things are more complicated than they look to you" whilst completely ignoring the fact that crashes started this, crashes are still happening all over the world and the UK market still looks accident prone, to say the least. I wonder if 5 years down the line the net assets/liabilities graph will look so friendly. Pretty sure there are nominal falls round here. With inflation still running at a non-trivial clip, its certainly falling in real terms right now. Bonkers to not even critique the Squid's argument in light of the possibility that we may see some acceleration in the deflation of our bubble.

[billybong]

Quote

Why did we have a financial crisis? And why has the recovery been so slow?

Ask any normal person these questions, they would probably blame the banks. But then world-weary "experts" - policy makers and commentators - would usually step forward, to put them straight.

"The banks made mistakes", these wise heads will say, "but really it's all our fault, for running up so much debt. We all had a binge, and now we have to pay."

It's an excellent morality tale, which chimes well with the British tendency towards self-flagellation.

There's just one problem. It's not really true.

In a nutshell, that's the argument that Ben Broadbent, a member of the Monetary Policy Committee has made, not very convincingly, in a new speech.

Amended - to be more accurate.

This post has been edited by billybong: 17 March 2012 - 01:12 PM

['Bart']

bmf, on 16 March 2012 - 10:36 PM, said:

I just found the article to be typical of pro-housing "wealth" in that it argues it's ok to have very high debt because the housing "wealth" balances this out.

In such a situation, wouldn't everyone have to sell their asset (houses) to pay the debt?

And which debt would they be paying, their own private debt or the public debt?

Very selfless of them if it was the public debt.

Where would they all then live? And who would they sell their property to? Russian oligarchs? Martians?

[dances with sheeple]

The fact that people have stopped buying houses,and interest rates are going up makes the article pretty irrelevant anyway? Didn`t read it BTW, Flanders, Peston etc are just Janet and John figures with the task of keeping sheeple making the payments just a little longer? If the truth was spelled out, written on a large blackboard in capitol letters by a celeb reading a telepromter,the sheeple would start killing each other, much better to just string them along with mumbo jumbo that tells them they were "right" to borrow big wads of electronic paper

[billybong]

Quote

Here's another interesting fact: the median loan-to-value ratio on a new mortgage didn't go up during the "boom" years - in fact, for most of the 1990s and noughties it was falling.

That's consistent with the idea that rising house prices caused bigger mortgages - not the other way around. According to Broadbent, there isn't even much evidence that "mortgage withdrawal" - loans taken out on the basis of rising property values, were used to fund extra consumption.

Not everyone will buy these arguments.

The 1st paragraph seems an excercise in confusing the loan-to-value ratio with the price/income ratio.

Otherwise why write such stuff. It's not "an interesting fact" because it's entirely consistent with increasing debt described in the earlier paragraphs of the article. If it had been the price/income ratio that had been declining (which it wasn't of course) then that would have been "an interesting fact" to mention.

As for the 2nd paragraph even the Bo'E's governor about 2004/2005 was reported to have said that housing market equity was important to consumerism. That's one of the reasons he used to drop interest rates then as prices were starting to show signs of slumping. Maybe all MEW didn't go into buying consumer tat but plenty of other loans against housing equity did - so the reference to MEW in isolation is also a bit misleading

This post has been edited by billybong: 17 March 2012 - 01:55 PM