Monday, Dec 19, 2016

A good analysis of market drivers...

Andrew Goodman Blog: The Fallacy of Booming UK House Prices

... of course as usual timing is everything.
The blog has other interesting HP articles too.

Posted by techieman @ 08:51 AM (4935 views) Add Comment

5 Comments

1. icarus said...

It's true that banks are money factories rather than money warehouses. They aren't recycling savings, they're creating debt. One ex-poster here used to say 'debt doesn't matter because we owe it to ourselves'. This is true when person A loans money to person B. When person B pays it back his ability to spend is reduced by the extra amount that A's ability to spend is increased. It's a seesaw. But when banks lend it's an elevator. Debt keeps rising for a long time or, when people start repaying, debt falls - the elevator comes down, with the possibility of debt deflation as the repayments reduce people's ability to spend on goods and services (outgoing include mortgage/rent, other repayments to banks - student, auto loans etc. - and don't forget penalties (the writer doesn't mention this), which can be more than interest, and taxes).

'We owe it to ourselves' - 'we' is the 99%, 'ourselves' = banks and the 1% rentiers, capital-gainers.

The writer has it that 'bailout of banks' 'was a major error on the part of the Governments involved and highlighted how much the political parties pander to their funders in finance.' The second part of that sentence rather contradicts the first part. Was it crony pandering or error?

His 'death of the British Pound' thesis depends on showing that other countries have more going for them than the British with their debt and finance. Hence the nonsense - "the USA is dominant in technology (computing), trading oil and other commodities priced in dollars, and war. So the dollar holds its value in spite of the fed’s money printing escapades (so called Quantitative Easing) because of the U.S. Economy which backs it up". I'm not sure how the 4 trillion dollars spent this century on wars in the middle east strengthens the dollar - it simply transfers money to the military part of the 1%. Others have shown that computing is not adding significantly to productivity or GDP, but yes, the reserve status of the dollar is a major crutch (and you could argue that war is an important support for that crutch). And look at Americans' huge pile of debt and US debt deflation. US government guarantees mean that for most mortgages lenders will lend up to 43% of salary. In NYC average rents are over $50k, average salaries $80k. After housing costs (say 40% of salary) there are credit card, student and auto loan debt (10%) and taxes (25%), leaving 25% for goods and services.

He mentions money printing by governments and by banks but doesn't say what the consequences are of each Regarding government printing he says the consequence is inflation - "Governments’ desire to print as much money as they see fit means that rampant inflation usually follows soon after their introduction." And what of banks' money creation? For a rebuttal of what he says of government-created money see http://www.yesmagazine.org/new-economy/trillion-dollar-coin

Monday, December 19, 2016 03:07PM Report Comment
 

2. libertas said...

By the way, interest rates on 1 yet gilts have been negative the past two days. Time to look forward to lower mortgage rates and higher house prices as capital ploughs into London from Italy?!

Wednesday, December 21, 2016 12:50AM Report Comment
 

3. techieman said...

Missed you Libby and your Christmas cheer.

Good to see some ho ho ho-ing.

Happy Holidays!

Wednesday, December 21, 2016 07:41AM Report Comment
 

4. jack c said...

Back in the halcyon days of HPC we used to have the 'Comedy Club' posts and I have to say this one has me chuckling "Time to look forward to lower mortgage rates and higher house prices as capital ploughs into London from Italy" (Wednesday, December 21, 2016 12:50AM)

I wonder if the capital that ploughs into London from Italy is from re-directed bailout money (if it happens)

www.express.co.uk/finance/city/745553/Eurozone-COLLAPSE-fears-as-Italy-demands-17BILLION-bailout-to-prop-up-its-doomed-bank

All the best for the Christmas and New Year break everyone

Wednesday, December 21, 2016 09:50AM Report Comment
 

5. nickb said...

Good analysis @1 and thanks for the chuckles @2.
Re the blog article, and the supposed evils of fiat money per se, the author seems to be yearning for the gold standard or something. Don't think that was a storming success when Britain tried to go back on it!
Merry Crimble everyone.
Nick

Thursday, December 22, 2016 01:05PM Report Comment
 

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