[Aberdeen, Aspc Stats]

a slightly bigger portion of Red Meat for the Aberdonian Bulls in the P&J as well.......

QUOTE

Stewart Milne Homes has tabled plans for up to 500 properties and facilities on the outskirts of Stonehaven at Mains of Cowie.

No, that's not right.

Increased supply plus static (or falling) demand equals lower market clearing price. Therefore this is news for the bears.

[Morgage Fraud £7 Million In Aberdeen]

When the tide goes out, we find out who's not wearing any swimming trunks, as Warren Buffet said.

There'll be many more instances of sharp practice like this still to be exposed.

[The Mcglashan Answers Hamish Mctavish]

Hiya Hamish,

Thanks for your thoughtful responses - I appreciate it.

If I may, I'll indulge myself with some thoughts on a few of the political and philosophical viewpoints, before moving on to economic matters (which are probably more worthy of substantial debate)...

had you done so, and sold at the top, you could have purchased that flat for cash several years earlier, HPC or no.......

There can be no argument with hard economic facts of this statement. However, there are socio-political soft facts which I believe should inflence the decisions of young people in similar situations:

As I alluded to, a two-decade commitment to servicing a major debt whould have completely cut me off from the life which I have subsequently explored... "If you can't do it when you're young, when can you do it?"

I would have, in effect, been living someone else's life, a conventional cookie-cutter cubical existence, someone else's idea of how a good consumer-producer should be and behave. Always at the back of my mind would have been the nagging thought that there was something... else, something better outside the walls which I'd volunteered to have erected around me. No doubt I'd have succumbed to the consumerist 'spoonful of sugar' to help this bitter tasting 'medicine go down'.

I mentioned a 'Portlethen McMansion' and, apologies, didn't make it clear that I was using the term ironically. My criticisms and analysis of UK housing would be similar to your own. However, I think we differ radically in the perception of the desireability of luxury. If pushed, I would have to say that, rather than luxury, I desire quality, originality and authenticity: all things which (in all aspects of life - not just housing) are in short supply in the UK and other regions you mention. I do not feel the need, so prevalent today, to compensate myself with luxurious posessions because of what else might be missing in my internal life. I choose 'being' over 'having'. My family prefers my presence to presents.

I don't pretend to have any final answer to the perennial question 'how should we live?', but the individual is, indubitably, the person best placed to answer his own question 'how should I live?'. The crux of the problem is that, if we settle for an existence where we surround ourselves with undemanding distractions, with easy comfort, then we run the risk of ignoring, avoiding, dismissing or not even asking the real existential question which faces us all: "Who am I? What does it mean to be a human being?".

You, yourself, have also intimated your own deviation from the 'traditional' norm. Who is to say what the 'traditonal norm' is? From where do we receive our opinion of what is 'normal'? My personal objection to the consumer-producer paradigm which prevails today is that young people run the risk of denying themselves the opportunity of 'living', of 'being', while volunteering for what, in effect, is a form of bonded labour in a gilded cage. I shudder to think what we, as the human race, are denying ourselves in terms of unthought-of artistic, scientific, political and social advances because of this wholesale theft of human potential. It is no mere happenstance that the abolitionist movement culminating in the Slavery Abolition Act of 1833 co-incided with the rise of the joint stock company, the smashing of the artisan's guilds and the creation of the urban proletariat. There has been little progess since then.

Now, I am no foaming-mouthed seditionist preaching revolution from above, but as the global financial crisis enters a stage with an altogether more socio-political flavour, these are now open questions which are on the agenda for the first time in a long time. It is over the next decades that a new 'battle of ideas' will be fought. Yes, we're all in it together, but we've all go to work it out for ourselves. I doubt that we are all as well-equipped as we should be.

Did you listen to the iPlayer link to Oliver James on Radio 4's 'Bookclub' which I gave above? Did you read David Cameron's Google Zeitgiest speech, or JMK's 'Economic Possibilities...'? I'd be most intrigued to read your thoughts on these important topics.

Just another couple of things: you've again picked up on my horror of commuting, my cycling habit and my making my own bread. All trivial things really, but, in a sense, we can use them as sounding-boards upon which to test our assumptions.

Upon setting up my own enterprise, I was faced for the first time in years with funding my own transport. With every penny a prisoner, I calculated that the full life-cycle cost of a ‘decent’ car comes to about GPB £300 per month (not to mention the environmental externalities), an expenditure I simply couldn’t justify at that time. For that amount of cash I can take a taxi any time I need to, and if I REALLY need a car, I hire one. Shorter trips (less than around 15 miles) are by bike. Last time I hired a car, I felt an intolerable level of restriction on my freedom, what with speed limits, one-way systems, traffic queues, parking restrictions etc. I also felt physically restricted behind the wheel: strapped in an inhuman metal box in a horrific parody of bondage. “The chains we so revere” eh? There is also, of course, the carbon emission matter...

So, I cycle when it’s appropriate. I walk when its appropriate. I get the bus or train when it’s appropriate and I drive when it’s appropriate. I have found that the ‘appropriate’ test is indeed the acid test for motoring in my personal circumstances, and so I hardly ever do it. When we commute, our precious time is stolen and lost, as you have pointed out. Commuting by car is doubly inhuman, at least on the bus or train one can read, write or think. At this time of year it's triply inhuman, getting up in the dark, working inside, cut off from the natural environment only to return home once again in the dark is about as alienating a way of life as it's possible to imagine.

So, I cycle more than most, and regard easy access to amenities by bike an important consideration when deciding where to live. Agreed, this is not a mainstream consideration for many in this part of the world; but it is elsewhere.

http://www.webstockpro.com/DigitalVision2/...-Station-Photo/

Perhaps I'm in the vanguard of seeing things this way. The problem with being in the vanguard is that you're the first to face the enemy, and your comrades may shoot you in the back.

To me, my time is worth money. Somewhere around £40 to £50 an hour. As I enjoy my work, and don't particularly enjoy baking bread, I'd rather work an hour, and buy bread for several months from the proceeds. The alternative is to spend many hours baking bread, and lose either hundreds of pounds, or many hours of recreation that I do enjoy.

To me, time is worth soooo much more than money. The baking example is a very small thing, a tiny part of my life, but I'll address it nonetheless as an example of how I live: Baking bread doesn't actually take very long, about 15 minutes to make and knead the dough. What it does require is one's presence in one's home: 1 hour later, you put it in the oven, 45 minutes later, it's ready. In the meantime, you can feel free to make as much money as you feel you need, or watch a movie, or read, or play the bassoon, or play the buffoon, or post to a blog, or phone a relative, or whatever.

There is, however, an unquantifiable value, a small thing, a certain fulfillment, you feel a primeval connection with those humans who first moved to an agrarian mode of production 10,000 years ago as the delicious aroma spreads through the house. It's original, it's authentic, you control the quality yourself. (You control the salt content yourself!)

The grateful look of joy and delight you receive when you give a hand-baked loaf to an elderly neighbour or relative cannot be valued in monetary terms. Social capital is like that, part of its reward comes in creating it. Money and the possessions it can purchase (including houses, for that matter) are just things, they have no intrinsic human value; it is in the realm of thought, emotion, generousity, consideration, playfulness and creativity that we express our humanity and its potential.

I fully understand the enjoyment that cycling can give... I keep it for the weekends.

The concepts of 'working week' and 'weekend' mean absolutely nothing to me.

My thing is more "Go hard or go home"

I don't understand what that means. It sounds like some sort of motto from one of those TV-friendly artificial American spectator sports - all very macho and aggressive and posturing and shouty. I think I'll just go home....

When I mention luck as the significant factor in success, whatever one's method for measuring success you respond

I'd suggest theres quite a lot more to it than that. In general terms, I do hear that type of comment a lot, when applied to anyone that has done well. My theory is that you make your own luck. Never give up. Never listen to the nay-sayers. Never let failure be an option. View every setback as an opportunity. Almost every person with those mindsets will succeed. Perhaps not in their original endeavour, but in something.

Well, I thank providence for my luck every day. But if I analyse my situation per your quote, it applies to me just fine too. This chap has written a recent book on this very subject, with special reference to 'the American Dream'.

http://www.newscientist.com/article/mg2002...m-gladwell.html

I've not read it yet, but it's on my list, so I'll let you know what I think...

It's interesting to note that Gladwell is one of the 'Freakonomics' generation of 'behavioural economists' the like of which Barak Obama has surrounded himself with.

So, so much for the politics and philosophy, what of the economics?

Again, I must apologise, you have indeed stated that you see a house price recovery starting 2010. I'm not so sure, per this comprehensive article:

http://www.marketoracle.co.uk/Article8080.html

However, I still await your responses to the majority of the (bearish) outstanding and referenced points I have asked you to comment upon, and which I summarise below, and would also like to see forecasts or data which re-inforce your viewpoints.

We are all, if we're not careful, subject to confirmation bias; that is, we seek out resources which re-inforce our prejudiced viewpoints. I would like you to appreciate that I'm totally open (in my own enlightened self-interest) to having my interpretations adjusted in the light of any evidence which you might choose to present to me.

1. Kondriatev 'super-cycle', invoked by George Soros

2. Inherent instability - the dynamics of complex systems.

3. Aberdeen & the oil industry: In the context of the triple whammy of the liquidity crisis, resource depletion and price volatility - does Aberdeen have Dutch Disease? (or Resource Curse)

4. The credit cycle and credit revulsion.

5. Inherent economic, political and international barriers to the socialisation of debt and quantitative easing.

new link

http://blog.iea.org.uk/?p=222

6. Soros' reflexivity in markets, momentum, sentiment. 'The trend is your friend' (or enemy, depending upon your point of view.)

7. Glut of empty properties.

8. The Minsky process

I have provided the original links to citations elsewhere, but just ask if you need them again...

Cheers,

McG.

(edited for clarity, nuance)

[Aberdeen, Aspc Stats]

who's moray to be dictating ?

5 minutes in the door

Na, moray's comment is fair enough, Hamish & I were moving far away from 'ASPC stats' and straying into ideological, philosophical, personal and political stuff. I enjoy counting the angels on the head of a pin, but it is off-topic.

[Aberdeen, Aspc Stats]

Hamish,

While I asked you to provide some form of back-up in support of your position by answering the outstanding questions I've posed to you, you chose to hand-wave past the outstanding points, attack (and then admire) my lifestyle, and then call for a truce.

In deference to Moray, I will answer your points here:

http://www.housepricecrash.co.uk/forum/ind...showtopic=99836

[The Mcglashan Answers Hamish Mctavish]

...More

Now, as for your comments regarding my own situation, as someone with two properties, the more valuable of which is paid for completely, zero additional debt, and significant additional assets, your comments on my LTV ratio are ignorant at best, and insulting at worst. My mortgage obligations (total debt) are currently less than 25% of my net worth. In the most extreme of cases, (ie, a crash and recession many times worse than is predicted by the gloomiest of prognosticators) they would still be less than 40%, a situation which is hardly troubling to me, given the long term (20 years plus) timescale that I base investments and asset ownership on.

Regarding my statement about LTV, lets just examine the reason for your resentment at my stating that no amount of umbrage at me will "improve your LTV". Let me first point out that this is a statement of fact, and is based upon no assumptions whatsoever. Moreover, I have tolerated a barrage of personal abuse from you, ranging from comparisons to firebrand socialists, through questioning my parentage and calling me 'evil' to accusations of delusion. You have even lampooned my reading of books. You have put words in my mouth and you have impugned my lifestyle, jumping to conclusions about my circumstances in the absence of evidence, citing only cherry-picked statements taken out of context. For my part, I have called your statements topsy-turvy bombastic bluster, and have drawn conclusions about the ideologies and dogma (laissez-faire neo-liberalist capitalism) to which you subscribe; but these conclusions are easy to draw from the statements of your beliefs which you have given for all to read. You have not challenged any of these conclusions which I have drawn.

Yet, tellingly, when I offer a factual observation about LTV ratios, you bleat that it's ignorant and insulting for me so to do. I think we can infer that you see this as very important aspect of your life, your net worth (a phrase you use repeatedly) being the foremost aspect by which you measure your 'success'; an aspect in which you feel increasingly insecure.

At the risk of appearing patronising, I would actually like to help you overcome this crippling problem...

Listen to this - Radio 4, yesterday.

http://www.bbc.co.uk/iplayer/episode/b00g9...lub_04_01_2009/

However, what I seek to attack is your repeated and unfounded assertions that property prices will recover and boom in 2009. I personally regard a 20 year span as being so far beyond the horizon of predictability that to commit myself to financial obligations across such an ocean of time as to be tantamount to selling myself into slavery.

And furthermore, I am by no means one of the 6 figure salary, wealthy folk who inhabit these parts in increasing numbers. I make only 15% or so over average, and my wife makes roughly the same. To be fair, we have no kids, and don't lead a glamorous lifestyle and so have been able to pay debts early and save, and we also worked as expats for a while with the tax free benefits that that entails. But we have done nothing out of the ordinary, or that anyone of average ability could not do. The only secret to our success is that we have invested wisely over the years, and have been moderately successful at calling the trends.

All very nice, but you do (I think I read elsewhere) work up to 50 hours per week. I, on the other hand, work up to only 20 hours per week, and do lead (what many would regard as) a glamorous lifestyle. I expect it comes down to what you choose to measure your success by. I refer you to the David Cameron speech and JMK essay linked above. I prefer my jam today; I love my cat, not the kittens she may or may not have at some point in the future.

You may congratulate yourself on your wisdom and ownership of the secret of success, but, as I have mentioned elsewhere, your 'success' is similar to a lottery-winner's luck. One can place bets, but it’ll be luck, not any special insight or genius on the gambler’s part which determines the outcome.

Now, to the point at hand.

You make a number of assertions regarding economic theories and opinions of a select group of commentators, some of which are mainstream, some of which are quite obscure, but almost all of which have equally valid opposing viewpoints.

You also challenge me to refute them, with quotes. I quite frankly have no interest in spending that much time researching your posts, and quoting sources with opposing viewpoints (of which there are many).

If I may correct you, I make no assertions, I offer logical conclusions. The economists and commentators I have referenced may be the poster boys of opposing ideologies, but their ideas converge in the situation in which we now find ourselves. This is an example of the dialectic method (sort of), and does not negate my referencing them, rather, the fact that they find synthesis on this subject re-inforces my arguments.

Again, you shirk debate by refusing to offer sources with opposing viewpoints. As I love debate, and you are clearly a capable adversary, I sincerely wish you would do so.

I will though, and have already done so, stick my neck out with regards to my predictions for the Aberdeen and Scotland housing markets likely future, the causes and cures to our current economic malaise, and also post and discuss things of interest for the local economy, the local and scottish housing market, etc.

I am quite happy to continue to debate these issues with you, and in the spirit of new year would suggest something of a truce, (perhaps we should just agree to disagree on many points) and a more direct form of debate that doesn't make other readers eyes glaze over at the length of our posts.

Fair enough, likewise.

Whilst I'm at it with this spirit of detante, it's not that I in any way wish to denigrate your lifestyle choices, in some ways I actually admire the freedom from conventional restraints that they give you, but I do not believe them to be mainstream, and I feel that your longing for a HPC to enable you to live your self imposed financially restricted lifestyle at the expense of almost everyone else who owns property (70% of the population) is somewhat misguided.

I agree that I am far from mainstream, and appreciate your admiration. But you are quite wrong to believe that I am financially restricted: I just have a strong nose for value-for-money and am wary of over-indebtedness and the misery and cutting-off of choices that it implies.

[The Mcglashan Answers Hamish Mctavish]

To obviate the risk of boring other contributors on the Aberdeen, ASPC Stats topic, I invite Hamish to continue our debate here.

Hi Hamish, Happy New Year.

From your own admissions, you are someone that has had a career in banking, a career in oil (ending when you were, and I quote, "laughed out of the boardroom"), and you now only work part time, 15 hours a week, in a self employed "creative" role......... whilst practising (and posting endlessly about) what you admit to be an "amateur" interest in Academic topics.

Bank job was more or less a summer job between secondary and tertiary education, not anything approaching a career.

Oil industry was, I thought, a career, until the disastrous episode you have picked up upon. I worked as a procurement manager for one of the large underwater construction contractors. Seeing the way the wind was blowing (pun intended) I suggested to the board that a business unit be set up to exploit the coming market for installation of deepwater offshore wind and tidal flow turbines. It was at this point I was metaphorically "laughed out of the boardroom".

A short few years later and we see this:

http://www.beatricewind.co.uk/home/default.asp

http://www.greatergabbard.com/opencontent/...lt.asp?itemId=5

http://www.offshore247.com/news/art.aspx?id=12464

and much more to come...

You jump on my use of the word "amateur". I use it in this sense:

amateur

noun

a person who engages in a pursuit on an unpaid basis.

adjective

engaging or engaged in without payment; nonprofessional

Translated from its French origin to the English "lover of", the term "amateur" reflects a voluntary motivation to work as a result of personal passion for a particular activity.

I engage in many interests on an 'amateur' basis. Some of these interests may be to my material gain in the future, and thus will turn out not to be 'amateur' after all...

And yet throughout at least two careers, in addition to your current situation, you have seemingly not been able to afford to buy a house. A situation you blame on prices, speculators, and lending, in short, anyone but yourself. I do not need to point out that had you purchased at the beginning of your career, and held until now, you would have paid in inflation adjusted terms, far less than you will now, or in the foreseeable future. You would also have seen a massive increase in your net worth, as by your own statements, the asset price would have gained dramatically whilst the debt was inflated away.

True enough, and I'm pleased to see you acknowledge the effect of inflation on affordability. Fact was, around the time of the "laughed out of the boardroom" incident, I was close to buying a double-garage McMansion in Portlethen. Had I done so at that time, I would have become the 'debt-driven wage slave' which I have sketched elsewhere. I would have been trapped in a career which I found increasingly unrewarding, and unable to embark upon the (initially) high-risk venture which has since provided me with a sinecure. I will be in a position to buy for cash sometime towards the beginning of next year, but I don't believe the price is right... yet...

You also have previously stated an interest in the attractiveness of prices in areas like Montrose, whilst more recently disparaging my

own statements about the affordability of southern coastal areas.

Again, true. However, you'll remember that what I specifically objected to was your suggestion that a young person should commute from these areas. I work (if you can call it work!) from a studio within my residence.

You have furthermore admitted that your own situation regarding desirability of location is guided as much as anything by your refusal to own a car (too expensive) and to cycle everywhere. Perhaps a noble endeavour, but hardly representative of the majority. You wish for, and cheer on, a crash.... in order to bring "flatted properties with garden" of 125K down to 70K or so (a situation in Aberdeen which no informed commentator believes will happen), ...

I admit to being an utter skinflint. However, my wish for a 70k flat in Aberdeen with a garden is not unrealistic. John Calverley, Standard Chartered “The key thing is that a 50 per cent decline in prices only takes many values back to where they should be. It does not make them cheap.”

...but which would allow you to purchase in a location limited by your "bicycle range" to the major facilities and sources of arts, entertainment and culture. Again, hardly a mainstream concern, and fringe values, such as your own, are unlikely to guide the wider market.

Arts, entertainment and culture are not mainstream concerns? The UK is a world-leader in the continually-evolving creative sector. This sector is comparable in size to the financial services industry (about 7.4% of the economy, approaching 30% of value-added), with 10% yoy growth and offers sustainable, high-level employment.

http://www.guardian.co.uk/education/2008/s...highereducation

Lastly, you have previously rejected my comments regarding your socialist tendencies and unrealistic expectations regarding property value declines to fit in with your chosen lifestyle.....

I again state that someone that works 15 hours a week, that has chosen (and i'm being generous here) to live a lifestyle where 15 hour weeks, spending many hours baking your own bread as the price of a loaf horrifies you, cannot afford to own a car, travels everywhere by bicycle, and trades hours of your time to balance your greengrocers books in exchange for a few pounds of fruit and veg a month, cannot possibly be considered either mainstream or economically viable for the majority.

I am not a socialist, as I have stated elsewhere, I cleave to no ideology and my expectations are perfectly realistic in the context of the references and citations which I have given at length and which you have made no attempt to refute. Bread is more expensive than it was; it's fun and fulfilling to bake one's own. I certainly can afford a car, but, on balance, have decided that, in my circumstances, it's inappropriate for me to have one - it's difficult to work out under what circumstances I'd use it! Cycling is fun for utility, leisure and fitness; and balancing my greengrocers books has much more to do with social capital than with any gross calculation of comparative advantage. Admittedly, these aspects of my lifestyle may not be mainstream, but, in the context in which I mentioned them, they are examples of what is possible if we chose to live debt-free, if we reject the 'spoonful of sugar' that consumerism offers, if we give up 'the chains we so revere'.

I know that you've voiced an objection to reviewing the various screeds of references I've given, but I urge you to read this speech from David Cameron:

http://www.guardian.co.uk/politics/2006/ma...es.davidcameron

And Keynes' text from which he took his major reference:

http://www.econ.yale.edu/smith/econ116a/keynes1.pdf

More...

[Aberdeen, Aspc Stats]

Aye, whatever. Didn't think anyone could be more delusional than McGlashan, but there you go......

Hamish,

You may use the anonymity afforded by these boards to insult me as much as you please, but, however much you wish it to be so, venting your frustration on me will not improve your LTV ratio.

The fact remains that I have raised several points which challenge your stated positions; points to which you have yet to respond. For your convenience, I re-state them (with citations) here:

1. Kondriatev 'super-cycle', invoked by George Soros

http://en.wikipedia.org/wiki/Nikolai_Kondratiev

2. Inherent instability - the dynamics of complex systems.

http://www.levy.org/pubs/wp74.pdf

http://en.wikipedia.org/wiki/Lyapunov_stability

http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf

3. Aberdeen & the oil industry: In the context of the triple whammy of the liquidity crisis, resource depletion and price volatility - does Aberdeen have Dutch Disease? (or Resource Curse)

http://en.wikipedia.org/wiki/Dutch_disease...f_Dutch_Disease

http://en.wikipedia.org/wiki/Resource_curs...ce_curse_thesis

4. The credit cycle and credit revulsion.

http://en.wikipedia.org/wiki/Credit_cycle

http://www.investorsinsight.com/blogs/john...-revulsion.aspx

5. Inherent economic, political and international barriers to the socialisation of debt and quantitative easing.

http://www.spearswms.com/spears-world/salo...rlds-bank.thtml

http://www.ft.com/cms/s/0/d049482c-cb8f-11...0077b07658.html

6. Soros' reflexivity in markets, momentum, sentiment. 'The trend is your friend' (or enemy, depending upon your point of view.)

http://www.sharpeinvesting.com/2007/08/geo...mit-speech.html

7. Glut of empty properties.

http://news.bbc.co.uk/1/hi/uk/7744342.stm

8. The Minsky process

http://en.wikipedia.org/wiki/Minsky_moment

http://www.levy.org/pubs/wp74.pdf

9. The historic erosion of your major debt by the process of inflation, a mechanism not available today. Recently we have had (and continue to risk) von Mises' "debt trap".

http://mises.org/story/1771

10. The basket case economies of the FSU and eastern block are a product of the rapid liberalisation of their economies, not of their former socialist heritage.

http://www.naomiklein.org/shock-doctrine/the-book

http://www.demokratizatsiya.org/Dem%20Arch...04%20bivens.pdf

Now, to borrow a phrase from our American cousins it is time for you to "sh*t or get off the pot". (Please excuse my vulgarity.)

I await your reasoned and referenced responses with anticipation.

[Aberdeen, Aspc Stats]

tell me about it! thats probably why I spend so many hours on here and other sites trying to make sense of what is coming.

I've gone for a mix of cash, cows and PMs!

Very good. If you notionally hypothecate cash for a potential house purchase at the bottom of the market, you're getting a much better real-value return than you'll get in any fixed-term bond available through retail banks.

Livestock looks like a good bet also, you'll always be able to eat and make a living, if even through barter (tho I doubt very much it'll come to that).

Please excuse my ignorance, what are PM's?

Personally, I hoard cash per above and, being involved in the creative sector, am investing only in the tools of my trade which (I hope) will preserve and enhance my ability to make a living.

[Aberdeen, Aspc Stats]

It is pain all the way now for anyone with a large multiple mortgage - if it is to be deflation then the principal is going to hang around for the life of the mortgage; high inflation and interest rates will have to go up and then the repayments will go through the roof.

Indeed, during 2008 we were in a phase of 'biflation' which has had the effect of rising prices for necessities, and contracting prices for debt-assets. Whether monetary policy (or any other form of stimulus) can deal with this two-headed beast is moot.

http://en.wikipedia.org/wiki/Biflation

Very difficult to plan for wealth preservation in such an environment....

[Aberdeen, Aspc Stats]

Two decades of 50 hour weeks, recessions and house price crashes, 15% interest rates at times, etc. Our first house was about 3 times our joint income, (about 4.25 times my single income) and the interest rates were horrific. It also needed a lot of work doing at the time, nothing like as nice as what people expect nowadays. It took many years of scrimping and saving to get it all done, we had no central heating for the first 2 years. Couldn't afford holidays, had hand me down furniture for the first decade (and in fact still do in some rooms).

I had a tear in the corner of my eye [puts away onion] while I read of Hamish's heroic tale of self-sacrifice and triumph over adversity. There's just one thing, however, which he consistently fails to mention when he hubristically congratulates himself. During the decades when he repaid his first mortgage, the principal sum was substantially inflated away.

Because of the Friedmanite inflation-targetting monetarism which holds sway over central banks today, this fortuitous facility is no longer available. I have asked Hamish to comment upon this before, but he has chosen not to respond.

In many of his messages, we see Hamish calling for policies which would indubitably prove to be inflationary. This is his agenda: he seeks to sustain absolute house prices through quantatative easing and the socialisation of risk and debt, letting loose the demon of high inflation to ease the burden of his new debt, acquired at the height of the boom.

[Aberdeen 2009 House Price Predictions.......]

Hamish, you have chosen to respond to my reasoned arguments with a barrage of bombastic bluster and personal abuse: I provide logic and citation, you provide sarcasm and scorn.

Can you not appreciate that by using tactics like this you are making it less and less likely that you will persuade anyone that you have a valid point of view? Can you not see that any points you might seek to make are obscured by your obloquy?

However, I'll answer your points, and at the end, summarise those points of mine which you have chosen to ignore.

Predicting the timeline and duration of the next bust, based on the last one. That couldn't possibly be a mistake you chide others for, could it?

I have done no such thing. It is clear that cycles are present in political economy - what I said was "Predicting cycles is easy - you’re bound to be right eventually". That's all I've done.

-

Actually, it could be argued (and has in the main forum on here) that the bull trap was the period between 2005 and 2007, following the various stimuli of 05. And that the timeline of this market is being rapidly compressed.

Fair play, I have not seen that discussion, and I'd appreciate if you could provide a link so that I can review it. However, it seems more likely that the slight decline in the house price index before the 2005-07 run-up was a bear trap.

But, wait, let me see if I've got your analysis right... are you suggesting that the current decline is the fear, capitulation and despair all together, and that the bottom is in sight? If that is your analysis, we are in a bear trap right now, and house prices will recover and continue to rise. Where do you see the top, if any, being?

-

It's always a bit tricky trying to convert all those pesky theories into actual practical applications., Still, maybe you can settle down in front of the fire with some more of those obscure economics books you're so fond of.

Indeed it its difficult to convert theory into prognostication, per my analysis of the inherent unpredictability of the dynamics of complex systems. As Mark Twain said "history does not repeat, it rhymes". (And historians repeat each other).

I can provide you with a recommended reading list, if you like. My love of reading books is not a valid vector of attack for you to choose, quite the reverse.

-

I specifically stated that overly loose 2007 lending was abnormal.

So you did, fair play, my mistake.

As for the mechanism, I addressed that quite clearly. Govt backed mortgage securitisation. If normal capital flows do not recommence, I can pretty much guarantee this will happen.

As I have said, it is difficult to see just what policy levers the government can use to pull this off without provoking high inflation or a currency crisis. The bond and forex markets are already looking pretty shaky. A return to capital controls and a roll-back of globalisation would be necessary: 'Capitalism in one country', if you will. The political and social downside dangers of such nationalism are manifold.

-

When I take the match of reductio ad absurdum to the straw-man of pent-up demand you say:

If you cannot already see the difference in need and demand between housing and ocean going yachts, I probably can't explain it to you. Which is precisely why the availability of credit will be restored, by the state if need be.

It is you who, elsewhere, invoked 'realistic expectations'. You said "Not everyone, and certianly not anyone on an average or below average income, can or should be able to afford a house..." My yacht example is an illustration of this very point. Yet you continue to invoke pent-up demand in support of your preferred policy of state intervention in support of house prices - in effect, a government-backed blank cheque to the over-indebted.

I re-iterate the point which I made that this is a politically (and economically) unacceptable form of debt forgiveness which would be frowned upon by international capital markets, and no doubt by the European Commission, the WTO and the IMF. You ignore what is the source of fiat currencies, which is debt. Central banks and finance ministries have no choice but to operate within the constraint of what might reasonably be expected to be repaid at some point in the future. There is a limit to sovereign debt and there is also a limit to what markets expect levels of sovereign debt to reach without the perception of a risk of sovereign default. This is not America.

You have completely failed to address this fundamental barrier to your preferred policy of the socialisation of risk and debt.

Again, I re-iterate that while it is likely that government will intervene on behalf of distressed debtors, there will be no free lunch on offer. Equity stakes will be extracted by the 'saviour' agency in return for the provision of a roof over the heads of the over-indebted.

-

I said "Finally, per my caveats above, I offer no prediction for house prices in 2009 but I will predict, per the graph on the front page of houspricecrash.co.uk that average prices will not return to peak levels for 15 to 22 years."

to which you responded:

Now just a few paragraphs ago you specifically stated you would not provide predictions of time scales. Hmmmm.....

Ok, I'll admit to a slip of the keyboard. Rather than say "... per my caveats above..." I should, of course, have said "...notwithstanding my caveats above...". Anyhow, I offer a 7-year horizon in which my prediction could be realised. Plenty wiggle-room there.

-

As I promised, I'll now summarise those points I've made to which you have chosen to offer no response.

1. Soros & Kondriatev 'super-cycle'

2. Inherent instability - the dynamics of complex systems.

3. Aberdeen & the oil industry: In the context of the triple whammy of the liquidity crisis, resource depletion and price volatility - does Aberdeen have Dutch Disease?

4. The credit cycle and credit revulsion.

5. Inherent economic, political and international barriers to the socialisation of debt.

6. Soros' reflexivity in markets, momentum. 'The trend is your friend' (or enemy, depending upon your point of view.)

7. Glut of empty properties.

I await, with great interest, your responses.

Finally, your offensively pugnacious "probably not much, and rarely" in response to my joking "What do I win" is a telling indication of your willingness to jump to conclusions in the absence of evidence, and is an implied re-iteration of your devil-take-the-hindmost, winner-takes-all philosophy: "all you've got to do is win"

"

Now your smile is spreading thin/

Seems you're trying not to lose/

Since I'm not supposed to grin/

All you've got to do is win/

Me, I'm fresh on your pages/

Secret thinker,/

sometimes listening aloud/

All you've got to do is win.

"

[Aberdeen, Aspc Stats]

Trump bails on 500 homes but still builds golf course

Bloody well knew this would happen..

Trump was allowed to build the golf course IF he built the 500 homes.

i believe the land was given to him for free too as this was one of the conditions.

We are getting royaly screwed at every turn while all the fat cats get richer and everything their way.

Does anyone in the Aberdeen Council has a goddam clue??

A post on these pages from me back at the start of the month. I believe we can expect more and more of a rollback on Trump's plans, until such time as Scottish Govt and / or Abdnshire council provide the money required to see Trump's plans through. A lang spoon and all that...

On the Trump thing, I have been following his difficulties in Chicago, problems getting re-financed from Deutsche Bank etc.

http://online.wsj.com/article/SB122523704293478077.html

Similar issues apply to his condo development in Baja California

http://www.forbes.com/forbes/2008/1117/034a.html

I have attempted many times to bring this to the attention of the EE and P&J bulletin boards and have been BANNED for my efforts.

This is Trump's established way of doing business. It seems, IMHO that he is not so much a successful property developer as a successful self-publicist and bankruptcy negotiator: He blows into town with grandiose plans. Sets up a development company, runs it into the ground, gets banks and local authorities to bail him out and re-patriates the profits to his privately-owned holding company in NYC which is a separate legal entity from the bankrupt concern.

http://select.nytimes.com/2007/07/06/business/06norris.html

http://query.nytimes.com/search/sitesearch...&srchst=cse

It looks very much like his casino and entertainment concern is about to go bankrupt for THE THIRD TIME.

From friday's NYT.

http://norris.blogs.nytimes.com/2008/11/28...-trump-casinos/

From the comments:

"Any one who invests in this braggart, this poser, is a masochist." Aberdeen City and Shire is that masochist.

So, I don't doubt that the Trump development will go ahead, it's just that we will end up paying for it. :angry:

A quick look at the share price of Trump Entertainment is eye-opening:

http://newsvote.bbc.co.uk/1/shared/fds/hi/...welve_month.stm

Trading at USD $0.28 [edit - $0.20] down from USD $5.57 [edit - $4.47] is quite a slide over 12 months. I remember these shares trading as high as USD $25 at the beginning of 2007.

The market is trying to send us a message about companies associated with Mr Trump. I believe that we should listen.

[Aberdeen 2009 House Price Predictions.......]

Hamish, Where to start....?

please try to leave the arguing/disparaging for the other threads, Thx

Who made you king then? There are some fundamental errors in your premise post on this new thread for which you seem to be claiming proprietorship. If you’re afraid that your statements do not stand up to rigorous analysis and rebuttal (with citations), why make them? For the benefit of others, I reserve the right to remove the log from your eye. The readers of this forum deserve no less.

“

The current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years. However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.

” 


George Soros, Financial Times, January 23, 2008

(Looks like Soros knows his Kondratiev)

http://en.wikipedia.org/wiki/Nikolai_Kondratiev

To extend and deepen Soros’ analysis with reference to Ben Bernanke’s identification of the ‘Asian savings glut’, the conversion of Asian savings into Anglo-saxon debt is undoubtedly the most significant contribution to Soros’ ‘era of credit expansion’. For a time, it was a symbiotic relationship that seemed almost perfect - one half did the saving and the other half did the spending. US savings declined from about 5% of GDP in the mid 90’s to zero by 2005, while Chinese savings surged from below 30% to nearly 45%.

The housing bubble (and household indebtedness in general) throughout the anglosphere was fuelled by the Asian savings glut - footloose savings looking for a home - which made it much cheaper for households (and governments) to borrow money than would otherwise have been the case. Some economists hailed a “stable disequilibrium”. What?! They should read up on Aleksandr Lyapunov’s work on stability and equilibrium.

http://en.wikipedia.org/wiki/Lyapunov_stability

A great deal of work has been done on the dynamics of complex systems since the 1890’s.

From Irving Fisher, the paramount US economist of the inter-war years. "Debt-Deflation Theory of Great Depressions" (1933).

"

Such a disaster is somewhat like the capsizing of a ship which, under ordinary conditions is always near stable equilibrium but which, after being tipped beyond a certain angle, has no longer this tendency to return to equilibrium, but a tendency to depart further from it

"

IMHO, (and that of others) the sub-prime bust was just one of may potential sources of turbulence for the global financial system. It could have been credit-card defaults (expect to hear a great deal about this in the spring), it could have been some emerging economy crisis (as unfolding in the former iron curtain countries and far east right now). Turbulence is now the prominent regime in just about all asset and commodity markets: volatility reigns, and any attempt to drive or dampen the oscillations will, inevitably, make the fluctuations worse. The markets will return to stability of their own volition. However - it is inherently impossible to predict with certainty when that stability will come and what that stability will look like.

Predicting cycles is easy - you’re bound to be right eventually - it’s picking the point of inflection in any market that’ll make you rich - one can place bets, but it’ll be luck and not any special insight or genius on the gambler’s part which determines the outcome.

But what of Soros’ and Kondratiev’s 60-year super-cycle, dating from the end of WW2? All the current talk of stimulus packages to mitigate the worst effects of the onrushing debt deflation automatically makes one think of FDR’s New Deal. The New Deal did not work. As late as 1938, one in five American workers was still unemployed. Genuine recovery came only with the advent of WW2, with its vast arms budgets and deficit spending. I feel uneasy that the ‘engine’ that finally pulled us out of the Great Depression may have been WW2 and then the permanent war economy of the United States. The ‘lifestyle’ benefits of consumerism provided by free-market economics are merely that: the civilian hinterland of a war economy. Perhaps I would be tempted to predict some sort of military catastrophe in the months to come... but I won’t.

Anyhow, let’s examine your predictions and “gut feelings” in detail:

Spring bounce more or less cancels out the about to be announced (and possibly another 8-10% decline) '08 Q4 losses, leaving us around 8-10% down cumulatively from peak.

Ah, the ‘bull trap’ - certainly not “a good time to buy”. Please see the attached chart “bubble psychology”. You are in the ‘denial’ phase. Your bull trap will certainly manifest at some point in 2009, I predict it will be followed by the ‘fear’ phase, then capitulation and despair before mean reversion. I will not provide a prediction of time-scales.

Oil will rebound. In the classic bubble course, it overshot on the peak, and has now overshot on the trough. I'm predicting $50+ by the end of 09, with $60+ not out of the question. Either way, enough to stabilise aberdeens oil industry jobs and avoid major layoffs (which of course is only 14% of the local workforce anyway).

I’m probably a bit more bullish on the oil price than you: OPEC will do it’s damnedest to get oil back up to $80-90 ASAP. Unrest in the Middle East will help.

However, as mentioned above, the underlying pricing regime is one of instability and is therefore an unsuitable environment in which to risk capital. There is a great deal of sense written on this issue here, which I urge you to read:

http://321energy.com/editorials/cohen/cohen122008.html

Volatility will cause producers and explorers to rub their chins and look at lower cost regimes than the North Sea in which to risk their capital.

A prediction: the downside of the Dutch Disease will begin to hit Aberdeen.

http://en.wikipedia.org/wiki/Dutch_disease...f_Dutch_Disease

Credit will ease, and more or less normal lending will resume

You may wish for this as much as you like, but it is difficult to see where the mechanism to provide this resurgence of credit will come from, given that we have barely begun the cycle of debt deleveraging. I take it that you regard 2007 levels of lending as being ‘normal’. I suggest to you and other readers that 2007 levels were aberrant, being part of the “mania phase” of the credit bubble, caused in large part by the ‘Greenspan Put’ following 9/11.

http://en.wikipedia.org/wiki/Greenspan_put

I predict that we will see a dawning realisation on the supply side of credit that a return to credit provision closer to 1999 levels is desirable. Quantitiative easing and ZIRPs will be an attempt to “push on the string” to achieve this, but there are downside risks on both the supply and demand side associated with deflationary pressures. I believe this is called ‘credit revulsion’.

Frank Veneroso on the US credit crunch PDF (warning - big, technical academic paper).

“

Credit revulsions are a response to real credit losses resulting from real failures of

borrowers to pay. Most of the credit revulsions of the pre war period and the credit

revulsion of 1989 – 1992 took a considerable time to repair. In some cases they set the stage for deep economic contractions and a compounding of the credit crisis.

The most famous example of this was the first banking crisis in 1930 which turned a

severe recession into a great depression. The only U.S. postwar example was the credit revulsion of 1989-1982. It contributed to the 1990 recession and resulted in a very sub-par initial economic recovery.

The most famous example of a credit revulsion in the postwar period is the Japanese banking experience from the bursting of the bubble in 1990 to the final onset of recovery in 2003. It was credit revulsion that kept Japan in stagnation and recession for more than a half decade despite a zero interest rate policy and unprecedented fiscal stimulus.

“

1) Quantitative Easing, print money, use it to re-supply the credit markets, and/or buy distressed assets therefore rebuilding bank asset sheets.

2) Government backed securities, eliminate the risk to funders of mortgage backed securities through govt guarantees.

3) Govt backed business lending, again, guaranteed by the state, low risk for capital providers.

4) Sanity will prevail. Toxic sub-prime loans were as much as 15% of the American market, but were less than 2% of the UK market.

One by one.

1) Difficult, but it will be tried in an attempt to kick-start credit markets and head off the deflationary demon. Risks Weimar-style hyperinflation. Requires international co-ordination to avoid exchange rate volatility - potentially requiring the wholesale rollback of globalisation and a return to 1950’s style capital controls. Risks not being bold enough to work.

2) What mechanism do you think will be used to provide this magic bullet? Shared equity through local authorities, housing associations or central government perhaps. This is already underway and is likely to be expanded in order to keep roofs over peoples heads. I predict that we will see the mop-up of mis-allocation of credit and over-investment (unfinished speculative housing starts) being bought up at wholesale or cost prices by this same central agency, whatever it may prove to be.

3) Ah, the socialisation of risk and loss, yet retaining the privatisation of profit. Politically difficult. We (as a polity) might allow this for ‘strategically important’ industries, but a government-backed blank cheque to any business with a cash-flow problem is totally unacceptable without a government equity stake in return.

4) Markets are inherently irrational, sanity did not prevail on the way up, it will not prevail on the way down. Your statement about sub-prime, while maybe correct, ignores the fact that UK consumers are the most indebted in the world. This is the greatest danger facing us as debt deleveraging becomes financial institutions’ priority. Your statement also ignores market sentiment and its tendency to self-reinforce. I believe this is called “reflexivity”.

More from Soros

http://www.sharpeinvesting.com/2007/08/geo...mit-speech.html

“

Reflexivity is, in effect, a two-way feedback mechanism in which reality helps shape the participants’ thinking and the participants’ thinking helps shape reality in an unending process in which thinking and reality may come to approach each other but can never become identical. Knowledge implies a correspondence between statements and facts, thoughts and reality, which is not possible in this situation. The key element is the lack of correspondence, the inherent divergence, between the participants’ views and the actual state of affairs. It is this divergence, which I have called the “participant’s bias,” which provides the clue to understanding the course of events. That, in very general terms, is the gist of my theory of reflexivity.

“

Affordability was never as bad here as many other places, ie, 3.5 times salary can still buy an acceptable place within reasonable commuting range for most FTB's, demand was and still is strong due to the healthy underlying economy, and there is now a massive supply undershoot due to new building being frozen.

I have dealt with your putative FTB thought-experiment elsewhere, and will not warm that soup again, but I must re-iterate that pent-up demand is irrelevant to house prices: only the availability of credit will have an effect. I have a pent-up demand for an ocean-going yacht, yet it is increasingly unlikely that anyone will lend me the money to get one.

Penultimately, I see the supply / demand equation differently. There is a great deal of housing which was started in 2006 still lying empty. The evidence I gather with my eyes while walking around town suggests that the mania phase of the bubble led to the mis-allocation of capital via overinvestment leading to a supply overshoot. I predict that we will see government legislation affecting the owners of empty properties to encourage occupancy.

Finally, per my caveats above, I offer no prediction for house prices in 2009 but I will predict, per the graph on the front page of houspricecrash.co.uk that average prices will not return to peak levels for 15 to 22 years.

What do I win?

[Aberdeen, Aspc Stats]

I quite agree. I was interested because I think that's the first time that I've actually seen a median figure mentioned in the press. Usually you see a mean which always sounds highly implausible.

Indeed. It's interesting to note (BBC Dateline London) that the crash in US house prices is slowing as average house prices approach 3x median of all earnings in the economy, although I'd hesitate to extrapolate that to the situation here, which may be better or worse depending upon your point of view...

BTW, loving your avatar.

[Aberdeen, Aspc Stats]

... to **** a snoop at the standards of ...

Ooh, that's a prudish filter, it's like playing Blankety-Blank in here!

[Aberdeen, Aspc Stats]

There's an article in today's Scotsman which has some interesting figures about average wages: Scots wages lag £3,000 behind UK average. It's talking about the results of a survey by the GMB, and it says that the average wage in Aberdeen is the highest in Scotland at £35,959 per annum. What's perhaps more interesting is that they point out that the GMB's figures are for mean salaries, and give a UK national average of £31,323. However, the ONS also compiles wage statistics, but they use the median wage: according to them, the average is £24,908. Quite a difference there.

Edit: here's a link to the GMB report.

The GMB publication itself is not a survey, it is a political analysis of an existing survey. The figures quoted come from the same source that we've referred to before - the ONS Annual Survey of Hours & Earnings (ASHE).

The high figure quoted for Aberdeen is a mean for full time annual contracted pay rates, including overtime, and therefore ignores large swathes of the employment picture. While useful for making political points, its not much use as a figure for determining aggregate demand in an economic region as a whole.

The ONS compile a vast array of figures, which, because of their comprehensiveness, are quite amenable to cherry-picking by interest groups.

The source page from the ONS from which the GMB have taken their figures is here: (direct download - MS Excel)

http://www.statistics.gov.uk/downloads/the...008/tab7_7a.xls

A great deal more data can be wrung from the figures than just the one media-friendly headline figure. Depending upon which axe you wish to grind, you can use the ASHE to back up claims that average annual earnings in Aberdeen range anywhere from £20K (median, all jobs, resident in Abdn, excluding overtime) from this table:

http://www.statistics.gov.uk/downloads/the...008/tab8_1a.xls

... to £39.6K (mean, male, full time, working in Abdn, including overtime) from this table:

http://www.statistics.gov.uk/downloads/the...008/tab7_7a.xls

That's a vast range, it's like trying to nail jelly to a wall, take your pick, the truth is complex.

Interestingly, the GMB language on their summary page is very 'class war' type rhetoric. I'm sure Hamish would approve:

"

Since these figures were taken up the credit crunch, which originated from excesses in the financial sector, has now given rise to a full blown recession and the misery that that entails. We will have to see if pay holds up in 2009 in the face of this slowdown.

As well as taking measures to restart their economies, Governments in the UK and elsewhere need to take steps to deal once and for all with the elements in the financial sector that visited this recession upon us.

We can no longer tolerate a 'provisional wing' of capitalism that is allowed to **** a snoop at the standards of transparency, disclosure and accountability required of the 'official wing' of the financial sector bound by stock exchange rules. Trading by this 'provisional wing' in financial markets should be outlawed forthwith.

"

Phew, man the barricades!

[Aberdeen, Aspc Stats]

Quite impressive in many ways The McGlashan.

I would guess you are either an existing or former academic, with a specialism in this area.

Am I correct?

No no, just an interested amateur, operating in my own enlightened self-interest...

Thanks for your kind words, tho.

[Aberdeen, Aspc Stats]

So much more to pick at from Hamish's topsy-turvy Xmas Buffet of bluster... It's a gift that just keeps on giving!

This current crash in housing has been caused by the lack of available credit, on that much we agree. (We also agree that the market was overpriced and due a correction, to some extent) However in my opinion it's not even as much the lack of BTL lending or lower multipliers, but rather the massive, massive increase in deposit requirements to far in excess of the long term average, that is proving to be the prime limiting factor in finding the bottom of the market.

When deposits get back to reasonable levels (10% or so instead of the current 25% to 40% to qualify for good rates)...

Hamish, the banks' demanding of higher and higher deposits is a simple response to the crash, not a cause of it. Banks wish to protect their exposure and maintain their equity stakes in the properties upon which they lend. The deposit requirement is a reflection of how much the banks expect house prices to fall within the horizon of a potential default on behalf of the borrower.

...and when residential mortgage rates come back down to within the long term average of more like +2% of base rates, instead of the current +4% to +5%, and when these conditions are available to new customers and not just existing, then we will see a fairly rapid and strong recovery in prices, particularly in markets like Aberdeen. Because the underlying demand and economic fundamentals are still there.

In fact, the next property boom (and it is inevitable that there will be one, there always have been and always will be) may be steeper, faster and bigger than the last one, because supply in an already undersupplied market has been so massively curtailed by the artificial financial constraints of the current bust.

???

Ah, good old 'pent-up demand'! Does the same 'pent-up demand' work for other unrealistic acquisition aspirations? I might desire a private jet, yet it is unlikely that anyone will lend me the money to get one.

Hamish, you agree that the crash is caused by a contraction in credit. Can you not see that the boom was, similarly caused by a boom in credit? I have explored above the cause and mechanism which delivered this credit boom. Where is the credit coming from to inflate your next property bubble? What evidence can you cite for your belief in this chimera?

This price crash was not caused by the traditional factors seen in so many previous crashes, ie, recession, lower demand, oversupply, weak economy, etc. On the contrary, it was caused by a savage and unprecedented contraction of available credit, to far beyond the long term average or norm.

Hamish, again, you need to examine the credit cycle to understand booms and slumps. Where do recessions come from? Where does oversupply [overinvestment] come from? What causes of a weak economy 'etc' (!) do you infer? Which previous crashes in particular are you referring to? Which price crash was caused by 'lower demand'?

To de-couple the wider economy from the housing market, in the middle of a recession caused by lack of credit, at a time when house prices, and therefore most people's net worths, are also declining due to the same lack of credit, would be sufficiently traumatic for the country as to be political suicide for our elected leaders. With an election due in the near future, theres simply no way it will happen.

For "most people" we should read "Hamish McTavish" This paragraph smacks of desperation. You seek and advocate government intervention to prop up your property portfolio? Yet you deride socialist policies? The internal contradictions of your wooly thinking are showing.

You blithely tell us "I'm the boss". Are you also the majority shareholder in the enterprise? If you are not, you should hope that the majority shareholders are not reading your pontifications on this board.

[Aberdeen, Aspc Stats]

Some further thoughts for Hamish...

And yet still some folks yearn for the misery, mass unemployment and poverty of the socialist state of the 70's.

Again, Hamish, you confuse cause and effect. In the UK, politically socialist policies were a reaction to the crisis of profitability (wage inflation) inherent in the Keynesian economic policies and the Bretton Woods system of the 3rd quarter of the 20th Century. The system collapsed in 1971, and currencies floated in 1973. Bretton Woods was unsuitable for dealing with shocks that reduce national income. The oil shocks of the 70’s had exactly this effect, triggering a battle over whether profits or wages should bear the brunt, typically in the form of a wage-price spiral. One of the problems, (for there are many) is that socialist policies are generally only clamoured for during times of economic adversity, when national economies are in no state to deliver socialist policies. This failure is not the “utter discredit” which you have referred to, rather it was the failure of Bretton Woods to accommodate the change in the OPEC terms of trade (in Keynesian terms) which provoked the difficulties of the 70’s.

As for misery, allow me to quote from David Copperfield, a novel by a man who’s father was in a debtor’s prison, written in 1850, a time of unprecedented economic growth, globalisation and capital formation, an era of laissez-faire that would make today's most dogmatic anarcho-capitalist drool:

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

More up-to-date is the work of psychologist Oliver James with his explorations of “Affluenza”. Here, have a look at this:

http://www.guardian.co.uk/lifeandstyle/200...lbeing.features

"

The Affluenza virus is a set of values which increase our vulnerability to psychological distress: placing a high value on acquiring money and possessions, looking good in the eyes of others and wanting to be famous. Many studies have shown that infection with the virus increases your susceptibility to the commonest mental illnesses: depression, anxiety, substance abuse and personality disorder.

The virus values prevent you from fulfilling fundamental human needs which seem to exist in every society. Whereas you want a better car or greater intelligence or bigger house, you can survive without them; the same is not true of Needs.

"

“I think you've more than adequately shown your true colours when it comes to wishing for a crash, recession, and returning to the days of mass, but equal, poverty. Those days are long gone, and I suspect you'll be bitterly dissapointed.”

Where have you seen me advocating or wishing for economic collapse or recession? It will hurt us all, but I am secure in my social and familial networks, it is unlikely I will starve, the birds will continue to sing in the trees and the sun will still rise every morning. The things about which I most care cannot be affected by economic privation. You sound less secure in your position than I...

It's remarkable that you have learned nothing from watching how badly that worked out for the basket case economies of eastern europe. Probably why so many millions of their citizens headed straight over to Britain to improve their lives the moment the wall came down. Whilst the houses in these failed socialist states are cheap, the accompanying misery, economic failure, and poverty are a price just not worth paying.

Again, your analysis is flawed. Following the collapse of Soviet hegemony east of the Elbe, provisional governments sought the advice of leading western economists and constitutional lawyers to help reform their societies and manage the transition. Unfortunately for the hapless Poles, Hungarians, Rumanians, Bulgars etc, those leading economists happened, at the time, to be products of the Chicago School of Economics, acolytes of Milton Friedman (as Keynes said "slaves of some defunct economist").

The “shock therapy” imposed by these dogmatic storm-troops transferred astonishing amounts of publicly-owned capital into private hands at knock-down prices, assets were stripped, entire generations of workers were thrown on the scrap-heap, capital flowed from east to west and entire economies which could have transitioned well if allowed to introduce market reform gradually via a mixed economy were stripped to the bone. This is the source of your “ misery, economic failure, and poverty”: the brave new world of “shock therapy” - total immediate transition to a market base; not the legacy of the “deformed worker’s state” which you assert without analysis.

“Socialism only works well for a very small percentage of society, mostly the slackers, the wasters and the lazy..... [the] socialist vision and economy that you want ... your dreams for a utopian socialist society where merit is irrelevant, success is despised, and failure is rewarded...”

That’s just offensive. You declare “I’m the boss” while clearly despising those “muppets” less fortunate than yourself, and blaming their lack of success (by your metric) on fecklessness - I believe that's called blaming the victim.

Your success metric itself is questionable: I daresay you measure success by net worth, your position in the corporate hierarchy and the quantity and up-to-dateness of your possessions. I, and others like me, measure success by emotional security, physical fitness, the quality of our relationships, how we treat others (and are treated by them), social cohesion, social networks, the quality of our environment and it’s suitability for human-scale activity. In short, social capital.

We prefer “being” to “having”. We know the difference between what we need and what we want. We do not buy things we don’t need with money we don’t have to impress people we don’t like. That does not make us socialists; it makes us realists who know the difference between cause and effect, pathology and symptom. We reject your free-market dogma, your unfounded assumptions, your assertion without analysis and your blatant historical revisionism.

“

All of your life you’ve been shopping for a reason/

Soon you’ll have enough to buy your redemption/

Buy Now!/

Pay Later/

On the up escalator.

You’re on the up escalator/

But you’re living in an upside down world.

”

Edit:

PS. While I'm on, I note that you've not made any attempt to respond to my analysis of the Aberdeen economy as suffering from the "Dutch Disease", nor have you responded to my identification of the triple-whammy of liquidity crisis + oil price crash + resource depletion facing us.

Are these omissions on your part further examples of you ignoring inconvenient interpretations which are discordant to your dated dogma?

[Aberdeen, Aspc Stats]

I'm the boss (or greedy management class exploiter of the proletarian wage slaves, as McGlashan would put it)

Hi Hamish,

I didn't ever use the word "greedy". You seem to be keen to tar me as some sort of un-reconstructed firebrand socialist or Marxist. Well, you are mistaking the tools of my analysis with ideology. I cleave to no ideology; it's realpolitic I deal in. I am not a Marxist, but then, neither was he: "je ne suis pas Marxiste" as he famously said upon his visit to the Sorbonne.

However, Marxian (not Marxist - an important distinction) analysis can be very helpful in these fraught times as the central bankers awake from their grand-mal N.I.C.E. fever-dream.

There is no doubt that BTL and higher multiples were something of a factor in fuelling the boom, but no more of a factor than population growth, household income growth, the increase in average salaries, the success of the local economy, a greater desire to own rather than rent, the decrease in both availability and desirability of social housing, ludicrous planning restrictions creating a clear imbalance between strong demand and limited supply. And the list goes on. All of these things had just as big an impact on prices as multipliers and BTL. To think otherwise is, in my opinion, far too simplistic.

Simplistic? There is only one response to your list of excuses: the boom in credit is responsible for the run-up in asset prices and responsible for the symptoms which you mistake as causes. That's all, nothing else. It is simple, not simplistic. The real meat lies in the analysis of where the credit boom came from, how the demand for credit was created.

The freeing of capital movements in the 80's combined with the collapse of the Eastern Bloc released billions of new workers into the world economy, creating a global reserve army of labour. That, in turn, has contributed to a rise in the share of world GDP accounted for by profits and an accompanying decline in the share accounted for by wages. Such a development leads either to over-investment by businesses or a shortfall in aggregate demand. When wages lag, spending can keep up with output only by an expansion of consumer credit.

Since (until recently) Keynes was unfashionable and Marx unmentionable, no-one asked what the N.I.C.E. period would imply for the levels and pattern of demand. The first consequence was that investment rose as a share of GDP, particularly in East Asia, and output soared. Yet, here is the central problem with the now globalised system. If profits and output rise persistently faster than wages, who will buy the output?

An expansion of credit averts the lack of effective demand (in Keynsian terms), for a time, but ultimately shows up in a problem of the realisation of capital (in Marxian terms), as we are finding today.

We all now know how the credit was created by the re-cycling of excess Asian savings through the west's fractional-reserve banking system and exotic derivatives. This mechanism is no longer available for the creation of credit, and, as we are finding out, printing money by leverage is not wealth creation. The process of de-leveraging has some way to run yet. There is now no credit-crutch to prop up effective demand, neither for consumer goods nor assets.

The over-indebted will sell or be foreclosed, prices will continue to tumble, I believe this is called a Minsky process. The underlying problem facing the world economy today is one of defective demand caused by profits outstripping wages in a world of excess labour. To believe that Aberdeen is immune is parochially panglossian.

[Aberdeen, Aspc Stats]

Hamish continually quotes the £36k average earnings figure for Aberdeen to us without the qualification that it refers only to full-time male employees working within Aberdeen City and that it includes overtime. It is the mean figure for such, and the highest average available within the figures published by the UK gov. statistical agency.

Please allow me to qualify Hamish’s ‘average’ by saying that statistical averages for Aberdeen earnings range from between £22k to £36k. An economically valid statistical figure can only be attained through knowledge of this range.

Hamish’s postings are long on assertion, but short of analysis, and, while his certainties may have been valid in his time, the sheen is off.

Let us first analyse his much-vaunted young man who has stretched to borrow 3.5x his salary for the privilege of the ‘easy commute’ from Brechin. He says we should take a tip from our ‘American cousins’ and regard such commutes as normal. Well, this is not America, and, if I may make an assertion of my own - it’s inhuman to commute for up to 3 hours per day. It is indisputably costly, I reckon about £300 pcm life cycle cost for the vehicle, its consumables and its maintenance, insurance, etc.

This will leave the young man a debt-driven wage-slave, controlled by Hamish’s managerial class: little time for any meaningful leisure, socialising, family contact, or any other type of non-monetary self-enrichment. He is alienated from his natural environment as a human being and has no opportunity to develop the conciousness even to analyse his own situation. In short, he is the new proletarian, just as the managerial class require. He is indentured, owned and enslaved. The surplus value of his labour is extracted on behalf of the employers by the managerial class, who are its trusties. Hamish advocates the formal to the real subsumption of labour (and leisure) under capital. His assertion that we should stretch and endebt ourselves to the maximum extent is the whip with which he wishes to oversee us.

Hamish tells us that we can all (“any muppet” was his tellingingly derisive phrase) be like him, while neglecting to tell us that his major debt was inflated away in previous decades (a facility not available to us today). Convenient. This is nothing short of the sort of social-darwinism devil-take-the-hindmost model of unfettered free-market capitalism which was so fashionable until very recently. Even unreconstructed Randroid Alan Greenspan recently admitted that there was “something wrong .... a fundamental flaw... in my world view”

Hamish, neo-liberal economics look increasingly, shall we say, *distasteful* in the light of recent events. Milton Freedman is dead, the Chicago School is discredited, the Washington Consensus lies in tatters. I can assure you there is much resentment in the country (and the wider world) at their activities. A period of silence on your part would be welcome.

Merry Christmas!

[Aberdeen, Aspc Stats]

Aberdeen lags for a reason, the economy here is stronger than most areas.

Really? It looks like the Dutch Disease to me.

http://en.wikipedia.org/wiki/Dutch_disease

Which, of course, makes an economy weaker in the medium to long term.

O&G has certainly shielded Abdn from economic woes in the past, acting as a conra-cyclic governor: 1970s - early 80's - O&G infrastructure boom while the rest of the economy suffered stagflation and high oil prices. John Major's recession - boom in subsea.

During these times, you consolidated your property portfolio while Aberdeen boomed and your debt was inflated away. A massive transfer of wealth to your generation from the younger generation of today.

One of the problems (for there are many) facing Abdn at the moment is the general liquidity crisis PLUS low oil prices. This has not happened before. Go figure.

[Aberdeen, Aspc Stats]

Actually, your graph pretty much proves my point.

UK national housing depreciated by 18% since peak.

Aberdeen depreciated by 8% since peak.

I said Aberdeen is not immune, but probably better placed than almost anywhere else. Your chart confirms that is true so far....

As we have pointed out above, Aberdeen lags the Scottish economy, which lags the UK economy which in turn lags the US economy...

2003

“An end to boom & bust!”

2006

“House prices only ever go up”

Aug 2007

“It’s an American problem, there’s no sub-prime here, so the UK won’t be affected”

Spring 2008, Reporting Scotland et al.

“Scotland is different, immune to housing problems hitting the rest of the UK”

Summer 2008, the One Show

“Aberdeen - the town the credit crunch forgot”

Christmas 2008, Hamish McTavish

“Aberdeen is different, the crash won’t be so bad here - average house prices are only falling £190 per day"

Spring 2009

“The west end is different, prices are holding up nicely, not falling nearly so much as other parts of town.”

Summer 2009

“Rubislaw Den is immune to the house price crash”

[Aberdeen, Aspc Stats]

They never made the ridiculous gains on the way up that were seen elsewhere, and they won't make the ridiculous falls either.

Not so. Look at the graph attached. The Abdn area property market seriously outperformed Scotland and the UK during 06/07 and fell 8% in Q3 08 alone.

That means that the average house lost around £1310 per week, or £32.72 per working hour.

Therefore... Not owning a house in Aberdeen is like having a very well paid 2nd job. Brilliant! (Or ridiculous, depending on your point of view).