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House Price Crash Forum

mattyfc

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Everything posted by mattyfc

  1. This is why letting the government grow too large is a very bad idea.
  2. It would have to be mass unemployment. The market is so lacking in liquidity, it is not easy to sell. Why would anyone realize a massive loss on a property without it being forced on them through repossession and auction. No one is going to sell voluntarily sell when they are underwater. Prices will not drop fast without massive rises in unemployment. I don't think this is likely having seen the policy response over the last few years.
  3. You would think the Japanese would have learned by now with the national debt 200% of GDP. More stimulus, they have been trying to Stimulate and Print for two decades and have achieved very little. They are still not over the late 80's asset bubble. The economy is being sucked dry by a circle of Savers buying government debt and it being wasted on stimulus spending. This will not be broken until Japanese consumers spend the cash themselves rather than saving with the government at 0.1% Interest. They need to restructure the economy so the massive Japanese export machine is matched with a confident spending Japanese consumer. A change in culture is needed.
  4. I would be very surprised if the chancellor got rid of the 2% Target. Osbourne is trying to be responsible and this would represent a significant blow to credibility. King has got policy completely wrong for the entire crisis. BOE forcasting has been a complete joke, we are meant to have 0.7% inflation now... Rates were to high in 08 and were only lowered after the Lehman crash. Now they are far to low and we will be risking more excessive speculation with rates so low. I am convinced Q3 Growth will come in above forcast again and we will see at least one rate rise by the end of the year. The real risk to the recovery is Southern Europe. These economies are in a strait jacket and things could get real ugly in the next few years if they can't find a way to grow and reduce unemployment over the next few years.
  5. Yes I think the initial investment value was added to the debt, as the share price fell the taxpayer lost money. Now the taxpayer is sitting on a healthy £7bn~ profit, which will come off the debt once the stakes are sold.
  6. This should give more ammunition to the MPC to start raising rates slowly. There has been a raft of solid data recently, if they want to control HPI rates need to rise to give buyers a reality check. I am convinced house prices will fall in real terms over the next 5 years + as interest rates rise back to normal levels.
  7. The US recovery is not going as planned as running such a large deficit is going to crush to the private job and growth creation machine of the US economy under a mountain of debt. More monetary loosening will only make the problems worse and things will only get worse until there is a major policy shift. Reducing our deficit will increase growth not reduce it. There seems to be a fundamental misunderstanding about deficit spending in this country and the media. Public spending cuts free up resources in the private sector that would have otherwise been used as inefficient government expenditure. The cuts free up cash from pension funds, investment and fund managers that would have been spent on guilts. They will invest in private enterprise, corporate bonds etc instead which will create growth. Cash removed from the Economy via cuts does not disappear from the economy. It is reallocated from inefficient and wasteful government spending to the private sector which should use it more efficiently to create growth. Reducing debt now will massively increase our longer term growth prospects. Deficit spending only boosts the economy in a situation where confidence is close to 0 and it is necessary to start kick start all forms of spending and investment. This does not apply to our current situation anymore.
  8. US economic policy seems to be all over the place at the moment. I can see sterling rallying significantly for the next two years as the US loosens monetary policy further and the printing presses are cranked up. Until they have a major policy shift things will only get worse for the dollar. $1.70 is more than possible and we could see $2+ I think. Things will improve after 2012 if a new president comes in and changes policy. The € zone at least have sensible monetary policy. The whole of southern Europe seems to be insolvent and stuck in a debt trap unfortunately. Default is inevitable for at least one country and Spain could easily bring the whole system down if they can't find a way to grow in the current straight jacket. We look in reasonable shape comparatively. I think interest rates will rise at least once before the end of the year as well.
  9. Forcing households to pay the license fee if they watch or record any live TV regardless of origin is not fair. Why should people be forced to pay for a service they do not use? The BBC seems to have lost it's way and has no idea what it is meant to do. I believe the intention behind it was to provide broadcasting services that would not have otherwise been provided by the free market. Since they are forcing everyone who watches live TV to pay for them, they seem to produce as much populist content as possible. To prevent their own extermination by a rebellious populace who would not want to pay £145 a year for nothing of interest. Secondly on the fee itself The fee is not enforceable unless you are prepared to confess to an inspector. Which a significant ignorant minority seem to do. The basic enforcement plan seems to be to send out a variety of threatening letters, and send inspectors round now and again. There is no requirement to speak to these inspectors and they can be safely ignored. They have no rights of access. Why would anyone even answer the door? They require a court issued warrant to enter your home and they will require evidence an offence is taking place to obtain one. There is almost no way of obtaining this evidence in a way that would not invalidate the warrant. The whole system relies on threats , bullying and ignorance. If the public understood they law I am pretty convinced the system would collapse in weeks.
  10. Current US economic policy has been a total failure. Unemployment won't budge because the job creating small businesses of the US economy are being stifled. The deficit is heading for $1.5tn. The private sector faces a stifling ever rising tax burden and future growth will be severely curtailed. Growth is already slowing. China is still manipulating it's currency and flooding the country with cheap tat. The printing presses are being warmed up.. The US is going to end up with (more) massive debt, persistent unemployment and a trashed currency. Proper recovery may begin in 2012 when Obama is replaced by a republican and the Democrats get a royal thrashing. If the new administration massively cut spending to deal with the deficit, put some confidence back in the $ and stimulate the economy through greater incentives to work, tax cuts and the like the US economy will recover. They should also tariff Chinese imports until they let the Yuan float as well. We may see a proper US recovery by 2020 ish.
  11. Agree. Some level of government spending is desirable as long as the benefit to the rest of society is greater than the cost, Schools, Transport Infrastructure, Police force and the rest. The problem is quantifying the benefit of these government services in £. A rule of thumb of 33% of GDP from the state seems like a sensible start. We are at about 45% at the moment. Funnily enough this is the exact plan of the government and we should be back to about 35% ish if the government carries out the emergency budget to it's conclusion. Once done we will be in a much better position to grow further. The transition may be quite bumpy as the populace is weened off the state. We knocked spending down from 45% to 34% between 82 and 89 so such a task is not without precedent.
  12. I have been wondering how long it will be until the idea that Government spending decreases growth is picked up by the media. All we hear about is how all this spending is helping the economy. The argument seem to ignore two key pieces of information. Public spending is financed by the private sector, more public spending means higher taxes on the private sector. The private sector creates almost all of the growth in the economy. By taxing the private sector you reduce economic growth in the private sector as businesses can invest less and pay less. Government debt is serviced by selling Guilts. If investors did not buy gilts they would have the capital free to invest in other things. For example businesses, which actually stimulate growth. Cutting public spending back to the level at which it actually benefits the economy will massively increase growth in the long term, not reduce it.
  13. Interesting, the bank must be pretty concerned about the client paying to do that. I would probably be pretty worried about the dollar tanking as well, since it has already slipped from $1.42~ to 1.57$ since may 17th. Could be $1.70 in a couple of months at this rate.
  14. Businesses have been way over leveraged for the past few years driven by the Brown belief that there would never be another recession and boom and bust was finished. Why not take on debt when you think your sales will grow in ski slope upward trend forever? "the flow of net lending to UK businesses remained negative in May and was more so than in April" Most businesses with any sense have been deleveraging for the past couple of years and are learning to manage there cash flow with "normal" levels of credit. This is perfectly sensible. Economists and Government seem to have forgotten the purpose of debt, to manage Cash Flow in the extreme short term, to expand through the purchase of capital equipment, investment etc. We are fresh out of the recession and significant demand for (debt) risk will take a few years to return. There is no shortage of credit to businesses that have strong cash flow and want to expand. If the last few years have taught us anything it's that the last thing we need is "a loosening of funding and a slight relaxation of criteria". Lending money to businesses that do not have strong cash flow, a proper business plan, sales projections that factor in the possibility of a recession is insane and will only cause credit crunch mark 2 down the line. The economic environment is returning to normal. The problem is after the last 10 debt fueled years no one knows what normal is anymore.
  15. We seem to hear the "Viable Business can't get Credit" nonsense every couple of weeks. Merv said the same thing last week I think. It seems fairly obvious to me that there is a lack of demand for loans from Viable small businesses. What business wants to pile on the debt after the experiences of the last few years? Loan demand will increase naturally as the economy recovers. Osborne is not an idiot IMO, I think this is mainly political rhetoric to make it look like the Government are supporting small business. Short of driving dump trucks full of cash to small business and giving it away I can't see how he can force the banks to Lend if no sensible business wants to borrow.
  16. Investors seem to have more confidence in £ now we seem to be starting to deal with the deficit and some descent numbers (GDP and Retail Sales) have also helped quite a lot. The eurozone is bust and US growth seems to be disappointing. Not much competition either. I have not heard Osbourne mention it but I personally don't think he would allow Mervyn any more QE. He has to ask for permission form the chancellor and I can't see it being given. Cameron has said in the past he wanted QE finished ASAP.
  17. The Yanks are bang on this time. Bailing out Greece when they will obviously never be able to pay back the money makes no sense at all. The root problems of to much debt, a lack of competitiveness, slim to zero growth prospects need to dealt with. The only sensible way of doing this is a debt restructure and devaluation one way or another.
  18. The Greece situation has been dealt with terribly, a total fudge driven by an irrational desire to keep the status quo in the euro zone. Until the real problem is dealt with the euro will be on a downward trajectory and sterling will follow at least in the short to medium term. Problems in the eurozone will clearly effect our growth / economy as well. That being said the USD is hardly rock solid, running a trillion dollar deficit and the printing presses going full speed ahead. No gold and hard assets are on the up.
  19. A good move. An extra piece of bureaucracy that was designed to negate the need for a survey, and ended up a horrible useless fudge. Not unexpected since it was in both the parties manifestos I believe and has been for 2 + Years. I can't believe many people would have invested large amounts of money in this when the Party ahead in the polls for the last 2 years have always said they would abolish it. Rather risky? Since parliament is not currently convened there is not much the government can do legislation wise currently.... They seem to be doing rather a lot considering.
  20. Spending needs to be cut down to 2005 levels, hardly the dark ages. The real question is where the extra £20-30bn a year has been going. As far as I recall the country functioned quite well in 2005 when we were only spending £500Bbn~ a year. I think it might be easier to cut the deficit than previously thought. It seems like. I would say most of the £160bn is being wasted anyway. What has improved over the last 5 years? Has an entirely new NHS been built? Have benefits been doubled? I can't get a grasp on what all this money has been wasted on. I doubt if most people have really noticed much difference between government services 2005-2010? Nice to see Cameron getting the BBC in his sights as well this morning. The labour party seem to have been neutered and no longer has any position in politics. I hope Cameron and Clegg get the voting boundaries sorted out so we can't end up with a large labour majority with only 35% of the vote.
  21. Yawn. There is going to be an emergency budget within 50 days and also a review over the next 3 months to figure our which areas the cuts can fall. How can the conservatives do anything faster than this? Interesting comments by Cameron this morning about the BBC. The top brass must be bricking it.
  22. The euro was launched at $1.18 I think and then sunk to around $0.90 before climbing out again. The main problem is the rapid rate of decline, from $1.36 to $1.23 in 4 weeks, a very steep decline. Traders seem to me to be betting on a euro zone break up and will keep selling. Sterling will be sold off in tandem due to our trade links with the EU. They have realized there is no other way out of the current southern European debt crisis and don't want to be caught of guard by a sudden French / German withdrawal which would obliterate the value of the currency. In the long term the economic recovery of Europe will be much faster once the Eurozone gets itself restructured allowing southern europe to grow rather than be crushed by austerity and civil disorder.
  23. Greece has not been "saved" the problem has only been delayed. Lending more money to Greece whilst crushing the economy with draconian cuts is making the problem worse. I expect the Greek economy to contract far more sharply than the IMF etc are predicting. Greek default has merely been pushed back 18 months and they will have even more debt when it happens. Lending to Greece at the same interest rates as Germany and letting the debt pile up to 100% + of GDP has exposed a major flaw in the whole euro project. There is no easy "bailout" or answer for Greece. The long term solution will have to be a massive restructuring of the the euro-zone. The southern European economies need to be in a monetary environment where they can grow from productivity increases and exporting rather than debt fueled constructions bubbles.
  24. I would be extremely cautious investing in anything in Eastern Europe as I would be worried about the long term political stability in the region. Latvia has a long history of political instability and whilst it may appear stable now who knows in 10-20 years. The economic situation looks very unstable currently as well. Massive unemployment and the economy contracted massively for the last couple of years (20% and 16% I think) The currency is pegged to the Euro. I would say the chances of Latvia joining the euro are now very low, this peg may come under threat. If the peg is removed the currency could devalue sharply. Considering the amount of euro denominated debt in Latvia this could crush the economy further.
  25. The rug seems to have been firmly pulled out from under the Euro. Already down to 1.236 v $. The realization is that the Euro will not work in it's current form. There is no mechanism for expelling countries with lax fiscal discipline from the zone. They will not leave voluntarily as there debt burden would still be in Euros and there own currency would sink like a stone. The only probable long term solution I can see is Germany and France both leaving the zone and reverting to there own currency again. The euro will crash and the weaker economies in southern Europe will then start to recover. Most currency dealers seem to have realized the Euro is heading for a major rupture and are getting out fast. I would expect the Euro go right down to parity with the dollar and sterling will follow to below $1.40 within 6 Months. As Long as oil falls 30% as well it should be quite beneficial to us. Obama can't be to happy, US companies will need to increase sales to Europe by 30% Just to be back to the $ revenue levels they had 12 months before. Doubling exports by 2015 not looking to likely currently.
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