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House Price Crash Forum


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Everything posted by scepticus

  1. Real compound growth above 1% is simply not sustainable for any significant length of time. 2.5% or higher even more so. We have already had a superb innings for 60 years so expect another 60 of the same seems greedy and naive (thats not aimed at you by the way, I think we agree actually).
  2. The reason rates are at zero is that zero is the appropriate rate of return for taking no risk. The base rate is the rate banks get paid to deposit their reserves at the central bank. Because these deposits are risk free, its hard to see how they should in the long run be able to attract a return. My assertion is that the history of fiat money is one of it evolving into a nominally risk free asset (thanks to central bank regime, deposit insurance, bailouts etc). Coincident with that is also the decline of nominal rates to hit zero. The way I see it is that the quantity of fiat and credit assets held by the private sector has had to expand to the point at which there are so many assets competing to be lent out that the interest rate for risk free or very low risk lending can be zero. That is what we have seen happen over the last 50 years. Of course inflation enters the picture and changes the real rate of return above or below zero, but the nominal risk free nature of these assets is unchanged.
  3. Yes they do, individually. In aggregate the banking system can make loans before taking deposits, but individual banks need reserves equal to the size of the loan before they can make it.
  4. You are making a "moral" argument, not an objective one. I never suggested that a rise would lead to a mass crash. Merely that the market determines the interest rate and the central bank tries to anticipate 3 months ahead, what that rate will be and to try and set their own rate accordingly. Like I said earlier, for a sustainable rise in rates, the rise needs to be led by the markets. If the market wants a higher rate, then they will set one. And the market here includes all players, including retail investors and savers.
  5. Yeah that's a meme around here. Also wrong. If rates were too low for the market we would not be seeing yield curve inversions occur from time to time. Also consider if rates were raised to an arbitrary level, and borrowers in aggregate fail to make all their repayments, and eventually, stop borrowing altogether. Banks will have less income but the banks savers still expect at least the central bank rate. But the banks can't pay that rate to their depositors so they simply pay what they can afford to their savers - lower than the central bank rate. In this circumstance, has the central bank succeeded in raising rates? No.
  6. Completely wrong, IMO. Interest rates are not something the central banks really have control of. If the central bank raises the rate above the real market rate, then financial markets stop working and you get a recession/depression. The only viable interest rate is the rate at which existing borrowers can afford their repayments and at the same time the rate at which savers can find borrowers willing to borrow their savings. The question you should be asking, if you believe rates should rise, is what would raise the open market rate of interest. Its a source of continual fascination/bemusement to me how many people, on this site but also throughout society, think that the central bank can simply set the rate wherever they please. Its childish nonsense.
  7. Actually no. In theory you can upload to the cloud without trusting the cloud provider as long as you trust the vendor of the processor in which the data is decrypted and the work is done and that whenever data leaves that trusted device it gets encrypted using keys only known to that device and not to the cloud vendor. That would be intel, AMD, arm, nvidia etc - whoever provides the actual hardware. Of course this requires that the processing device is equipped with these features and that you trust those features.
  8. Yeah, but this is changing. The winners in cloud will be the ones which get this sorted first. Money is being spent.
  9. Yes, that is the positive side of the coin when it comes to NIRP. Not before time either!
  10. True enough but it is less transparent. I'd rather suffer a decade or so for people to get used to flat-ish, sometimes declining, sometimes rising house prices than try and go back to a 2% inflation target come what may. Also, actually maintaining a 2% inflation target when we are already at peak debt and ZIRP is extremely difficult. Japan has tried and failed for 20 years. After all, we only have to go back to the mid 90's to find a time when permanent HPI wasn't the general expectation.
  11. Trouble is, when buying in this scenario, you need to find sellers who have a similarly realistic view of things.
  12. Agreed - long slow grind downwards from now on. However this will apply to both house prices and the returns on STR funds I think. That said, I feel sure the former will outpace the latter.
  13. The point is that the rationale of a REAl UBI (not just a simple rehash of existing benefits system), is that many more people will be in receipt of it and will depend on it than currently depend on benefits. And this has profound implications for democracy.
  14. The private versus public debate is pointless IMO. Our modern western civilisation has evolved over perhaps 600 years, a reasonable mix of mechanisms for the organisation and deployment of human labour. Market capitalism is just one part of the recipe. Governments and public sector institutions are another. Not so long ago, when people were more spread out, literacy uncommon and communications slow, organised religion was also an essential part of the mix, but has become less important now everyone can read and write. Another part of the resiliency recipe is the left/right political swapsies we do every decade or two, which prevents misguided ideologues from one end of the political spectrum or the other from taking a hatchet to one of these essential components or another. None of these mechanisms are perfect and all have various annoying inefficiencies, but as a whole they have proved reasonably effective and resilient which is why our cities have survived and grown for 1000 years.
  15. Large scale organisations will of course have higher overheads - call them non jobs if you like - than smaller ones, but if the economy of scale trumps the higher overheads then its still more efficient, even if areas of waste are obvious.
  16. We might call it capitalism (or other names) but its not much different to many spontaneous self-organising processes found in nature. What we know of as capitalism essentially came on the back of the printing press and the improved communication links established from the renaissance onwards. But these are just analogous to digital communications technology and more open borders in our current age, and what we had before the printing press/digital technologies is not much changed in essence from what went before. We need this process of course and should not try and suppress it (ala communism and central planning or magical thinking) but at the same time we should not imbue them with any exceptional or mystical anthropocentric (or worse, Western) attributes. Also efficiency is not the only goal of these processes, resiliency and self-propagation are really what is guiding the "invisible hand" and are more important than mere efficiency.
  17. In the long run such distortions get ironed out. In any complex system that maintains some kind of dynamic equilibrium there are always excursions and fluctuations along the way even without changes to external conditions, and when external conditions do change the short term response is not linear.
  18. I second this. The larger the economy and the more integrated/connected it is, then absent too many artificial constraints then one would expect it to find reasonably efficient solutions - simply by the law of large numbers. This is what I was alluding to when I suggested we increasingly live in a world ruled by numbers. It is also a cautionary note against expecting a future in which many/most people are paid not to work - that is simply not how complex systems evolve. More likely, over the long run, is an outcome in which there are simply less people, or rather, the man:machine ratio is much much lower. To some extent we already see evidence of this with slowing birth rates in developed economies. Lowering the man:machine ratio by simply increasing the number of machines may not be possible given the energy and climate constraints we face. In fact that outcome is likely only possible if most of those people and machines are not on this planet.
  19. Well, while the real rate of return is declining, real asset prices are increasing, they are two sides of the same coin and this will happen without any "intervention". So, starting from a high rate of return and low asset prices, to some extent the two balance one another out - what I lose in yield/income I gain in capital appreciation. THis is what has been propping up pension funds IMO. However when the rate of return has come close to zero and flatlines there, then income is very low but also there are no more asset price rises to offset that, and this is when the problems for pensions come home to roost. And we are only just starting this new flat/stagnant phase, and I expect it to continue for a very long time indeed.
  20. Asset price rises since 2009 have helped. I think pensions will struggle if asset prices flat line, let alone decline, for the next 10 years.
  21. I agree with this. Increasingly, we live in a world ruled by numbers. It stands to reason that with billions of people digitally connected then social, economic, health and business outcomes becomes a matter of statistics, which are increasingly amenable to analysis. Of course there is more to life than this, one hopes.
  22. Sure - a watered down UBI scheme that is basically a slightly more efficient and more transparent benefits system could work. But that doesn't really change anything does it, people would still need some decent paying work to make ends meet in a world, we are told, in which such work won't be accessible to most. The real problem with UBI ideas is that they are at best a minor rehash of the current system, and at worst a myth that stops people engaging with a future in which there isn't enough work to continue to run society along the social norms of today. Its a kind of equivalent to greenwash-type solutions to climate change. So I would say that either the mooted threat to work is a myth and UBI is an irrelevance, or that the threat is real and some more rigorous thinking about social implications is required.
  23. Actually I don't think this is the primary issue. The primary problem is that it creates one class of persons whom are totally dependent on the largesse of the other class. Its not a safe recipe to build a democracy on for that reason. Where the dependent class are more numerous and can vote, they can indeed (and probably would) vote themselves an unfair share of the surplus. Where the dependent class are less numerous, the other class may well be likely to eviscerate the UBI to the point of poverty. It also seems that the threat of incarceration would be much more likely levied on the dependent class than the working class (here working class inverts its usual meaning), given that the working class are necessary to the government (who own enforcement) and the dependent class are not. That is the point of the article. I think this is a more fundamental issue than one of fairness, since the latter is entirely subjective. In the Iain M Banks novels, the humans do indeed get a very nice UBI which is nice enough to live a very good life on. But this is because he has imagined a surplus so vast that there is plenty to go round, and that the government is a load of AI machines who consume vastly more resources than the humans do anyway, so that the humans consumption is neither here nor there.
  24. >In my view, a UBI at a relatively low level would just end up with a greater number of people working part time or shorter hours. UBI that is not enough to live on doesn't really qualify as UBI. It would just be another benefit non means-tested.
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