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About Growlers2

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  1. How can it be over priced if it is yielding greater than the cost of credit? That's my point. Any price falls will lead to increased yields and thus stability in prices is likely.
  2. You missed the most significant thing from the above - the fact that interest rates are so low Ignore the SVRs, OOs and LLs can borrow at under 2% at 75Pc LTV. That's nuts and I'd have to agree with the conclusions of another poster (can't remember name) that rental yields are higher than this across the country. Why would you sell an asset yielding 4pc for example if you are able to borrow at these rates? It's not about availability of credit imho it's about rental yield Vs cost of borrowing. The lack of products in the 85pc bracket is immaterial in my opinion. It's likely due to the interaction between regulations (rental cover) and the tax changes.
  3. Right, so I get this right, this guy - https://profile.theguardian.com/user/id/17623718/replies?page=1 -is the Ex PWC partner who is confusing GAAP with tax policy? Is that right? Crouch's quote references an EX PWC partner being among the 118 crew gernally but I couldn't see a quote there. I'm just speaking for myself, the difference between taxation principles and GAAP accounting would not be obvious to me without having done my accountancy training. It seems a reasonable point to make to me i.e. the "guy" in question (Home Provider) didn't appreciate the distinction and that the misunderstanding was understandable given that GAAP and tax policy are generally alligned in the concept of economic profit (execpt when governments want to shut down a sector and apply taxes in excess of economic or accounting profit).
  4. Surely you are splitting hairs here! Some guy said "GAAP" rather than "principles of taxation" so what, many people don't have an accountancy background (or and expensive education). The fact is that the tax system does (or used to) be alligned to the concept of economic surplus or profit i.e. if you tax this "bit" then people carry on their economic activity without disruption and there is limited impact on overall output. To this extent the confusion between accounting profit and tax charged is understandable because the BTL tax changes (as you note on the Bootle Thread) obviously do not allign to this principal - their objective is not to raise tax but to shut down the BTL sector. Whilst I welcomed the tax change (in the overall context), I think my personal view is that the tax system should not be used to achieve political objectives because this is how we have ended up with the ludicrous tax system we have. I'd rather a hardcore tax on economic profits.
  5. Unfortunately, i don't think this is representative of Croydon. Was this for a room or a property? If room i agree rents have been static for years. However the rent for properties have clearly gone up. I considered renting a flat (one bed near the center) in the back end of 2010 and rent was £650pcm. It was a nicish place too. Have a Google on right move and i'd bet you can't get a studio for that now (I've not checked in months). The unfortunate fact is, is my opinion, that rents in Croydon are up c. 30% on 2010. That would be my best guess.
  6. Anyone been to Wye before? https://en.m.wikipedia.org/wiki/Wye,_Kent Seems like a nice village near Canterbury and Ashford.
  7. Thanks for providing those. I found MMT insight on money really interesting - I don't think I viewed money in those terms before. I can see how this approach to viewing the economy is anti homocentric - it seems to ignore individuals and focusing just on the plumbing [Perhaps this is the approaches major failure / weak point - i.e. to exclude people from a social science]. I'm still finding the contours of area but it is interesting. I think most people know that the monetary system is fiat / credit based but I think most assume (myself included) that the natural result of this arrangement would be higher nominal interest rates eventually perhaps following / during a period of inflation resulting from excess (definition TBC) money creation as individuals demand compensation to hold the currency. Mentally I think that is how I saw house prices mean reverting for a number of years. It's interesting to me that the opposite could be true although I struggle to understand the mechanics of how this would work. How does the unconstrained supply of a commodity (fiat money) lead to its fall in price. What occurred to me as I wrote that is that the above statement would be accepted immediately for any other commodity - e.g. An unconstrained increase in the supply of bananas led to a fall in the price of bananas. The trouble with the banana comparison is that money servers a store of value purpose in addition to a medium of exchange. I found the following on Wikipedia describing this mechanism: Source: https://en.wikipedia.org/wiki/Modern_Monetary_Theory#Policy_implications So unconstrained supply of fiat credit leads to lower rates through a mechanical supply / demand arrangement for funds [underlying assumption of the above is that demand for funds is unaffected by fiat money creation]. I had two questions from the above: Why NIRP - why does the equilibrium rate end up at slightly negative? Why not zero for example. Surely there is a risk that the end result *long term* of this arrangement is not NIRP but hyperinflation? As noted above, this framework ignores demand for funds (and the people demanding them). It assumes that fiat credit will be created and pumped into the banking system and that individuals will continue to accept this arrangement. At what point do individuals give up on the currency in question and refuse to accept it even for short periods of time? History has a number of examples of fiat credit regimes and the result of these has been a destruction of the currencies themselves. I watched and interesting interview on MMT with Bill Mitchell and the above point on Hyperinflation (Weimar and Zimbabwe) were raised - I found his refutations pretty unconvincing (he seemed to blame the supply side of the economy rather than the money creation). So perhaps, we get ZIRP / NIRP briefly followed by PIRP in a big way.
  8. Scepticus, I'm keen to understand your NIRP views in more detail and will read your past posts on the subject. A question that came to mind was - how do you categorise / define you economic philosophy? In terms of the schools of thought - Keynsian, monetarist, marxist, Austrian, institutionalist.... etc. What is the underlying framework that you use? Furthermore, would you consider your view hetrodox to mainstream economist and academics? i.e. do you think that central bankers really subscribe to views similar to your own but are prevent from essentially being honest and this would limit their room for maneuver.
  9. Correct that is what I have argued. I have previously suggested that a multi variable hypothesis for house prices is an alternative to the standard credit bubble hypothesis. It's not my idea - I've read this idea elsewhere. I think part of the confusion has come from me refusing to fully back the theory. This is deliberate because I am trying to view the world through alternative hypothesis (and assigning probability) rather than absolute truths. That said, I am strongly leaning to the view that house prices (outside of London) are not in a bubble. I'm not arguing the above because it is not necessary for my position. I've found Scepticus's views on NIRP absolutely fascinating but I'd be lying if I said I fully understood them. With respect to long term interest rates, what I can do is outsource the hard work to the bond market - it is telling me clearly that interest rates are very, very low. It is also telling me that interest rates will stay very, very low for a very, very long time. The point I am making is that we don't need credit to explain current house prices. I've asked this question dozens of times but - what 'should' the yield on property be when: the 30 year Gilt is yielding 1.33%, housing supply utterly insufficient with net migration c. 300K pa? The bond market my be 'wrong' (which is what I was asking in my question above about the 3 different scenarios / explanations for the world) and the housing market could be in a bubble as a result. But I don't think this is very likely. The implication of the above is that, rather than being a force that propels house prices higher, availability of credit is acting as an anchor - "house prices 'want' to rise but are not being allowed to". If we truly wanted to address high house prices we might consider - large scale building programs, restriction of migration, and reform of the monetary system that has led to low Gilt yields (as suggested by Scepticus). Further, I'd argue that the dominance of the 'credit bubble hypothesis' could be actually socially damaging in that it has led to tighter, more restrictive credit to individuals. The result of tightening credit would not be / and has not been a lowering of house prices but a concentration of these appreciating assets by the rich. i.e. Credit affects the distribution of ownership and the rate of increase but not the absolute price of housing. After all, current house prices would be far, far less socially corrosive if ownership were more widely distributed. With respect to credit (in the context of the dysfunctional housing and monetary system) - We need to limit credit to landlords, increase transaction taxes on the rich and make credit more available (e.g. HTB) to individuals.
  10. Thanks for taking the time to respond. I don't think I really have much to add to the above. I don't think I disagree with anything you've written in particular although this isn't my area of expertise. The next 18 months are quite likely to be very interesting from a macro economics perspective. Perhaps we will have some more insight on the above. I agree with your sentiments earlier in the thread about morality - why let it cloud your judgement? - let us try to understand the world as best as we can. Ultimately things are as they are *And I write this as a 33 year old long term London renter*. I think the whole 'credit bubble hypothesis' for UK property should be open to more scrutiny generally. Not least because people make decision based on what they read and they should be presented with all available arguments and counter arguments. That said, I'd like to highlight - based on the above, and you own acknowledgement - you may well be wrong! And, It (literally everything) might all turn out to be one ******-off massive CB bubble! You are right about (3), your point was not what I had expected. I was being deliberately vague but the points I meant included: + Collateral scarcity - and it's impact on non bank (shadow bank / Eurodollar) credit creation. [http://www.alhambrapartners.com/author/jsnider/] + Income inequality - CB actions and their impact on inequality (perhaps easier to establish) and the associated differentials in marginal propensity to consume between rich and poor. + 'Austrian' criticism - non specific critic around 'misallocation of resources' as a result of miss-pricing of credit. [i don't subscribe to this view but found Mises's view interesting in so far as I could understand them *have you ever tried to read human action!?*]
  11. Your posts from last year made me consider the limitations of the 'credit bubble hypothesis' for current house prices. That said, I struggle to understand whether the relationship between long-term interest rates and central bank behaviour is causational (i.e. CBs set them) or correlated (i.e. CBs respond to markets and the economy but cannot / do not influence them materially). From memory, you've previously argued that the current interest rate configuration (NIRP / ZIRP) is not a result of central bank action and that these banks would be unable to maintain rates above these levels even if they wanted to (presumably similar to the European example of 2011). It's interesting that you argue the opposite was the case in the past (i.e. rates kept 'artificially' high): The question I ask is, how is an observer (me) able to discern between the following scenarios / explanations for the world: 1) 'Ineffective CB world' - A world with stagnant growth where central banks have kept rates 'artificially' low, leading to lower long term interest rates (than they would otherwise be), 'artificial' higher asset prices (bubbles) but no / limited impact on growth. 2) 'Neutral CB world' - one where central banks had responded to stagnant growth and 'followed' market rates down. Asset prices are higher but are durable and set by the economy and not the CB. 3) 'Negative CB world' - a world where central bank action has led to and caused the stagnation (economic strangulation as a side effect through means TBC) and therefore lower interest rates and therefore higher asset prices [which persist so long as the CBs retard growth.] Central banks and economists seem to repeatedly opt for narrative 2) which make sense in that it absolves them of any responsibility for some of the negative side effects of low interest rates. That's not to say that they are wrong but I'm quite struck by the vacuous arguments presented for this economic malaise (e.g. Secular Stagnation / debt etc.). Narrative 1) seems to be fairly well established within the internet / financial community but I can never work out what 'artificially low' means (presumably a deviation from the Taylor rule) and how adherents could be sure that rates wouldn't be at that level independent of CB action. Narative 3) is interesting and seems to be growing in strength at the moment. We are obviously limited in that we have just one world to make comparisons but is it really possible to definitely say that CBs are not the cause of economic malaise and/or low interest rates? If no, then it seems to be that the 'credit bubble hypothesis' for UK property is still plausible (i.e. long term interest rates will revert once CBs realise their actions are either harmful or ineffective leading to lower asset prices).
  12. Thanks. Bracket malfunction accepted. I'd had a few post holiday beers. Thinking about it further - I think my definition of jobs created by tech (CT) is wrong / incomplete also. It's not just the jobs created by the new technology (which may be limited) but also the jobs created through new tastes, desires and values (potentially [or not] eminating from the new tech).. Many of these may come about through temporary labour surplus. Would it really require herculean effort? We have the productivity data a meare google search away, across many countries. I've not looked into it but AIUI it isn't going up. Is productivity growth necissary? Are they capturing output fully / completly etc - i.e are we understating producivity growth (FB, Netflix, intanglibles blah blah). These are the questions to be asked. I note the example that you sight but respectfully this is just an anadote that could of been presented at any period over the past 100 (?) years i.e. new technology in factory leads to large scale job loss. It does not support the supposition that we are in / entering a new period of wide spread technological disruption i.e. DT > CT (redefined). A diversion into annocodotes (sorry) - I'm always reminded of this debate (tech / labour) when I visit supermarkets - The overiding image of labour being replaced by computerised tills is unavoidable. Annocodote - I lost my debit card in a local CO-OP in South London, that I visit prety much daily, a couple of months ago. I asked at the counter whether it had been handed in and after a few awkard exchanges I realised that none of the staff working behind the counter - that I intereacted with daily - were in anyway able to speak English. I was quite shocked and hadn't realised this till now as most of our exchanges had been around baging requirements or payment means but I left wondering - How *******ing* tight is the labour market right now that Co-Op are employing staff in a customer facing roles that are completly incapable of speaking English? From this I begun to wonder whether the installation of automated tills by supermarkets across the country was in *response* to labour shortages and shareholder desire to preserve profit margins rather than genuine technological disruption. i.e. we are / could we be confusing causation with correlation here. We see labour saving technology and assume it has disrupted labour where as in fact it has been introducted into a role it is not ready for (customers hate it; I hate it) as a result of labour shortages. From the perspective of the UK, this labour shortage hypothesis makes allot more sense to me than the technological obsolence one. What kind of a country undergoing wide spread technological obsolence of it work force (over say the past 15 years) imports c. 3 million (assiming 250k pa) young economically active employees? It doesn't make any sense at all. We've had the internet for 15 years and mobiles for 7(?), surely the trends of technological obsolence of the workforce should be visable in: Higher unemployment, higher productivity (and wages) and lower imigration (why would they come if there were no jobs?). None of these hold. Unemployment is going down, wages and imigration are going up and *hopefully* indequality down. Do the above trends mirror what we see in the political arena? Trump / Corbyn?
  13. Give the guy a break. He's one of the few media types that actually seems to care about the housing crises.
  14. I was thinking about this thread on a long (4 hr) drive home today. One of the core hypothesis of this thread (not the only) seems to me to be that - technological adancement will lead to material *TBC quantificaiton* job losses and that this will be signfiicant because it will lead to a higher unemployment rate. Large numbers of people will be made technological obsolencent and unable to contribute econonically (from a supply side perspective) to the modern economy. Perhaps drawing up a strawman but I wanted to simplify. I assume the employment rate is defined something like (I'm not an economist): Employment rate (ER) = Number of employable population in employment (NE) / Employable population (EP) ER = NE / EP I assume that, the technolocial obsolence argument assumes that more jobs will be destoyed by technology than created. So after a period of time (to 2030): ER = (NE - Jobs destroyed by tech (DT) + jobs created by tech (CT)) / EP ER = (NE - [DT + CT]) / EP Thinking about this I wondered, if we are going through a period of technological obsolence then the effect of [CT - DT] *must* be observable now. i.e. if we are making predictions about huge, material, future job losses based on technological development, to some extent, this must be observable today. Surely. The thing is, the above relationship must always have existed. i.e. All technology is disruptive to some extent. What we are arguing here is that the rate of disruption has shifted so that CT < DT or much, much < DT. Assuming the above makes sense, if we are destroying jobs *but presumably, handing their functionality over to machine* sure productivity must be increasing. How else would the above hold? (I can think of arguments but dont want to preempt them). I assume (I'm not an economist) that: Productivity (P) = Output (O) / Number of population in employment.(NE) P = O / NE We lose a job due to technology, O remains the same but NE reduces so productivity (P) increases. Surely this is the acid test? Surely improving / increasing productitiy is a fundamental requirement / collobrating evidence that widespread techological disruption is occuring? http://www.ft.com/fastft/2016/08/17/uk-productivity-shows-no-improvement-in-q2/ Does productivity or lack there of refute the technological obsolence hypothesis? --- A separate but related point: Going back to the above relationship: ER = (NE - [DT + CT]) / EP Assuming the whole technological unemployment hypothesis (i.e. DT> CT by a large amount), we are ignoring demographics. AIUI, the western world is facing a unpresident demographic crunch with the retirement of the baby boomers. This isn't a prediction but a widely accepted fact (am I wrong?). This retirement process wil most likely (I assume) lead to job losses resulting in reduced demand from retireming boombers but it will also crucially shink the labour pool materially (and by a factor greater than the loss of demand for labour). So: ER = [(NE - [DT + CT]) - Jobs loss through retirement of boombers (Jb)] / (EP - number of boomers leaving employment pool due to retirement (Rb). ER = [(NE - [DT + CT]) - JB] / (EP - RB) http://bawerk.net/2016/08/17/stupid-is-what-stupid-does-secular-stagnation-redux/ So the question I got to on my long drive home was, why are we obsessing on technological obsolence of workers - something there is little evidence for (productivity) currently, that is highly speculative (made several times in the past) and that the effect of which (assuming it is correct at all) will surely be swamped by demographic factors? I wondered, why we (this thread) focused on the hypothetical loss of jobs when there is clear evidence (demographic) of a cliff approaching? i.e. I'd argue that (JB + DT - CT) < (EP - RB) Just wondering out loud
  15. You've obviously got good judgement for picking up on trends. Back in 2004/05, as a younger man, I didn't have a fully formed view of the world and couldn't put my finger on what *exactly* was wrong . I wish I'd found the forum back then (I think I'd found the website). Something was obviously wrong, I was sure, but I couldn't work out what. My reading at the time led me to the conclusion that resource scarcity and environmental degradation / global warming were going to be the key challenges the world faced. There were allot of wacky ideas out there at the time as I recall. I couldn't have been more wrong.(note - does anyone either bother to talk about Global Warming any more?! I'd quite like a topic on it as a cautionary tale). I only mention the above because both of these themes (global warming / resource scarcity / peak oil etc.) had huge intellectual followings at the time. The science / evidence looked compelling and arguments were forcefully made with an air of 'this time is different' (e.g. substitution and technological advancement vs. depletion rates for peak oil). The narrative was reflected in market prices creating a self re-enforcing feeling. I think that I smell a whiff of this with the whole technology narrative - 'AI is the future', 'machines are going to take our jobs', 'technology is going to disrupt everything' etc etc etc. This is not to pour scorn on those who hold these views but just to highlight that there seems to be slight social panic going on in this topic. Or it seems that way to me at least. Perhaps I am wrong. [Perhaps the misconception is the lack of appreciation of the magnitude of the impacts.] It's worth remembering, with respect to the impact of these technologies on employment, the same arguments have been made many time in the past and they have always proved to be incorrect. It's a lazy point to note but worth making. This time will perhaps be different. Similarly, I am sure that similar arguments you made re. virtual reality impacting the distribution of house prices would have been made at the advent of email (maybe they did but this was offset by larger factors). And yet we are where we are. There is no use in be contrarian for the sake of it but I do believe that humans herd and get things wrong so it is useful to calibrate from time to time and when new ideas flourish to ask yourself who is on the other side of the debate and what are they saying. The interesting thing to me is that there doesn't seem to be that many people on the other side of the debate on this topic. I wonder if a truly contrarian view on the topic of technology would be to assert that the rate of technological progress has peaked, that future developments will be insufficient to offset the coming collapse in labour and that the vast majority of human labour is not substitutable for technology and probably never will be. The world of the future will be much like today. If everyone is wrong about technology then what *is* the issue of the day? If they are not wrong about the impact of technology on society then why is everyone talking about it? [as noted above, maybe it's just impact].
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