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Unmoderated

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  1. I bought a house on a busy cut-through about three years ago, but I knew they were building a relief road (they call them distributor roads now so as not to freak out the people this new road goes near). The aim is that traffic falls dramatically but I end up on a through road that is not a short cut to anywhere. 

    Phase two is a large extension to the existing property but need to see how phase one works out. The road is somewhat delayed with Covid but only by a couple of months at this stage. 

    I agree that EVs would make the world of different to noise and air quality especially at junctions where hard acceleration produces a lot of noise and exhaust. If the speed limit is over 40mph then I wouldn't be keen on the road though, as others point out you get to a certain speed and the rolling and air noises overcome the engine noise. 

  2. Mortgage prisoners: Key workers in 'financial nightmare'

    They (MPs) are asking for the Competition and Markets Authority (CMA) and the Financial Conduct Authority (FCA) to undertake a joint consultation and introduce a cap on standard variable rates.

    The Treasury said it sympathises with the situation of borrowers who cannot switch mortgages if, for example, their loan is too high against the value of their home or because they are now too old to re-mortgage.

  3. 20 hours ago, mattyboy1973 said:

    No doubt the devil will be in the detail, and it will exclude any meaningful, useful home improvements - just like shoddy cavity insulation drives of the past. I was living in Aus during the GFC and the government introduced a roof insulation scheme that saw an explosion of fly-by-night companies pocketing cash for substandard work, including on our own rental where I am (almost) certain that the govt handout was split between the contractor (using 15 year old boys to rip off the roof tiles and chuck insulation in from the top, no safety gear etc) and our dodgy landlord. The whole thing was a disaster that ended up with a government enquiry, and nothing about the competence of our current government leads me to suspect it will be any different here.

    I'm not against some sort of stimulus scheme, especially something green since we could kill a couple of birds with one stone, but how about something simple like suspension of VAT for home improvements, reinstating solar panel feed in tariffs etc.

    Yeah I can see that happening. I bought my current place a few years ago and the old boy had every receipt of anything he'd bought for this place including one for cavity wall insulation. Cannot find a trace of it in the property lol. Ultimately this is a development project so any VAT cut would be welcome but could end up just increasing demand for builders and therefore their rates. I plan on doing a lot of the work other than the main structure so it would be a help. One thing I definitely want it underfloor heating through the downstairs as it's a 50s build with a suspended floor so not too bad to retrofit and could be done well in advance of the additional work. Would also need the sub floor insulated. 

  4. Looks like HTB is the only option then for those with a low deposit. 

    2 hours ago, Locke said:

    Looks like 95, 90 and 85% loans are off  the table. - they aren't there's just less competition

    So let's say the most you can get is a 4x leverage loan (80% LTV) - ok 

    When you could get 95%, £10k would get you £200k of house - yep

    Now it gets you £50k of house.

     

    Some people's on here predictions of an 80% fall aren't looking so outlandish now are they? - yes, your illustration above demonstrates a 75% reduction. It's also not gonna happen. 

     

    Ah but the housing market is looking at a bounce back, right? - I wouldn't go that far, it'll take a hit, but it isn't going to collapse like that. 

     

    Go on, bring up Japan. I love that one. 

  5. 1 hour ago, Locke said:

    I don't see how it possibly couldn't be, in the long run. As you know, most money is debt today, which means that as people default on debt, the supply of money contracts and therefore theoretically prices should collapse. There is also the extreme leverage in the system which means that some defaults cause further defaults in other areas and it cascades into a debt implosion.

    On the other hand, they are running the digital money printers in a way not seen in the West for almost 100 years. Combine with a collapse in production, the supply of goods n services is going to shrink, which is price inflationary.

    Just because house prices are going up, doesn't mean that house values are going up. If you correctly adjust for inflation, house prices have gone nowhere for 30 years.

    During Weimar Republic inflation, those who made out best were holders of gold and farmland.

    ...yet

    They can try, but I don't think they have the capital to hold their position.

     

    Personally, I think we will see this:

    hyperdeflation in things you want:

    • cars
    • video games
    • hookers
    • excess living space
    • holidays
    • beauty services

    hyperinflation in things you need:

    • food
    • water
    • fuel
    • a roof over your head
    • medicine

    Although the former will be cheap, you won't be able to afford them because the latter will be so expensive.

    It's inflationary, generally, because right now there's less supply with people laid off or furloughed and they're getting paid with magic money. Therefore more £'s chasing fewer goods. Similar trend globally though more complex on a country by country basis. GDP shrank by 20% in April but we've not seen deflation. Granted there's always a lag though.... so we'll see. 

    During the Weimar Republic Hyper Inflation the people who owned property were initially immune, but that gave rise to the Nazis and ultimately anyone owning any illiquid or hard to move property was screwed. Great book by Adam Fergusson "When Money Dies" covers off just how quickly things went south. 

    The banks can do whatever with central bank support. If we see negative interest rates that's a charge on banks closing the day with any deposits, therefore they'd rather lend at zero since there's no charge (assuming no default risk etc). Very quickly you can see the perversion of lower negative rates whereby a bank is paying people to borrow since the cost including default risk is still lower than the charge with the central bank. 

    We wont see hyper inflation in this country, defined as out of control inflation with a 50% or greater increase in prices per month. 

    So I think your assessment here agrees with me. There's never been a better time to buy a house because it'll be hyper inflated. In other words the debt will evaporate. But then you say the banks can't support delay and pray so that would be deflationary on a credit bought asset like houses so not sure you're entirely with me there?

  6. 2 hours ago, Locke said:

    What if you buy a lathe and sell finished goods in your spare time?

    If you bought hookers on your credit card, that is an increase in economic activity, but not a growth in productive capacity (probably; the hookers might buy a lathe and start making things), hence probably less real growth.

    Well like I said, if you are blinkered to the view that only saved currency is savings, then we will never agree on anything. I imagine you agree with the term "barbarous relic" as well.

    You really are clutching at straws. 

    If you buy something on debt (consumption) and produce something (more consumption of raw materials) and sell it on to a third party (consumption) then your income has increased. Debt isn't income though. 

    You'd know more about hookers than I so i can't comment. Again, whatever you're spending it is not increasing your income. Unless now you're saying national income in which case, the increase in debt (the opposite of savings) to spend more (increase in consumption) increases economic activity. 

    Stop making diagonal comparisons ... savings from an economic and monetary standpoint is the point you made. 

  7. 3 hours ago, Biggus said:

    They are available at an increased price. So there is not a shortage. Prices adjust so that there should always be a supply available at the market price. If they are not available at the market price it generally means prices have been fixed.

    So there's not shortage at a higher price? I guess it's how you define a shortage. According to this school of though there's only ever a shortage when there's none of it left. 

    If you've an interest check out a merit and de-merit goods. From an economic standpoint you'll note the under and over provision of these in a free market. 

    Bloody love economics. 

    Anyway, Locke's original post was all about money printing or QE, and to be fair to Locke that is an interesting subject. My view is it's inflationary and there's never been a better time to get on the housing ladder with the potential for hard negotiating.... but.... there's an absence of forced sellers even in these crazy times. I think most money lenders would rather delay and pray. The exception might be BTL and BT-Airbnb?

  8. 16 minutes ago, Riedquat said:

    Does it though? In the short term, yes, in the long term because you get charged interest, which will inevitably be greater than the interest you get on savings, you've got less to spend overall. Counter-arguments would be that the saved money might not get spent at all but just stay sitting in a bank account (or box under the bed), or that the overall short-term boost from everyone doing that might feed back in to you getting more income in the first place although that sounds unsustainable if kept up (and where we are these days certainly doesn't change my opinion on that).

    Your expenditure is not your income. Income is money in not money out. It's possible to spend more than you earn with debt.

    Flip side, last year my income was £440k because i borrowed £360k from the bank. Your spending is not your income. 

    However, playing along.....now we're saying the opposite of savings (debt) increases income and consumption and feeds back into more income if everyone does that so actually savings, QED doesn't actually drive the economy it is spending (consumption) that does so. So I think you've also proved the point... savings is bad for economic activity, spending is goooooooood. 

  9. 11 minutes ago, Locke said:

    To differentiate from debt based stimulus. Spending on your credit card, while it could improve your income, is not the same as spending out of savings.

    No. If massive debts (i.e. stimulus) are taken out to create demand, and the output overall is lower after they are paid off or defaulted upon, then there was never any real growth. Perhaps I should have used "real" rather than "sustainable".

    Firstly, you would agree that this represents excess production, so clearly there is a lower demand than supply.

    The price of what they have saved goes down relative to other goods and services. More people want to produce those other goods and services. The savings are traded for those other goods and services.

    Without the savings, the other goods and services would not have been produced.

    So production exactly equals consumption. I would imagine growth of economic activity per person is pretty flat.

     

    Spending on your credit card doesn't improve your income at all but it does improve your consumption ergo expansions in private debt increase spending and increase economic activity.

    Savings doesn't equal excess production. In economic terms savings is any income not used for immediate consumption. All this is available here : www.google.com

    This is basic stuff man, comeon. 

  10. 2 minutes ago, Locke said:

    Might die.

    Clearly we are not going to agree on anything if you can't even understand how storing food is saving.

    Your insulting facetiousness aside, there have been plenty of times when a larder full of food would get you significant amounts of property.

    Might, die, correct - the point though is if a hunter gatherer didn't store food he'd die. Hunter gathering though is not an intertwined and monetised economy. 

    Saving food is saving food, it is not saving money as in the context of your first post - here it is again:

    image.png.ff2b00473a8caae6b4d1a2957548d5d1.png

    Are you now trying to substitute money with food and then rewind back 300 years to a time when it might have occasionally been used as a rare medium of exchange?

    Plenty of times like back in the day when peppercorns were used to pay ground rent and Samuel Pepys buried his Parmesan?

    :D 

     

  11. 6 minutes ago, Locke said:

    I disagree. If a hunter gatherer made some beef jerky, that could be viewed as savings. If they fell upon hard times later, having saved up the meat could save their life, or perhaps enable them to play around with iron ore and charcoal instead of hunting for a day.

    https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm

    Modern banks are not constrained at all by reserve requirements. Even where these exist, banks can simply make a "loan" to each other, which counts as an asset on their books towards their reserve.

    Natural banks are constrained only by the risk of bankruptcy- being unable to honour a note holder's request for the associated asset.

    Creating more lathes than are needed for full capacity would be excess which is readily stored.

    The beef jerky is preserved food. If the hunter gatherer didn't do this he'd die. It's not savings. 

    I've got a cupboard full of jam Mr Mortgage Provider. Can I use that as inclusion in my savings assessment please?

  12. 1 hour ago, Locke said:

    The other guy was insisting that savings do not drive an economy. Savings are the result of excess production and are the only thing which drive sustainable growth, which is the only thing that matters.

    Savings are not the result of excess production. In simple models markets clear, i.e. there isn't an excess production rather price is discounted to sell everything. 

    Excess production of anything perishable results in wastage. 

    Excess production of anything non-perishable results in stock. 

    It must be clear to you by now hence your attempt to alter the definition of savings from income less expenditure. 

  13. 1 hour ago, Locke said:

    The other guy was insisting that savings do not drive an economy. Savings are the result of excess production and are the only thing which drive sustainable growth, which is the only thing that matters.

    I'm not sure there's anything more anyone here can do to educate you. Now you've added sustainable and underlined it. It wasn't there to start with. Is now your aim to argue this towards one of a fiscal prudence rather than growth and therefore savings would cushion the impacts on spending (consumption) in a recession? Just asking now to save us all some time. 

    Thought experiment one - nobody spends anything and saves everything. What happens to economic activity?

    Though experiment two - people spend all of their money as soon as they get it. What happens to economic activity?

  14. 19 hours ago, Biggus said:

    Savings is I. Income - consumption = investment or savings.

    NB - not a Keynsian.

    Investment (in capital goods) is not saving. 

    Hoarding cash away in a bank account doesn't stimulate the economy, rather it does the opposite. 

    I'm not a Keynsian either. I don't think anyone who has studied it is. 

  15. The premise of almost all taxation in UK is based at the point of a transfer of value. The closest we have to a wealth tax is council tax, though that totally ignores the value of the debt and only the asset value. 

    There are problems with calculating wealth too. I might take out an interest free credit and splurge on that to get into debt and withdraw my savings from the bank to put myself in a net debt position. Furthermore most govts have some exemption for either debt, real estate, or provide a real estate allowance for the nominal value or complete value of a primary residency. Might burn a few BTL landlords though. 

    Typically it is levied only on the wealthy since it's harder to hide that money but still possible. Ultimately the very wealthy would park it overseas and then be semi perm vacationists in the UK if they still liked it here. 

    Land Value Tax still the best option imho. 

  16. 3 hours ago, Locke said:

    If savings do not affect growth, why does your chart include the interest rate?

    Savings do affect growth but they don't drive it (as you stated in your earlier post).

    Higher interest rates reduce consumption and investment by increasing savings. So again, with the AD and LRAS formula you can clearly see that increasing savings as the result of an interest rate increase causes AD to fall. 

    If you prefer a real world right now in the UK example:

    image.png.5dc0c935cb6d17299412872eba7131c2.png

    A drop in consumption and a dramatic contraction in the economy is met with record savings (where debt is negative savings).

    https://www.theguardian.com/money/2020/jun/02/uk-consumers-repay-record-74bn-of-debt-amid-covid-19-lockdown

     

  17. 2 hours ago, Locke said:

    This explains why you don't seem to be able to understand.

    If a farmer produces exactly the amount of crops he needs to feed himself and to plant some seeds for next year; zero growth.

    If he saves some seed and goes a little hungry and works an extra hour in the day so he can plant more seeds, then next year he has more food and has to go less hungry; growth.

    Sustenance farming isn't economic growth lol

    Next year he consumes more food - so you're counting that increase in consumption as growth?

    It's incredible that you would like to think that Economics is unable to understand growth, perhaps you can show me where savings features? Savings is deferral of consumption. It is the antithesis of growth:

    image.png.204c2837da46e02e2916e46c46f417d5.png

  18. Just now, Biggus said:

    When you sell something you are paid by someone who produced something. If you don't spend the money you're paid spare capacity has been added.

    The size of the economy should not matter, so far as I know.

    The point in the size of the economy is that it got big by growing. 

    Savings do not grow economies under any economic model I've seen.. been a few years since I did my economics degree though. Loans or investments on the other hand do.

    In the short term a shift in aggregate demand (consumption) drives growth but without a response in the Long Run Aggregate supply (production) the increase in demand is inflationary.

    Consumption is a dog and production is the tail. The tail doesn't wag the dog. 

  19. 3 minutes ago, Biggus said:

    You produce something and sell it. The instead of spending the proceeds of the sale on a new pair of shoes, or an ihpone ap or a bag of crisps, you don't spend it. You can put it in your piggy bank.

    When you save it adds spare capacity to the economy. The excess can be used to create capital. The specific dynamics of how the spare capacity gets to the enterpreneur is an interesting question! Banks are supposed to be intermediaries between savers and borrowers, balancing security and risk for the best return. Economists will tell you that resources will be used by the person who bids the most. In theory that's should be the person that would put it to best use or generate the highest return.

    It's just as valid to say production drives the economy as consumption. One needs the other. Production without consumption creates growth. But you have to produce something that someone is willing to pay for. Consumption without production distorts the economy.

    There we go, selling it leads to several outcomes, one of which is savings. 

    Question, is consumption higher or lower in larger economies? 

  20. 3 minutes ago, Biggus said:

    Savings create growth. But you have to produce something to save first! Giving everyone a million pounds each to do nothing does not create real savings. You have to produce something and not consume it to allow entrepreneurs to create capital.

    Consumption does not drive the economy. The economy is people exchanging goods and services, not simply consuming everything in sight. Things need to be produced before they can be exchanged. Giving everyone a million pounds to do nothing would stimulate consumption, but nothing would be produced.

    Inceased production would produce more transactions. Hence investment will create growth. So saving will grow the economy. Consumption without production will not grow the economy.

    Savings create growth.... right

    But you have to produce something first to sell it to have something to save? You will only produce if there's a consumer. 

    ergo........ 

    Then what do you do with those savings? They sit in the bank doing nothing that rives nothing. You mean loans drive the economy I'm guessing? So consumption of financial services drives the economy. 

    Thanks for helping me see that. 

  21. On 05/06/2020 at 16:15, Biggus said:

    It's an interesting argument. Do you think there's a danger people might save so much that consumption falls off a cliff?

    It's more that it is consumption that drives an economy, not savings. 

    It seems simple to say the economy is stronger if everyone has savings. It might be more stable but there's less production, less work, less consumption. 

    Right now the economy is shanked because we cannot go out. We've also paid down the most debt in forever. Savings up, consumption down, economic output down. Once the place opens up again I'd expect a very strong bounce in consumption and inflation. In the UK at least paying people to sit around doing FA while they are producing nowt will create more money demand for scarce goods post lockdown. 

    And now we've negative interest rates. Friend of mine who has never had any debt (bought his house cash, didn't even go to uni) just bought a motorbike because it was 0% finance.

    Exciting times. 

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