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House Price Crash Forum


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Posts posted by huw

  1. If NW had offered a deal whereby if you have substantial savings with them and no mortgage (i.e. you were a net lender of money to NW), you retained the card abroad perk for as long as you kept them there, that would have been fundamentally fair.

    But not to net lenders who don't use the free facility; they are best served by NW charging for such services, while using the proceeds to maximise interest rates. Similarly, borrowers would hope to see the proceeds used to minimise their interest rates (both are members of the society and entitled to a share of the additional slice of pie, much as you or I might wish that lenders received priority in this :))

  2. Right so we should should just forgive the very people who are instrumental in stoking the unsustainable demand that cause the bubble and ensuing bust. Sure the banks contributed with their willingness to lend but a large portion of the blame must lie with those who are were just too f*****g thick and greedy and deliberately blinded themselves to their impending folly, and who in many cases committed fraud to fund their self delusion.

    Fraud is a criminal offence; those who committed it should be prosecuted, no need to discuss further.

    For the rest ... given bubble-inducing credit conditions, the bubble is inevitable. Real blame lies with policy makers (internationally) who created the conditions.

  3. I heard this argument a few years back and it's thought-provoking at least:

    'Locals choose to sell their houses to weekending city residents. If they do so, they can't then complain that the village is becoming a ghost town. You don't want a ghost town? Only sell your houses to people who work locally.'

    Once they've done that, chances are they're not locals any more :)

    i.e. they've asset-stripped their community and decamped to Spain or somewhere, leaving others -- including those who never had property in the first place -- living in the ghost town.

    You won't correct the "problem" of human nature that leads people to behave in socially counter-productive ways during economic booms. You might be able to correct the imbalances that lead to the boom in the first place.

  4. Yes!

    Do you think that people lived in the industrial waste land that is the North of England 200 years ago?

    NO, they moved from being farmers on the land to work in the industrial centres.

    Now, there are no jobs for them and they should get on their bikes and move to where there is work.

    I did it and didn't look back.

    That model has the entire population living in London and the South East, or as close to it as they can afford -- hardly an efficient use of the resource that is the UK.

    We need to go deeper than "get on your bike" (though people should be prepared to do that, if genuinely necessary e.g. if their mining community has no reason to exist any more because the mine is played out).

    We need to look at why London has developed into such an economic hub. Personally I believe that the answer can largely be stated in two words: Banking Licenses. If you modified all banking licenses to add the terms that the businesses must be substantially based in Manchester, Manchester would eventually become the economic hub of the UK because Manchester would be where credit was created, and eventually interest rates would be set there, too.

    Which brings me to another part of the answer, the idea that Northern unemployment is a price worth paying to curb Southern inflation. That, together with the "on your bike" prescription, forces the Northerner to uproot themselves so that the Southerner can stay at home (though in increasingly expensive, unpleasant and crowded conditions).

    Trade and wealth-creation in the UK needs to be re-balanced across the regions and out into rural areas. Among other things that means that new rural build should NOT be aimed at commuters (i.e. slave boxes and "executive" homes), they need to be designed along different lines, maybe live/work units, houses with substantial gardens for families and food-growing, basically places where people do more than store their commuting vehicle while they regenerate themselves for a distant, disconnected life of PAYE.

  5. Who says they'll buy our stuff? As they have virtually colonised Africa and will use Africa as its cheap labour force for the foreseeable future.

    And quite simply what can we sell them? Back in the 1800s all they wanted was silver, so we had to sell them drugs.

    I never said they'd buy our stuff, however we could buy our stuff, which would be a step in the right direction.

    Re-balancing is more likely to come from some kind of debt repudiation (inflaton or default), than from Chinese demand for UK products beyond its IOUs. As long as they're prepared to keep rolling previous debt over, and lending more, that won't happen -- but those actions only postpone the day of reckoning and make it worse. Though I suppose you reach the point where it can't get any worse, maybe we're there already and should just keep enjoying the free stuff for as long as it lasts B)

    Hard to see what else we could do anyway, short of import tariffs and capital controls.

  6. China is now dumping, its official.

    America is trying to threaten China into submission (millitery exercises in their backyard),

    which has by the looks of it has back fired.

    On the contrary, all else being equal this will lead to a weaker USD and stronger RMB, which is what the Americans have been calling for for some time (as discussed in the other currently-active China thread).

    Weaker USD/GBP will mean pain in terms of reduced consumption, but it's essential in the long term if Western economies (and the global economy in general) is to rebalance.

  7. I'm not sure.. on one hand you have a billion people who suddenly reap the benefits of what they produce (what else are they going to do with all their production and cheaper imported raw materials due to a stronger currency?)

    On the other hand, you have the Western world who see their purchasing power drop, inflation sky rocket, and standard of living reduce.

    We are effectively arguing that the Chinese worker should be given a higher standard of living instead of being so aggressively economically competitive. That wealth would be transferred directly from the western consumer by way of higher prices and higher cost of living.

    Yes. However I think it will require several kinds of change in China, and it won't happen overnight. First of all there are practical considerations, such as the power demands that gadget-obsessed societies place on their power grid. Even the size of homes is significant if you want a room for the big flat screen TV, a study for the computer, separate bedrooms for the kids to play with their consoles, etc.

    More subtly, perhaps: can the Chinese political system tolerate advanced "computational" consumption in the first place? Chinese consumers don't even have access to Amazon afaiaa, let alone to the Kindle store, let alone to the DTP platform where Westerners can upload their work for sale. Yet it's this kind of information-ecosystem that drives demand for the corresponding gadget. How many people would buy Kindle/ipod/whatever if you could only buy content from a government approved list?

  8. Competative Devaluation! China is well ahead of the curve and has been buying the world with the proceeds. Western governments were quite happy to sell debt to them in the boom years and exploit the voter bonus of ever increasing house prices.

    Those same governments are now nursing huge youth unemployment, a generous benefit culture and a massive housing bubble. ALL paid for by the sweat of China's citizens and now they are getting grumpy?

    We happily took the benefits when times were good and were selling loans/houses to each other in our "Knowledge Based" economies.

    Now when things get tight, we start blame the the tiger letting for us dangling our economic balls in it's mouth!

    It will take a very brave state indeed to slap that tiger!

    Yes, they've cleverly swapped the sweat of their citizens, and the wellbeing of their country, for a pile of Western IOUs. A weak currency policy means business-as-usual: more labour exploitation, more environmental damage, more transient goodies for us, literally on the never-never. Hooray! :)

    The Chinese leadership are smart enough to know that our IOUs are largely unrepayable, and they know from their own country's recent history that sovereignty trumps foreign ownership claims. So why don't they do the obvious thing: stop buying our IOUs thus allowing the RMB to appreciate? The only credible explanation is that they daren't. The leaders of China are riding the tiger, probably even more than we are.

  9. Although China is far better placed than anyone else; they've got the factories.

    If the USA/Western Europe throw up trade barriers, the Western economies will tank: no more electronic gizmos (phones, telecom equipment, PCs,...) for starters.

    It would take decades to rebuild these industries in our countries (and train all the people who will work in them). Building factories is not like building websites; it takes time :)

    In the meantime, China will suffer from unemployment and labor unrest... which is far preferable to suffering from shortages of essential goods.

    I suspect that many in China already suffer from shortages of what we'd consider essential goods.

    In terms of ramping up industrial production, China seems to have got up to speed pretty quickly, and we'd be starting from a much higher level than they did. What will clobber such efforts IMO is is primary resource shortages, rather than a lack of cellphones and PCs whose most important function (apart from being the building blocks of a thriving web development sector :huh:) is as retail tokens, exchangeable for debt within a miracle economy.

  10. TBH, I can understand the USA's annoyance, but isn't the strength of the Chinese currency a matter for the Chinese people (and their government) as well as the markets? If the Chinese people are happy to do back breaking work for a pittance, isn't that their problem and their responsibility to demand more value for their money?

    It's our problem too, because they suppress their currency and keep us "solvent" by buying our debt -- i.e. their policy is one of continual credit expansion, which is not leading anybody to a good place. In the meantime, try buying RMB (please let me know if you find out how :))

    But it's all good I guess, as long as they don't get stroppy about the inevitable defaults.

  11. Because they were in charge making the decision? The fact they benefitted from free education that now requires such hideous fees to be paid by their children is probably a coincidence

    The nature of our democracy and voting patterns means that it will always be the older generation making decisions that affect people in school or at university.

    ALL the vocal NL supporters I knew in 1997 -- the ones who fell for the line that things could only get better -- were in their early 20s, had benefited from free tuition, and were pulling up the ladder :)

  12. Nice in theory but I'm not sure about the 'orderly' bit been possible. To implement it there would have to be an extended bank holiday.

    That would cause fear.

    Fear causes panic.

    Panic causes violence.

    Violence causes fear.

    Et al.

    I still think the bail-outs were the least worst option given the time-scale in which Governments had to calm the markets.

    We'll never know for sure.

    IMO there would have been a hiatus, how bad it would have been would have depended on how good the planning and implementation were. Banks were broken up and taken into new ownership without operations being interrupted (B&B for example, iirc).

    On the panicking markets: a co-ordinated announcement of decisive, credible action would have had a calming effect, since the panic was caused in the first place by the perceived insolvency of the global banking system, the very problem that was being corrected by the "good bank" plan. It obviously wouldn't have reassured anybody with a stake in a "bad bank", but that's what the plan was all about -- letting insolvent banks fail, and not having to save their investors.

    Instead, we've shoveled their losses onto our sovereign balance sheets. The consequences of that are still unfolding, the anger expressed in this radio programme may be no more than foretaste of what's coming.

  13. The level of anger directed at the banks is understandable.

    However, The Irish Government (like all Governments around the world) had no choice but to bail them out in an effort to

    keep the status quo.

    Believe me, if the world's banks had gone into meltdown then most countries would now be living under martial law.

    Food and energy would be rationed.

    That's the choice - austerity for a decade or no freedom.

    That's the choice.......

    They didn't have to go into meltdown, they could have been broken up and nationalised in an orderly way protecting vital financial services and depositors, while handing losses to the risk-takers who signed up for them.

    It would have required internationally co-ordinated action though, among all countries with systemically important failed banks.

    BTW food and energy are already rationed ;)

    edit to add a snippet from Willem Buiter:

    Rather than wasting the $1.4 trillion of public funds it would take to restore (according to NYU economist Nouriel Roubini's estimate) the capitalization of the U.S. banking sector to its fall 2008 level, it would be better to use public money to capitalize new banks that don't suffer from an overhang of past bad investments and loans -- and to guarantee new borrowing or new loans and investment by these banks. This "good bank" model achieves this by identifying the systemically important banks that are kept afloat only by past, present and anticipated future public financial support ("bad banks") and taking their banking licenses away.

    The "stress test" proposed by Mr. Geithner for major banks (assets in excess of $100 billion) could be used to gather the necessary information to identify the bad banks. New banks, capitalized by the government (possibly with private co-financing) would take the deposits of the bad banks and purchase the good assets from the bad banks. Future government support, through guarantees or other means, would be focused exclusively on new lending and new borrowing by the new good banks and those old banks that passed the stress test.

    The legacy bad banks would not be allowed to make new investments or new loans and would simply manage the inherited stocks of assets in the interest of their owners. They sink or swim on their own. If they fail, their unsecured creditors can figure out what to do with the bad assets.

  14. That's coz the Irish have one of the highest percentages of Uni/further educated? citizens of any country in the Western World.

    Eejit. :rolleyes:

    Nah, there has to be more to it than that, they're ahead of is in tertiary education numbers, but not that far ahead. And you can get a degree without being particularly articulate or well-informed, nowadays B)

  15. the same is true of buying equity on the FTSE in an IPO.

    With the difference that the extraction of dividends isn't likely to affect the motivation of most of the assets ... plant, salaried employees, business models etc. can be expected to perform the same before and after the IPO. The company's original owners might be demotivated by the dilution of their stake, but then investors in a corporate IPO presumably understand that the life-long commitment of the founders is not part of the deal.

    And presumbly most corporate employers would require you to authorise a check with the various labour bond firms before signing you up.

    Maybe, though we're talking about the creme-de-la-creme here, who's to say they'll need corporate employers?

    Also, I suspect there would be employers and jurisdictions where competitive advantage trumps doing the right thing by an employee's equity-owner.

  16. [edit: and of course part of the beauty of it is that it introduces a price signal that transmits information about the skills industry actually needs. You want to do underwater basket weaving? That'll be 20% of your income for 20 years then. Why not consider 'electric drivetrain engineering' instead?]

    The same could be achieved with a traditional loan -- differential interest rates for basket weavers and drivetrain engineers.

    TBBs may well be a misnomer. They have a lot more in common with an equity stake, than with a bond.

    A disadvantage compared to a proper bond is that the "investment" is relatively less incentivised to produce wealth, since the more wealth he creates, the greater his liability becomes. With a regular loan or bond, the finance costs remain constant. Obviously, someone who doesn't expect to do well will prefer the former arrangement ... but is that the kind of person you want to attract into the scheme?

    Another potential problem (with any scheme to go "long on labour") is that people can move to a new jurisdiction that doesn't recognise the bonds, or set up one of their own. Imagine if you'd had TBBs on Americans in 1776 :)

  17. It's all a bit surreal out there at the moment. Was speaking to a self catering complex that WAS booked up for the Summer then suffered literally a torrent of cancellations - most were from people losing their jobs - highly paid bods judging by the tariff!

    Just that name suggests "malinvestment" to me :huh:

    I wonder how many such enterprises were built to service the UK's miracle economy?

  18. Continues the usual glib conflation of students' incomes with that of their parents.

    There is still time to fix this one. At bare minimum, no graduate should have to pay more than the cost of his degree: anything beyond that is income tax. If growth really matters to this lot, then allowing someone who has invested in a degree to enjoy any return that ensues should be a matter of instinct. The state's role should be limited to ensuring that those on low incomes who qualify academically are subsidised.
  19. Listening to this right now. I urge other HPC'ers to do the same - I don't know if these are people who believed the Celtic Tiger hype and over-borrowed and overspent.

    I doubt its all of them.

    The measures they're complaining of hit everyone, e.g. the 5% electricity levy, and "poverty tax" whatever that is -- a tax on being poor? B):ph34r:

    And it all seems exacerbated by what they perceive as "let them eat cake" behaviour on the part of their political and banking elites, who are telling ordinary people to tighten their belts and/or being bailed out at public expense.

    Refreshing to hear articulate, informed people making such points. Puts a lot of UK phone-ins to shame, I'm sad to say.

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