The Smell Of Fear Is In The Air Today........

[guitarman001]

Check out Hamish's posts in the Scotland section - akin to Sibley in every way.

['Bart']

For theTrekkies out there, Karl Denniger hypothesised that our so-called leaders are facing their own real life Kobayashi Maru test.

Kobayashi Maru is a no-win scenario which is designed as a test of character, so I fully expect our leaders to fail it 100%.

Kirk got around it by reprogramming the simulator. Gordon fiddling the figures won't have quite the same effect alas.

[Unsettled]

Isn't the problem with your thesis that your price and asset inflation will trigger off another round of interest rate rises and commodity and energy inflation similar to the one we've recently experienced? And will this not throw the economy back into the situation your thesis has so recently saved it from? How then can any increase in house prices be sustained for any length of time?

Unsettled.

[huw]

Now I don't know how this will all play out. I do know things look very different today than they did even 6 weeks ago. But as a centre-right voter, I think I'd rather see a recession continue than see GB get re-elected, or see the Tories get in, only to get booted out after 4 years due to Labours "poisoned chalice". However, I admit thats somewhat selfish, and I don't think the rest of the country quite feels the same way.

Bear in mind is that energy/resource prices have fallen back because of looming depression, any nascent boom at this point would soon be pinched off by commodity inflation. Look at our trade gap to see what a problem this would be. But if it does play out as you envisage (and personally I don't think that the UK's credit is good enough for its guarantees to work) then the 'selfishness' will be in the bequeathing of a much bigger collapse to future generations.

For myself, and speaking purely selfishly, I'd like to music to continue for the rest of my life, cos it's been very pleasant so far, compared to what's probably in store

[InternationalRockSuperstar]

the credit rationing that is the primary cause of the current recession and price crash.

WTF?

[ccc]

Check out Hamish's posts in the Scotland section - akin to Sibley in every way.

Indeed. Hamish is simply Sibley in a Kilt.

Still keeps things interesting.

[PropertyGuru]

So, why the smell of fear on HPC?

The only smell on HPC is coming from your pants, estate agent.

[bobthe~]

Kobayashi Maru is a no-win scenario which is designed as a test of character, so I fully expect our leaders to fail it 100%.

Kirk got around it by reprogramming the simulator. Gordon fiddling the figures won't have quite the same effect alas.

Never underestimate the power of reprogramming the simulators.

Or reversing the polarity of the neutron flow...

[HAMISH_MCTAVISH]

So I predict large falls in property prices, in numerous threads, but I'm a Bull just because I also argue it's not the "end of days", and that things may get better more quicky than some on HPC (who are already in the gloomiest 1% of society) predict?

Or that as much as some of you lot argue there are systemic reasons for the crash being about far more than the credit crunch, I argue that there are just as many other issues are at work as well?

And because I take as much schadenfreude at watching savings returns diminish as so many of you do at watching assets values diminish, I'm also now a troll.

Hmmmmmm.

[Si1]

Hyperinflationary depression.

Nicer.

Financial and personal destruction of the insolvent, mortgaged or immobile. Feudalism by the back door. Apparently those that wil suffer the most wanted it, or at least they acted like they wanted it by voting in this govt and loading up on debt. And those that should survive ok were the ones who didn't want it.

Weird but priceless.

[equitystasher]

Good post.

I do however do not agree.

Sentiment is the biggest driver of them all.

I think sentiment has turned to far the other way and by the time the goverment get these schemes up and running they will find them ineffective as the downward spiral will have further reinforced negative sentiment.

The whole U.K economy is geared towards ever rising house prices and borrowing. To make the econmy work in its curr ent state you need to convince large amounts of people that it would be a good time to take on more debt or a mortgage. Most people now just want to pay down their debt or save for the hard times.Most with money are being rewarded by waiting and will continue to do so inforcing the downward spiral in asset prices.

All the banks will not want to catch the falling knife even if they get shot of their bad debts. Again proper risk pricing will rule the day which will mean a continued fall in house prices back to where the have historically been in relation wages. The whole reason the securisation was so huge was because investors were defrauded.They thought they were getting good returns for low risk.This made credit artificially cheap

Even with government guarantees for a proportion of the investment the investors will want a decent return and will want the investment to be transparent so risk will be properly priced in crashing housing market. Investors move in a herd.Always have,always will. They may very likley not touch anything to do with securitisation.

Money pumping willl just cause a bubble in something else ie Gold

[KingBingo]

but I'm a Bull just because I also argue it's not the "end of days", and that things may get better more quicky than some on HPC (who are already in the gloomiest 1% of society) predict?

Most people on here have Cabin Fever.

[thecrashingisles]

So I predict large falls in property prices, in numerous threads, but I'm a Bull just because I also argue it's not the "end of days", and that things may get better more quicky than some on HPC (who are already in the gloomiest 1% of society) predict?

Or that as much as some of you lot argue there are systemic reasons for the crash being about far more than the credit crunch, I argue that there are just as many other issues are at work as well?

And because I take as much schadenfreude at watching savings returns diminish as so many of you do at watching assets values diminish, I'm also now a troll.

Hmmmmmm.

You registered on this site in December 2008. When did you first become aware that a house price crash was coming? You don't seem to understand that the housing bubble (globally) was the underlying cause of the credit crunch, not some unrelated phenomenon.

[Unsettled]

So I predict large falls in property prices, in numerous threads, but I'm a Bull just because I also argue it's not the "end of days", and that things may get better more quicky than some on HPC (who are already in the gloomiest 1% of society) predict?

Or that as much as some of you lot argue there are systemic reasons for the crash being about far more than the credit crunch, I argue that there are just as many other issues are at work as well?

And because I take as much schadenfreude at watching savings returns diminish as so many of you do at watching assets values diminish, I'm also now a troll.

Hmmmmmm.

You haven't answered my question how will the inevitable commodity/energy/price inflation and the resulting interest rate rises not spoil your house price recovery party?

Unsettled.

[Si1]

I do however do not agree.

Sentiment is the biggest driver of them all.

are you drunk?

[Moo]

Having read a fair bit of gumpf about this today, I'm slightly at a loss as to what it's supposed to do. Unless I've missed the point, it's basically an attempt at a short-term money-spunk in the hope that those who've just decided securitisation was a Really ******ing Bad Idea will suddenly forget that it's pretty much trashed their industry, and change their minds back again. The phrase "extremely expensive speed bump" springs to mind.

[_w_]

Thanks to the OP for this excellent and detailed analysis of what may well be in the making for the UK.

I only give this scenario a roughly one in three chance of turning into reality though, the main unknown for me being whether investors will accept to invest in long term securities that offer artificially low rates engineered by the UK Gov and US Fed. Pension funds and the like might well accept it, it's not their money after all, but I know in my case I won't.

The prospect of a 1-4% return for the next 30 years in a world pumped full of credit is the equivalent of investment suicide. I believe a lot of people feel the same.

If a majority of individual investors refuse to take this risk, then SWFs won't be sufficient to keep this new ponzi up and running, rates will rise and that will be the end of that.

So 2/3rd chance your scenario won't work in my book but thanks for putting that case forward in such clear and insightful way. The worse one could do would be to ignore it IMO.

[RajD]

You are actually Gordon McBrown and I claim my five pounds

p.s. almost all respected commentators (and I don't include idiots like D.Smith, Kaletsky and yourself here) without political links/agenda are predicting an almighty crash so I'll take an educated risk and stick with their version thanks.

[ccc]

Sib...Sorry I mean Hamish thinks that property prices in Edinburgh, at about 8 times the average local salary, are not vastly overpriced.

To be fair he/she does agree they are a little overpriced. However that is still a little mental IMO.

[Y-QUERK]

[Minderbinder]

Will it work? Absolutely. If done in sufficient quantity, theres almost no doubt the above measures will succeed in creating asset class inflation across the board, and will probably also massively slow unemployment and business failure. Recovery in employment and business will take longer, until consumer spending returns have had some time to work through the system, but, if the job loss bleeding ends this year, confidence will quickly return, spending will flow again, and the crisis will have been averted, for now.

No. It might work. It might not. There is nothing clear cut or absolute about it. Probably the most important issue is whether or not investors (particularly foreign investors) happily accepts a reflationary plan of huge government borrowing plus QE printing. If they don't this could all get much, much worse.

Even if they do, there's no certainty about how the reflation will play out. Where will the money go? It requires that banks find good, safe, profitable investments to make in the current economic climate. It could take many years and the money could flow into unexpected areas. It could get a lot worse before it gets better.

Whilst Asian central banks, Mid East sovereign wealth funds, etc, are not happy to flood money into the current mess on an unsecured basis, with the guarantee of western governments behind them, they probably will. Simply because if they do not, their own economies are going down the cr@pper due to a lack of buyers for the things they produce. The Chinese government, faced with a choice between buying another two decades of economic growth by lending to the west, or facing economic collapse and revolution at home, really doesn't have a choice.

Currently pretty much every economy is in deep trouble. Many western economies are some way down the road of planning and implementing reflationary strategies. They all need the support of Asian investors. Some will probably get it. Some probably won't. The UK is not the west; it is one significant western economy amongst many. We have no way of knowing yet if the UK economy will be able to keep up the support from foreign investors. Possibly the bigger the economy the more likely it is to keep investor support through reflation? But possibly the bigger the mess its in the less likely? Where does the UK economy fall? No idea.

[copydude]

In the week that announced the demise of Wedgwood and Viyella (Viyella dates back to 1784, by the way) a lot of people realised that no one is safe.

My neighbours got the point when their haulage firm went bust last week. This is an old haulage firm going back three generations. One of the largest in Essex. Grandfathers and sons have driven the trucks.

A couple of descendants were in the protest - largely unpublicised by the BBC - against Gordon's unfair taxation of diesel in the UK.

While the 'hard workin' family' next door kissed goodbye to their century of endeavours, Gordon was on the airwaves promising 100,000 new jobs. I can imagine several pieces of Wedgwood being thrown at the radio.

'There is work . . . but we can no longer do it for the overheads' said the outgoing manager. It's all about the 'inflation that dare not speak its name'.

These people, like many I imagine, take it personally. Among people I talk too, Gordon is the man who has destroyed their homes, businesses and jobs. The smell of fear should be in Downing Street.

[HAMISH_MCTAVISH]

You haven't answered my question how will the inevitable commodity/energy/price inflation and the resulting interest rate rises not spoil your house price recovery party?

Unsettled.

In short, theres no reason why it should spoil it any more now than it did before. Commodity prices have fallen by huge amounts. They could likely climb significantly from todays levels (oil in particular) and still be within long term affordability.

But I think I sort of already addressed that type of concern in the following.

Well, the doom-mongers are mostly right about the long term systemic imbalance in the money supply, the over-indebtedness of society, the smoke and mirrors act that our economy has become, the fact that house prices, in many although not all areas, are simply far too high. And probably even right in forecasting a great crash and depression at some point in the future. But it looks increasingly like it won't be this time. If it isn't going to happen now, then asset prices will re-inflate for another decade or two, houses included.

And IF they succeed in reflating the economy, and IF they then mop up liquidity through taxes to defeat hyperinflation, and IF they then pay down govt debt, then it may not be next time either, as they can probably milk that theory through several more crashes til "the big one".

I would argue an eventual super-crash is almost inevitable, given the global trade, economic, resource and money imbalances. But I expect we'll see several more cycles before it happens. Perhaps getting shorter though, as this crash already seems to be time compressed compared to the last one.

[thecrashingisles]

I would argue an eventual super-crash is almost inevitable, given the global trade, economic, resource and money imbalances. But I expect we'll see several more cycles before it happens. Perhaps getting shorter though, as this crash already seems to be time compressed compared to the last one.

Oh yes, because there are signs that we're coming out the other side all over the place, aren't there? It's only just begun, especially regarding house prices.

[agb41]

Alas, I guess we all have either a MSM or crackpot informed post within the first month or so of getting here (I did). You don't immediately appear to be trolling, so I guess if you stick around you won't be saying things like "credit rationing that is the primary cause of the current recession" in a few months.