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Realistbear

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Recent recessions are usually the result of the BoE increasing base rates to stop inflation getting out of control.

Rates go up, house prices come down.

But the cause of this recession was different. Rates have fallen, not increased. For the vast majority, this has made houses cheaper not more expensive as has been the case historically.

Maybe that makes a difference.

And what caused this recession?

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The bull trap, have been predicting it all year.

Possibly a small rise this month, maybe for the next two months, then the falls will start in earnest. Expect falls of -2% or greater every month from September through 'til March 2010.

I suspect you have just made yourself signature fodder for every bull on this site.

Well done. :lol:

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Recent recessions are usually the result of the BoE increasing base rates to stop inflation getting out of control.

Rates go up, house prices come down.

But the cause of this recession was different. Rates have fallen, not increased. For the vast majority, this has made houses cheaper not more expensive as has been the case historically.

Maybe that makes a difference.

The economy needs to breathe, you have expansion and contraction. The same is with house prices, you cannot have exponential growth it's impossible, this is not to say you cannot have short periods of large growth but these are not sustainable in the long term.

How's your £1.38bn house?

http://hubpages.com/hub/Causes-of-economic-recession

One thing that every economist believes is that recessions are something that cannot be avoided. The reason for this is that in a healthy economy you are going to have periods of high growth, slow growth and no growth. In fact in order for the economy to be healthy there needs to be some contracting and expanding. But in order for the economy to be considered in a recession the contracting period has to last for at least two consecutive quarters of a year or more simply put 6 months in a row. But the most common question that nobody can seem to answer very well is what is going to cause the next recession. In fact even fifty years after the great Depression, a really bad recession, and the answers to what causes an economic downturn or a recession is still a huge mystery.

Even though the exact causes of an economic recession are still a mystery there are numerous theories that have been put forth as to what causes an economic recession. But probably the most common thought on what causes a recession is that they are caused by events that have an economy-wide impact. Some examples of these events would be: increase in interest rates or a decline in consumer confidence.

http://www.richardpettinger.com/economics/...of-a-recession/

A recession occurs when there is a fall in economic growth for 2 consecutive quarters, however if growth is very low there will be increased spare capacity and people will feel there is a recession, this is sometimes known as a growth recession.

If there is a fall in AD then according to Keynesian analysis there will be a fall in Real GDP. The effect on Real GDP depends upon the slope of the AS curve if the economy is close to full capacity lower AD would only cause a small fall in Real GDP.

AD is composed of C+I+G+X-M, therefore a fall in any of these components could cause a recession. For example, if the MPC increased interest rates sharply this would cause the cost of borrowing to increase and make saving more attractive. This would have the effect of reducing consumer spending. AD could also fall due to deflationary fiscal policy, for example higher taxes and lower government spending would also cause a fall in AD.

If there was a fall in AD the multiplier effect may magnify the initial fall in AD, for example if there was a fall in output, workers would be made unemployed. These workers would then spend less causing a secondary fall in AD. This would make the fall in Real GDP greater.

A key feature in determining the rate of economic growth is the level of consumer and business confidence. If confidence was high then higher interest rates may not reduce demand. However if confidence is low and people fear they may be made unemployed, then they will start spending less, causing AD to fall (or increase at a slower rate). Therefore this shows that expectations are very important and it is possible for “people to talk themselves into a recessionâ€

An important feature of the UK economy is international trade, therefore the UK would be affected by a global recession. For example a recession in the EU would cause a fall in demand for UK exports reducing our AD (EU accounts for 60% of our trade therefore is important). Also a recession in other countries would effect economic confidence if people see the US in a recession they are worried and will spend less. However a global recession may not cause a recession in the UK if domestic demand remains high.

Classical Economists believe that any fall in Real GDP will be temporary and will end when labour markets adjust to the new price level. Classical economists argue that if there is a fall in AD then in the short term there will be a fall in Real GDP. However with a lower price level wages will fall therefore the SRAS will shift to the right and the economy will return to the original level at Yf and the recession will be over.

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:rolleyes:

Nationwide house price index Feb 09, £147K

Nationwide house price index May 09, £154K

Conclusive proof then? As soon as the decline is reversed it's the end of the crash?

four-bears-large.gif

During the depression as the above chart shows there where many "recoveries" during the collapse. None lasted.

Luckily this time it's different. The £1.38bn 3 bed family house will arrive on schedule in about 90 years?

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Recent recessions are usually the result of the BoE increasing base rates to stop inflation getting out of control.

Rates go up, house prices come down.

But the cause of this recession was different. Rates have fallen, not increased. For the vast majority, this has made houses cheaper not more expensive as has been the case historically.

Maybe that makes a difference.

In Japan - Houses/flat prices are still declining. Japanese banking rates have kept near zero & actually gone NEGATIVE during this time!

Japan saw 15-straight years of year-over-year home price declines

Quote >

". . . . any trend up or down may suddenly be reversed if there is an economic "regime change†a shift big enough to make people change their thinking."

I think that describes a General Election plus regime change to include different policies.

Loads of Private sector working for nothing/accepting wage CUTS - Public Sector Hatchet job, Management clear-out and Wage Cuts on near horizon!

More banking 'shocks', higher interest rates etc etc

- what's gonna happen within 12 months or so?

Edited by erranta

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:rolleyes:

Nationwide house price index Feb 09, £147K

Nationwide house price index May 09, £154K

A blip in a downward trend. Deal with it, house prices are in terminal decline. 1983_red_wine.gif

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:rolleyes:

Nationwide house price index Feb 09, £147K

Nationwide house price index May 09, £154K

Nationwide house price index Apr 10, £128K

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Why do you say there were no houses being sold last November when there clearly were?

You know perfectly well what I mean - very low sales. 55% of not much isn't that much. There has been more interest and activity since November, but this is partly seasonal, partly a limited amount of cash buyers and maybe others who were finally able to buy a house after falls of 20%. You know all this, it's been pointed out repeatedly. Please tell us how high unemployment, which is accompanied by the fear of unemployment, cannot have a negative effect on the housing market.

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A blip in a downward trend. Deal with it, house prices are in terminal decline. 1983_red_wine.gif

Yup. Time will tell. Fact is, silly funny money cannot be thrown around like confetti anymore, wages going down, unemployment rising steeply, closures all over, etc etc. We will have a Japan style decline..... drip, drip, drip.... It's the long, long, long hangover from the last decade of fraud and insanity.

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