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Elizabeth

A Flat Housing Market And A Goodly Dose Of Inflation

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It occurs to me that if we had a goodly dose of inflation for a couple of years (what the government is desperately trying to avoid), and a flat housing market then we would achieve the 20% cuts that are needed to bring house prices back in line with earnings - if inflation then dropped to about 5 or 6% for another couple, housing would start to be within reach of ordinary people who want to establish their own little castle for the first time.

Any thoughts anyone (I know that inflation is suppose to be a bad thing, but in these gurgling flatulent inflated times, inflation on other things has stalled, and I am not unkind to the proposition that reality needs to catch up with the dream)

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It occurs to me that if we had a goodly dose of inflation for a couple of years

Cost of living inflation - yes

Asset price inflation - possibly but not in housing. Next bubble is always different from the previous one. There was dotcom bubble sandwiched between two housing bubbles in 80s and 90s-00s.

Wage inflation - possibly but not for salaried private sector workers.

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It occurs to me that if we had a goodly dose of inflation for a couple of years (what the government is desperately trying to avoid), and a flat housing market then we would achieve the 20% cuts that are needed to bring house prices back in line with earnings - if inflation then dropped to about 5 or 6% for another couple, housing would start to be within reach of ordinary people who want to establish their own little castle for the first time.

Any thoughts anyone (I know that inflation is suppose to be a bad thing, but in these gurgling flatulent inflated times, inflation on other things has stalled, and I am not unkind to the proposition that reality needs to catch up with the dream)

Good night last night? Perhaps should have waited a while to sober up before posting. :rolleyes:

The sort of inflation that is created (if they can) post this type of crisis will not be "good" inflation. We have had the "good" inflation phase over the last 30 years, which is rising wages and rising asset prices. Any inflation created now will only serve to lower living standards rather than re-balancing things in line with house.

Edited by Confounded

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The sort of inflation that is created (if they can) post this type of crisis will not be "good" inflation. We have had the "good" inflation phase over the last 30 years, which is rising wages and rising asset prices. Any inflation created now will only serve to lower living standards rather than re-balancing things in line with house.

Wage inflation in the last 30 years has been very low compared to economic growth and has been virtually wiped out recently by high rents/property prices. I think this trend needs to be reversed for things to stabilise (i.e. real wages need to increase relative to the size of the economy). All those businesses wondering why consumers have stopped buying their products: it's because the wages you pay your staff are too low and your prices are too high. Consumers are wage-earning staff. Until wages rise relative to prices, demand will stay low and businesses will struggle to shift stock.

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It occurs to me that if we had a goodly dose of inflation for a couple of years (what the government is desperately trying to avoid), and a flat housing market then we would achieve the 20% cuts that are needed to bring house prices back in line with earnings - if inflation then dropped to about 5 or 6% for another couple, housing would start to be within reach of ordinary people who want to establish their own little castle for the first time.

Any thoughts anyone (I know that inflation is suppose to be a bad thing, but in these gurgling flatulent inflated times, inflation on other things has stalled, and I am not unkind to the proposition that reality needs to catch up with the dream)

What makes you think the government is desperately trying to avoid inflation? From where I stand, it's trying everything it can to create inflation in order to (as you say) reduce its/everyone's debts by stealth, and also to force us lot to get out of bed in the morning. Whether it succeeds or not is another matter.

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Guest absolutezero
What makes you think the government is desperately trying to avoid inflation? From where I stand, it's trying everything it can to create inflation in order to (as you say) reduce its/everyone's debts by stealth, and also to force us lot to get out of bed in the morning. Whether it succeeds or not is another matter.

As far as I see it the only way out of this whole mess is to inflate the debt away. I believe that always was and always will be the plan.

However those peksy Chindians (willing to work for very little and thereby force Western wages down) have thrown a spanner in the works.

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As I understand it inflation is likely to lead to falling house prices in the short term.

Wage inflation normally follows price inflation and price inflation follows wage inflation. Since price inflation is the one that is being engineered by the currently elected political bandits then wage inflation will follow it. For instance, the prices down the supermarkets have risen but wages have generally not. They may be a year or more behind the price rises. In this period the spare cash available to people is reduced and it's the spare cash that people spend on their mortgages and rent. Therefore house prices shall fall as soon as there are actually houses for sale.

With FTB's not having access to mortgages at the criminally low interest rates and those who own houses not being motivated to sell due to the low cost of servicing debt on SVR then my guess is the smug agents will soon find themselves back in a sticky hole again. Before they had lots of sellers and no buyers. Soon they will find themselves with next to no sellers and no buyers that can meet the demands of the sellers asking prices. Stalemate!

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What makes you think the government is desperately trying to avoid inflation? From where I stand, it's trying everything it can to create inflation in order to (as you say) reduce its/everyone's debts by stealth

And not even by stealth really! Low interest rates and QE are fairly openly encouraging inflation.

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Guest The Relaxation Suite
It occurs to me that if we had a goodly dose of inflation for a couple of years (what the government is desperately trying to avoid), and a flat housing market then we would achieve the 20% cuts that are needed to bring house prices back in line with earnings - if inflation then dropped to about 5 or 6% for another couple, housing would start to be within reach of ordinary people who want to establish their own little castle for the first time.

Any thoughts anyone (I know that inflation is suppose to be a bad thing, but in these gurgling flatulent inflated times, inflation on other things has stalled, and I am not unkind to the proposition that reality needs to catch up with the dream)

Governments and banks seem to have got used to the average house price being a multiple of six or seven times the average wage. And they are deliberately inflating the economy.

Edited by D-503

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