Some Seriious Questions For Bulls To Answer

[Monkey]

there are pleanty of people who see the country and even the world just about to come out of the recession and all financial issues will be resolved.

i on the other hand dont.

so i have these questions that if you are of the optimistive view that weverythnig is rosey then could you answer them please, and give reference as to why.

1, interest rates are at and have been held at a record low of 0.5%, what will happen when they will rise?

2, VAT is due to go back up to 17.5% at the end of this year, what sort of impact will that have on the retail market and their personal spending habbits? also linking it with interest rates

3, how are we expected to pay back the £100's of Billions extra we (as a country) have been forced to borrow to bail out the banks and keep the country going?

4, olympics, getting more expensive by the day, the total figure wont ben know till long after the event, how is it going ot be paid for?

5, Rising unemployment, say someone is paying £400 in tax a month, then gets made redundant, thats £400p/m the government is out of pocket. then they claim benifits of say £600p/m (not real fugures dont know what they would be) the government is actually down by £1000. Unemployment is at IIRC 3.78million and rising, thats alot of lost tax revenue. how will they get that back?

[workingnomad]

6. Lowest house building in decades.

7. Increasing population.

8. More single households.

9. More property investors = more competition for buying housing

10. Brits love of property.

11. Pent up demand.

[ralphmalph]

there are pleanty of people who see the country and even the world just about to come out of the recession and all financial issues will be resolved.

i on the other hand dont.

so i have these questions that if you are of the optimistive view that weverythnig is rosey then could you answer them please, and give reference as to why.

1, interest rates are at and have been held at a record low of 0.5%, what will happen when they will rise?

2, VAT is due to go back up to 17.5% at the end of this year, what sort of impact will that have on the retail market and their personal spending habbits? also linking it with interest rates

3, how are we expected to pay back the £100's of Billions extra we (as a country) have been forced to borrow to bail out the banks and keep the country going?

4, olympics, getting more expensive by the day, the total figure wont ben know till long after the event, how is it going ot be paid for?

5, Rising unemployment, say someone is paying £400 in tax a month, then gets made redundant, thats £400p/m the government is out of pocket. then they claim benifits of say £600p/m (not real fugures dont know what they would be) the government is actually down by £1000. Unemployment is at IIRC 3.78million and rising, thats alot of lost tax revenue. how will they get that back?

1) depends how much they go up if it is by .5% no problem, they could most proberly rise to 4% with out casuing a problem.

2) the reduction in VAT did nothing to stimulate demand (why a cash for clunkers if the VAT cut was so successful) so rasing back again will have no impact at all.

3) cut spending, cut benefits, remove tax credits completely and raise the limit at ehich tax is first paid, tax people who have more than two kids very heavily, charge people who want to emmigrate here 20,000 GBP (the people traffickers get it at the moment) and raise taxes (the majority on the poor).

4) who cares the olympics is 10 bill max and we are spunking away 400bill over the next 2 years if labour stay in power.

5) rising unemployment needs to be in the public sector and it needs to be the middle management and high earners it is cheaper to pay this lot benefits than 50K to 100K per annum plus pensions.

[ReadingRabbit]

6. Lowest house building in decades.

7. Increasing population.

8. More single households.

9. More property investors = more competition for buying housing

10. Brits love of property.

11. Pent up demand.

12. 25% deposit

13. Major banks/mortgage lenders gone bust or on taxpayer support

Edited August 19, 2009 by ReadingRabbit

[Guest pioneer31]

there are pleanty of people who see the country and even the world just about to come out of the recession and all financial issues will be resolved.

i on the other hand dont.

so i have these questions that if you are of the optimistive view that weverythnig is rosey then could you answer them please, and give reference as to why.

1, interest rates are at and have been held at a record low of 0.5%, what will happen when they will rise?

2, VAT is due to go back up to 17.5% at the end of this year, what sort of impact will that have on the retail market and their personal spending habbits? also linking it with interest rates

3, how are we expected to pay back the £100's of Billions extra we (as a country) have been forced to borrow to bail out the banks and keep the country going?

4, olympics, getting more expensive by the day, the total figure wont ben know till long after the event, how is it going ot be paid for?

5, Rising unemployment, say someone is paying £400 in tax a month, then gets made redundant, thats £400p/m the government is out of pocket. then they claim benifits of say £600p/m (not real fugures dont know what they would be) the government is actually down by £1000. Unemployment is at IIRC 3.78million and rising, thats alot of lost tax revenue. how will they get that back?

I shall reply on behalf of the bulls

1) they won't

2) none. people still have to live

3) tax the rich

4) tax the rich

5) tax the rich

[Guest DissipatedYouthIsValuable]

6. Lowest house building in decades.

7. Increasing population.

8. More single households.

9. More property investors = more competition for buying housing

10. Brits love of property.

11. Pent up demand.

Lots and lots of juicy mortgage arrears building up.

Tick tock.

[VeryMeanReversion]

1, interest rates are at and have been held at a record low of 0.5%, what will happen when they will rise?

They wont, look at Japan.

2, VAT is due to go back up to 17.5% at the end of this year, what sort of impact will that have on the retail market and their personal spending habbits? also linking it with interest rates

Dropping it didnt make any difference, putting it up wont.

3, how are we expected to pay back the £100's of Billions extra we (as a country) have been forced to borrow to bail out the banks and keep the country going?

Time.

4, olympics, getting more expensive by the day, the total figure wont ben know till long after the event, how is it going ot be paid for?

More tax.

5, Rising unemployment, say someone is paying £400 in tax a month, then gets made redundant, thats £400p/m the government is out of pocket. then they claim benifits of say £600p/m (not real fugures dont know what they would be) the government is actually down by £1000. Unemployment is at IIRC 3.78million and rising, thats alot of lost tax revenue. how will they get that back?

They wont. I understand going unemployed costs the govt £9K overall.

Big tax bills and lower level of services for decades is next.

VMR.

[interestrateripoff]

Time.

Will the Universe last that long?

[the flying pig]

My first piece of advice is to disentangle general economic growth/well-being and house price inflation/deflation. The relationship between the two is pretty weak, e.g. compare the following two eight-year periods [based on ONS & Halifax data]:

(1) 1991-1999: total GDP growth – 25%; total house price growth – 7%;

(2) 1999-2007: total GDP growth – 24%; total house price growth – 162%

But it’s true to say that significant **real** house price growth from current levels anytime soon is literally impossible without substantial earnings growth. Current house price levels are largely a hangover from a level of loose lending that just physically can never be increased upon [although of course there are many who want to see a level that is only just below it]. All the VI bleatings about ‘supply and demand’ are a crock of shite –rents and house prices are equally determined by the scarcity of roofs to go over peoples’ heads, and the wedge between the two has almost never been as high as it is now; the current level of house prices is clearly a result of an unprecedented willingness & ability to pay [borrow] for home **ownership** rather than a lack of housing per se, not the same thing at all.

I suppose that significant nominal house price growth from current levels might happen soon if QE were to lead to high inflation.

By far the best ‘moderately bullish’ argument to my mind is to argue that, whilst growth is out of the question, further falls are unlikely simply because of extraordinarily low interest rates. They won’t stay so low for ever, of course, but they will do for ‘a while’, it’s entirely possible, maybe even likely, that prices won’t fall much whilst they remain low.

[Monkey]

By far the best ‘moderately bullish’ argument to my mind is to argue that, whilst growth is out of the question, further falls are unlikely simply because of extraordinarily low interest rates. They won’t stay so low for ever, of course, but they will do for ‘a while’, it’s entirely possible, maybe even likely, that prices won’t fall much whilst they remain low.

but that is like saying that i used to be able to make 55 litres of petrol last a whole month................... but i only drove 5 miles a day, so now i drive 50 miles a day why am i using 10 times that? i have to change my car for a more fuel efficient one

interest rate will have to rise, its not IF but WHEN, and when they do it will affect how much money people have in their pocket. some will feel the pain more than others, and its the people who have streached them selves to buy now who will feel it the most.

i can not see interest rates staying at 0.5% untill next June, i recon they will go up by the end of this year (calendar year)

Edited August 19, 2009 by Monkey

[interestrateripoff]

My first piece of advice is to disentangle general economic growth/well-being and house price inflation/deflation. The relationship between the two is pretty weak, e.g. compare the following two eight-year periods [based on ONS & Halifax data]:

(1) 1991-1999: total GDP growth – 25%; total house price growth – 7%;

(2) 1999-2007: total GDP growth – 24%; total house price growth – 162%

Have you got the figures for mortgage growth to run along side those figures? Also would be useful to see what money left the UK in that time frame as well as entered. Something has funded house price growth.

Those figures just raise questions for me.

[AteMoose]

there are pleanty of people who see the country and even the world just about to come out of the recession and all financial issues will be resolved.

i on the other hand dont.

so i have these questions that if you are of the optimistive view that weverythnig is rosey then could you answer them please, and give reference as to why.

1, interest rates are at and have been held at a record low of 0.5%, what will happen when they will rise?

2, VAT is due to go back up to 17.5% at the end of this year, what sort of impact will that have on the retail market and their personal spending habbits? also linking it with interest rates

3, how are we expected to pay back the £100's of Billions extra we (as a country) have been forced to borrow to bail out the banks and keep the country going?

4, olympics, getting more expensive by the day, the total figure wont ben know till long after the event, how is it going ot be paid for?

5, Rising unemployment, say someone is paying £400 in tax a month, then gets made redundant, thats £400p/m the government is out of pocket. then they claim benifits of say £600p/m (not real fugures dont know what they would be) the government is actually down by £1000. Unemployment is at IIRC 3.78million and rising, thats alot of lost tax revenue. how will they get that back?

VMR gave you a stagnation view, here is my inflationary currency crash view:

1. They will only rise when inflation has started to pick up, the will trail badly

2. Very low impact

3. by printing any money that is required via QE and creating an environment of higher inflation/currency devaluation. Going abroad will be very very expensive and foreigners will find the UK very very cheap.

4. see 3.

5. see 3.

Edited August 19, 2009 by moosetea

[BearlyBegun]

6. Lowest house building in decades.

7. Increasing population.

8. More single households.

9. More property investors = more competition for buying housing

10. Brits love of property.

11. Pent up demand.

I'm genuinely interested in you expanding/explaining further a few of these points, namely:

7. Increasing population - of course the british population is increasing but certainly in London there seems to be an ongoing drain of migrant workers, be it Polish/Austrlalian/etc due to the lack of available work. This is surely having an impact on the trend line for increasing population. I understand that London may be considered special but what are your thoughts on this drain?

8. Most of the articles I have read alongside what I see on the ground suggests this is actually going the other way with many more 18-30 year olds actually moving back home or in with friends where before they might have lived alone. This is driven by unemplyoment/loss of income but it seems to be the growing trend now

9. Really? Where are these investors coming from? Most with 'spare' cash must have been hammered by the recent equities and property pain, surely anyone left with free cash isnt looking at UK housing?

10. I also think this is already well into the change within the 18-30 demographic. We see property as historically un-reachable due to the cost, and the last few years will only damage confidence in the "property only ever goes up" mantra. I think we might have already begun the systematic adjustment in the attitude that people have towards property in this country, so young people now fear it that much more. This applies to those that did buy the last 6 years equally as much as those that did/could not

I am here to learn & would appreciate a response if you could

[the flying pig]

Have you got the figures for mortgage growth to run along side those figures? Also would be useful to see what money left the UK in that time frame as well as entered. Something has funded house price growth.

Those figures just raise questions for me.

I think we all know what happened.

The first thing to note is that the starting points, in terms of affordability, were different - 1991 house prices were fairly high relative to wages, a hangover from the smallish bubble at the end of the 80s, whereas houses were very extremely affordable in 1997. Today's affordability position is, of course, much closer to the 1991 level [it's considerably worse in terms of the wages ratio but for now that is mitigated somewhat by low interest rates].

And then what happened is, well, a house went from being something that:

(1) you mostly bought to live in;

(2) you might get some capital gains on if you held on to it for long enough; and

(3) you could probably borrow something like four times single income to buy.

To something that:

(1) you were just as likely to buy for speculative reasons as for a place to live in;

(2) you [ahem] couldn't fail to earn massive capital gains on, forever ['supply and demand', apparently]; and

(3) you could borrow anything you liked at all to buy.

These grasping VIs and goldfish-memoried fools who think that that sort of pace of real growth is possible anytime soon refuse to appreciate, or are incapable of appreciating, where we are today both in terms of a starting point and the capacity for strucural changes that are favourable to house price growth to happen. The current state of play is:

(a) a ridiculously high starting point in terms of affordability;

( every man and his dog having dabbled in or at least considered being an amateur BTL tycoon; and

[c] prices being reflective of the highest imaginable level of lending.

It's just about possible that prices might be supported at this level, but talk of real growth is literally preposterous.

Edited August 19, 2009 by the flying pig

[ken_ichikawa]

The answer to all those questions is printing ,

not enough tax revenue ...print out some more money

too many on benefits? ... print it.

you get the idea, as such due to hyperhyper inflation say twenty trillion % daily express/mail head lines will have to start using powers to express the % house prices have increased by.

Also by injin's logic taxes create demand for money and thus Monday the income tax rate will be 530000000% , by Tuesday it will be 94000000000000000000000000000000000000000000000000000000000000000000000000000000

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00000000000000000000% basic rate income tax. (hey in Japan they managed to get income tax rates at 150% with modern improvements in efficiency and skullduggery and outright lies they can get much higher yields).

[Bloo Loo]

but that is like saying that i used to be able to make 55 litres of petrol last a whole month................... but i only drove 5 miles a day, so now i drive 50 miles a day why am i using 10 times that? i have to change my car for a more fuel efficient one

interest rate will have to rise, its not IF but WHEN, and when they do it will affect how much money people have in their pocket. some will feel the pain more than others, and its the people who have streached them selves to buy now who will feel it the most.

i can not see interest rates staying at 0.5% untill next June, i recon they will go up by the end of this year (calendar year)

can some Bull PLEASE direct me to the Mortgage Company offering me .5% rate on my mortgage to purchase TODAY please.

[d2thdr]

1) depends how much they go up if it is by .5% no problem, they could most proberly rise to 4% with out casuing a problem.

On the contrary, it might be ok for a short period of time. Any longer than 1 year, when TSHTF, it will get very difficult.

2) the reduction in VAT did nothing to stimulate demand (why a cash for clunkers if the VAT cut was so successful) so rasing back again will have no impact at all.

it will. things will get a little bit more expensive, people will have less money in pockets. is it difficult to grasp this.

3) cut spending, cut benefits, remove tax credits completely and raise the limit at ehich tax is first paid, tax people who have more than two kids very heavily, charge people who want to emmigrate here 20,000 GBP (the people traffickers get it at the moment) and raise taxes (the majority on the poor).

benefits can be cut, if immigrants will be charged 20000 gbp, why would the legal ones move here. we will get a lot of illegals. happy days, innit?

4) who cares the olympics is 10 bill max and we are spunking away 400bill over the next 2 years if labour stay in power.

the possibility of the worst olympics in history coming up? No on the contrary we will be able to see how a third world country can organize olympics.

5) rising unemployment needs to be in the public sector and it needs to be the middle management and high earners it is cheaper to pay this lot benefits than 50K to 100K per annum plus pensions.

ah, but unless you do not have productive people, how can you expect recovery? not all people on 50k are unproductive.

[abharrisson]

there are pleanty of people who see the country and even the world just about to come out of the recession and all financial issues will be resolved.

i on the other hand dont.

so i have these questions that if you are of the optimistive view that weverythnig is rosey then could you answer them please, and give reference as to why.

1, interest rates are at and have been held at a record low of 0.5%, what will happen when they will rise?

2, VAT is due to go back up to 17.5% at the end of this year, what sort of impact will that have on the retail market and their personal spending habbits? also linking it with interest rates

3, how are we expected to pay back the £100's of Billions extra we (as a country) have been forced to borrow to bail out the banks and keep the country going?

4, olympics, getting more expensive by the day, the total figure wont ben know till long after the event, how is it going ot be paid for?

5, Rising unemployment, say someone is paying £400 in tax a month, then gets made redundant, thats £400p/m the government is out of pocket. then they claim benifits of say £600p/m (not real fugures dont know what they would be) the government is actually down by £1000. Unemployment is at IIRC 3.78million and rising, thats alot of lost tax revenue. how will they get that back?

I'm not a bull but I will have a stab at answering the questions.

1/ Interest rates will of course rise. I for one though don't think they will rise that quickly. The issue fior many households are not interest rates but Mortgage interest rates and currently these bear little relation to the BOE rate. This could go either way.. a rising BOE rate may push mortgage rates higher, however we may see more competition in the market which will have the effect of leaving rates broadly where they are with currently grotesque margins being slashed. In a rising rate environment there will however be rising costs for those on theor lenders SVR or trackers.. many will be bale to cope with these as they historically have bourne much higher costs. Some of course won't but I do doubt that that would be anything other than a small minority. Rising BOE rates don't actually mean autmatically higher housing costs for all remember.

2/ VAT will of course go back up.. personally I doubt it will have a major effect, after all it didn't have a major effect when it was cut... making the change though will annoy businesses and rightly so.

3/ Paying back the extra borrowings will be relatively straightforward.... what we need is a complete new brrom when it comes to deciding what we spend money on, we need the wastage at the public service to be cut out, we need an end to the lavish terms and conditions many public sector workers now have and we need unnnecessary large scale projects to be cut out, especially where these involve the initials IT.... we should also see some cut backs in benefit payments and some reduction in taxes that cost more to collect than they deliver and perhaps.. and finally there should be some form of tax perhaps called the Brown/Blair levy which everyone needs to pay, perhaps say 1p or 2p in the pound so that they'll always be remembered in the right way. .. of course whether the new govt will take the tough decisions needed or not will depend on whether they think it will be possible politically... this is of course entirely wrong... people are elected to lead not to make decisions that will be liked... sadly we have few politiciansof sufficient moral rigour to be bale to deliver this.

4/ The olympics I fear whilst a travesty is a mere pimple in the wider situation.

5/ The answer for this is wrapped up in the answer to item 3...... it willbe possible I beleive to squeeze a huge amount of wastage out of the system if there is enough drive and focus on doing so.. you could find this is as much as say 20% of total expenditure ..... add in some benefit reform, some tax reform and an end to the recession ( even if recovery is weak) and the public finances could rapidly return to a more manageable situation..... 3-5 years I would say for them to reach the realm of the decent and perhaps another 5-10 to repair the years of wastage that blair and brown inflicted on us.... so in total perhaps 15 years to repair entirely the 10 years of financial mismanagement under labour ( granted though their first 4 years were good).