Jump to content
House Price Crash Forum
Injin

Price Signals Are Almost Gone!

Recommended Posts

Some rambling thoughts I had.....

Basic principle -

All market economies run on a very simple (but usually philosophically hidden) principle - the principle that anyone can refuse any offer that is put to them.

The amount of something you have to offer in order to persuade another person to do something for you (i.e. in order to overcome their reluctance to work, sell, buy) can be fairly accurately described as the price signal. To take a very simple example - you have an infinite amount of coal - you want your next door neighbour to sell you his house.

The amount of coal you will have to offer him in order for him to be happy to swap you is the price. He might hate coal and then you can't make the swap. This is also invauable information. If coal won't do it, you'll have to find something else that he does want. You can usually do this by asking him! If you can't find anything, you can't have what you want. If he likes mints - you'll have to first swap your coal for mints, then trade with him.

When the bulk of people are engaged in this negative exploration of each others values - then general happiness and the ability to engage in long term planning is the result. Of course there are always some who don't offer trades, who force, who steal, who defraud and so on but they are generally a minority due to the dangers of such behaviour and the generalised moral arguments that most hold to be true.

Only the person who is being made the offer can determine it's worth, only by them having the ability to refuse can the right price be found. That person will make their determination based on a near infinite amount of factors - including their long term estimation of what they will need/want in the future, and the ability of the general economy/infrastructure to provide for them.

Again, no one else can make this decision for them - even if they do it badly, no one else has better information about them and their circumstances than they themselves do and this can never be anything otherwise.

.............

What has happened - credit crisis.

Credit, at it's most basic, is trading things of substance for things without anything of substance by using promises for future payment(s.)

If I extend to you £100 of credit today - then I will be expecting £100 (plus interest) at todays value when I am repaid. So I will make my plans based on that. Lets say I want a a conservatory and it is £100 (today) - so I am planning on building my conservatory when I get repaid. I put a deposit down and the conservatory maker makes his plans in turn.

What if I don't get repaid?

I can't finance my plans - and that will feed through to the conservatory maker, who might have to lay off staff, sell stuff he's already assembled etc. If the money supply is fixed or stable, a few plans won't come to fruition but the effect will soon peter out - each transaction is only a part of anothers world and something that is wanted will soon crop up.

What if someone adds to the money supply to pay the credit?

I probably still won't get my conservatory for £100 because it's now more expensive to build. Although these costs might be absorbed by the manufacturer - who will then also find his plans aren't as viable as he though they were

But

and this is the crucial but

He'll find out after he's commited resources, time and energy that his plans have gone awol. This will knock on to the next guy inthe chain - the guy who makes bricks, or the guy who does the glass, the van driver. All of them will carry on what they are doing - and find out theres not actually as much in it as they though twhen they set off. it goes without saying that this pisses them off.

What happens if we add more to the money supply at this point?

Same again - people carry on with their plans without the full appreciation that the resources are not there to support them in the future. If whoever is adding to the money supply keeps doing it we have -

Hyperinflationary depression - 100% guaranteed.

---------

Add in our lunatic banking system to our masters mad desire to save the world by printing to pay for their own plans and we are in for one hell of a crash.

We are currently facing two disasters - an enormous state that cannot be meaningfully refused when it makes its' "offers" and mass printy printy to make good on plans that should have been abandoned decades ago. Right now the boomers should be creating market gardens, halfway through rebuilding small communities and looking to downscale their standards of living drastically, as well as getting the hell out of dodge as far as housng and the stockmarket is concerned.

Pretty much everything done in the last ten years (much longer tbh) has been malinvestment, malemployment. An economy needs price signals to function and it can only have that when people can meaningfully refuse each others offers.

Edited by Injin

Share this post


Link to post
Share on other sites

Is what you are saying not so much that people cannot refuse these offers as that they do not have full information relating to the worth of said offers at the settlement of contract?

Share this post


Link to post
Share on other sites
Is what you are saying not so much that people cannot refuse these offers as that they do not have full information relating to the worth of said offers at the settlement of contract?

Yeah - you can't refuse the monetary addition, you don't know how much it is and you can't plan based on it. You carry on as normal until *plink* the resources run out.

It's a bit like building a house with a pathological liar as a hod carrier - he tells you there are plenty of bricks, but your house now has to be a bungalow.

Edited by Injin

Share this post


Link to post
Share on other sites
Yeah - you can't refuse the monetary addition, you don't know how much it is and you can't plan based on it...

Then it makes a lot of sense.

If that is the added money is leaking into the money supply.

And I accept that if all the boomers took their money out of the bank, then much of the new money would have leaked into the money supply.

Share this post


Link to post
Share on other sites
Yeah - you can't refuse the monetary addition, you don't know how much it is and you can't plan based on it. You carry on as normal until *plink* the resources run out.

It's a bit like building a house with a pathological liar as a hod carrier - he tells you there are plenty of bricks, but your house now has to be a bungalow.

but money is not coming into the economy....its sitting in banks....despite an extra £175bn ultimately in QE, consumer debt is down, mortgage lending is down and business lending is just about gone altogether.

credit insurance is hard to get.

this money is sitting in the banks vaults...all bundled and ready for shipping, but Joe potbelly isnt borrowing it....he's paying it back.

deflationery recession....followed by a return to normal.

Share this post


Link to post
Share on other sites
but money is not coming into the economy....its sitting in banks....despite an extra £175bn ultimately in QE, consumer debt is down, mortgage lending is down and business lending is just about gone altogether.

credit insurance is hard to get.

this money is sitting in the banks vaults...all bundled and ready for shipping, but Joe potbelly isnt borrowing it....he's paying it back.

deflationery recession....followed by a return to normal.

Yes, that's the depression bit.

The inflation bit is when they add to the money supply, leading to a total of hyperinfationary depression. (If they don't stop, ofc.)

Replacing credit with money is inflationary.

Share this post


Link to post
Share on other sites
Yes, that's the depression bit.

The inflation bit is when they add to the money supply, leading to a total of hyperinfationary depression. (If they don't stop, ofc.)

Replacing credit with money is inflationary.

Do you invisage the price of basic foodstuffs increasing?

Share this post


Link to post
Share on other sites
but money is not coming into the economy....its sitting in banks....despite an extra £175bn ultimately in QE, consumer debt is down, mortgage lending is down and business lending is just about gone altogether.

credit insurance is hard to get.

this money is sitting in the banks vaults...all bundled and ready for shipping, but Joe potbelly isnt borrowing it....he's paying it back.

deflationery recession....followed by a return to normal.

I thought that their big customer had tapped them for another £16Bn last month. Must have a little hole in the piles of notes in the safe.

p-o-p

Share this post


Link to post
Share on other sites
I thought that their big customer had tapped them for another £16Bn last month. Must have a little hole in the piles of notes in the safe.

p-o-p

That's exactly it - all the "savers" should have been told that they are broke. Alright they would have been poor, but they would have been poor in a functioning economy.

Share this post


Link to post
Share on other sites
Well, not one I would have chosen - but whatever floats your boat ;)

Actually no, there is another option (at least at first) ypu can produce cookies at the original price......in much smaller amounts, both as total production and size per unit. Houses become bungalows.

Wagon wheels were bigger when we were kids, right?

And some inflation fuels competition and is good for the economy - right? :lol:

Share this post


Link to post
Share on other sites
Actually no, there is another option (at least at first) ypu can produce cookies at the original price......in much smaller amounts, both as total production and size per unit. Houses become bungalows.

Wagon wheels were bigger when we were kids, right?

And some inflation fuels competition and is good for the economy - right? :lol:

Cool. That sorts out obesity and overindulgence. A Righteous return-to-mean.

Share this post


Link to post
Share on other sites
Cool. That sorts out obesity and overindulgence. A Righteous return-to-mean.

Ah if only.

What's we'll have is would be fat people and desperate soon to be very thin ones.

And a big fight.

Central banks really are evil.

Share this post


Link to post
Share on other sites
Ah if only.

What's we'll have is would be fat people and desperate soon to be very thin ones.

And a big fight.

Central banks really are evil.

No, you are mistaken. Central Banks are just bricks and mortar. I think you mean Central Bankers.

Just a few taps and a click and you can be evil too !

https://gs6.globalsuccessor.com/fe/tpl_ecb01SSL.asp

Share this post


Link to post
Share on other sites
No, you are mistaken. Central Banks are just bricks and mortar. I think you mean Central Bankers.

Just a few taps and a click and you can be evil too !

https://gs6.globalsuccessor.com/fe/tpl_ecb01SSL.asp

Oh, I already am.

How else do you think I understand them so well?

But for a happy accident I'd be where they are. (And probably better at it, too.)

Share this post


Link to post
Share on other sites
Oh, I already am.

How else do you think I understand them so well?

But for a happy accident I'd be where they are. (And probably better at it, too.)

I'm glad you admit to what we both know to be true.

Doesn't bode well for your advertised Nirvana though.

Share this post


Link to post
Share on other sites
I'm glad you admit to what we both know to be true.

Doesn't bode well for your advertised Nirvana though.

I thought a demonstration of the "give people what they want and they are happy" idea would be fun. :)

Aren't you a bit happier too, now you are no longer trying to get something from me?

Share this post


Link to post
Share on other sites
I thought a demonstration of the "give people what they want and they are happy" idea would be fun. :)

Aren't you a bit happier too, now you are no longer trying to get something from me?

Grace doesn't suit you, which is why I believe this to be ********

Edited by Alan B'Stard MP

Share this post


Link to post
Share on other sites
Grace doesn't suit you, which is why I believe this to be ********

A fine demonstration of people being pissed off when something they thought they had wasn't there.

Please, carry on proving my thesis.

Share this post


Link to post
Share on other sites
A fine demonstration of people being pissed off when something they thought they had wasn't there.

Please, carry on proving my thesis.

Mmmm.

Shall I pretend I understand what you are harping on about so we can continue to counterfeit replies to one another?

Stuff it ! I'll just cry ******** again and see what floats to the surface.

Share this post


Link to post
Share on other sites
Mmmm.

Shall I pretend I understand what you are harping on about so we can continue to counterfeit replies to one another?

Stuff it ! I'll just cry ******** again and see what floats to the surface.

Learny learny.

:lol:

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   295 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.