Who Else Has A Feeling The Next Big Leg Down Is Coming

[XswampyX]

You are not wrong

You heat one room up by stealing the heat from another

It's called theft.

You, your children and your grandchildren will be the victims as you all live in the cold room now.

Meanwhile the bankers get to keep the heat on and pretend like nothing happened.

Nice.....

it would be if QE was going out in the wild...they cant get it out though...lending is down.

So the bankers are in one room, heating it up with QE while stealing the heat from our room and leaving generations cold.

It's no wonder they are all sweating then, is it? And I thought is was because they'd fecked it all up!

[Giordano Bruno]

You are not wrong

You heat one room up by stealing the heat from another

It's called theft.

You, your children and your grandchildren will be the victims as you all live in the cold room now.

Meanwhile the bankers get to keep the heat on and pretend like nothing happened.

Nice.....

Yes, nice!

Thanks, I needed a second opinion.

[Jim B.]

I agree and you got this from the Guardian?

Wonders will never cease!

Door slammed on ftb's http://www.guardian.co.uk/money/2009/sep/1...uyers-mortgages

and in the comment section, the ever bearful Patrick Collinson 'Too soon to talk about recovery' http://www.guardian.co.uk/money/2009/sep/1...es-house-prices

"So, we still have high house prices, high interest rates, high deposits, and no wholesale funding. Just what sort of base do the "optimists" think this forms for a "recovery"? I'm in the other camp of optimists – those who are optimistic that prices will stagnate or fall for years to come."

[Guest Steve Cook]

I disagree that it has to come out.

currently, their lending is based on MBS and CDO...these are losing value...yet the loans are still out there...for 23 or more years yet.

the QE will have to be retained as the financial assets are finally written down to real market values. the QE will fill the solvency gap.

IMHO of course.

I know what youy are getting at bloo loo and tend to agree with your point about the money being needed to be retained.

However, if the money needs to be retained by the banks to keep the losses at bay, then that represents an amount of money out there in the economy that would have otherwise had to be diverted to where the QEd money is now residing. The fact that it has not means one of two outcomes. Either there is too much money out in the economy now given the significant downturn in economic activity. Or, the relative excess will have to be sucked back out via taxes/reduced public services.

A deflation of the credit supply (which is what fiat really is) via default might really be seen as a natural re-adjustment of the money supply relative to the economic need for it. Painful, but absoloutely necessary.

One way or another, given all of the otherwise bad credit that has now been monetized, someone will have to pay for it somewhere at some point. Either in the form of a debased currency and/or in the form of reduced public services/raised taxes.

Probably both.

Edited September 19, 2009 by Steve Cook

[Kurt Barlow]

Havent had a good one for ever so long. They used to be almost daily.

Maybe all the people who started them are now hunkered down with their guns atop their bean stash?

I will rectify.

It's a seasonal thing. During summer we are all too busy making hay.

Once the clocks go back and its cold and miserable the SG&BB threads will be two a penny

[gus]

Last week I got 3 phone calls from estate agents in my area who I'm listed with, with property's I might be interested in - not one phone call from them in last 6 months though! This is how it started in 2007, buyers are drying up, won't be too long now...

A few months back I made an offer of 350K on a place priced at 499K. The EA laughed at me and said , "I'd buy it myself at that price".

Fast forward.... last week the house had dropped to 415K but still no takers . Called the EA who said he was about to ring me after pressure from the vendor to follow me up. They want to know if I can increase my offer a little. Only one person laughing now!!

[Dr Doom]

In the poll I started a few months back (see below) the consensus was that the next leg down would begin Q4 2009,

which sort of fits, either we'll be proven right ( in the next 3 months ) or house prices will continue rising and rising

indefinitely in the face of falling wages and economic meltdown.

http://www.housepricecrash.co.uk/forum/ind...howtopic=119136

So still lots more housing wealth to evaporate into thin air from whence it came.

Oh what a tangled web we weave, When first we practise to deceive!

[WATP]

I know what youy are getting at bloo loo and tend to agree with your point about the money being needed to be retained.

However, if the money needs to be retained by the banks to keep the losses at bay, then that represents an amount of money out there in the economy that would have otherwise had to be diverted to where the QEd money is now residing. The fact that it has not means one of two outcomes. Either there is too much money out in the economy now given the significant downturn in economic activity. Or, the relative excess will have to be sucked back out via taxes/reduced public services.

A deflation of the credit supply (which is what fiat really is) via default might really be seen as a natural re-adjustment of the money supply relative to the economic need for it. Painful, but absoloutely necessary.

One way or another, given all of the otherwise bad credit that has now been monetized, someone will have to pay for it somewhere at some point. Either in the form of a debased currency and/or in the form of reduced public services/raised taxes.

Probably both.

The best way to think about it is that the banks lent out large amounts of money they did not have to people for mortgages. There were 2 ways to solve the problem. Either force the banks to get their money back creating a massive asset crash or print money and give it to the banks. This second idea is QE.

The main downside to QE is you are debasing the currency. The second problem is you are creating a massive transfer of wealth from people who save to those who borrow.

The Government has added a second leg to supporting the house prices by running a massive public deficit and spending it on wages. As a result there are a large number of people being overpaid. These inflated salaries can be used to get overinflated mortgages.

The mood change in the country is not good for house prices. The cutting of binmen salaries in Leeds is just the start of a wage deflation movement. At the same time we are likely to see the cost of living rising with our currency continuing to fall. People will have less money to spend on rents and mortgages. The best we can hope for is stagnation for many years.

[sleepwello'nights]

A huge portion of the productive futures of every man woman and child has been stolen from them in order to save bad banks today.

Steve this is getting to the nub of the question I keep searching for an answer to.

Credit brings forward demand by making the goods or services available before saving. But by bringing forward demand does it suppress future availability? I look at the analogy of a hotel room. It's there but if no one can pay for it it is unused and wasted, if someone can pay for it with credit then it is utilised and not wasted.

The supply of credit enabled the economy to expand and we have all (well most of us) benefitted from a better standard of living. For sure if the economy had expanded more slowly then we would have had to wait longer for the benefits. Is it a bad thing that we have had the benefits earlier than we otherwise might?

I guess I'm thinking in terms of capacity utilization. The boom gave us higher capacity utilization. Isn't the higher capacity utilization a better outcome. I'm very influenced in my thinking by Steinbeck's novel the Grapes of Wrath. In particular the situation where farmers were destroying crops rather than giving then to starving people because it would reduce the market value of the crops. An absurd outcome.

[Guest Steve Cook]

Steve this is getting to the nub of the question I keep searching for an answer to.

Credit brings forward demand by making the goods or services available before saving. But by bringing forward demand does it suppress future availability? I look at the analogy of a hotel room. It's there but if no one can pay for it it is unused and wasted, if someone can pay for it with credit then it is utilised and not wasted.

The supply of credit enabled the economy to expand and we have all (well most of us) benefitted from a better standard of living. For sure if the economy had expanded more slowly then we would have had to wait longer for the benefits. Is it a bad thing that we have had the benefits earlier than we otherwise might?

I guess I'm thinking in terms of capacity utilization. The boom gave us higher capacity utilization. Isn't the higher capacity utilization a better outcome. I'm very influenced in my thinking by Steinbeck's novel the Grapes of Wrath. In particular the situation where farmers were destroying crops rather than giving then to starving people because it would reduce the market value of the crops. An absurd outcome.

The elephant in the room in all of this is the question of the limits to growth.

If there aren't any, then this crisis we are currently experiencing is nothing more than a little local difficulty that our economies will eventually grow out of. If, on the other hand we have already, or are about to, reach the limits of growth, then the ever-growing drawdown of future production in the form of credit and QE today will only lead to an even greater collapse of our economies tommorow and, ultimately, our way of life. I think you can guess where I stand on this matter.

There's a storm coming. It will surely bring our civilisation down. What we have experienced to date is merely the early squalls of it.

Edited September 20, 2009 by Steve Cook

[Guest Steve Cook]

The elephant in the room in all of this is the question of the limits to growth.

If there aren't any, then this crisis we are currently experiencing is merely a little local difficulty that our economies will eventually grow out of. If, on the other hand we have already, or are about to, reach the limits of growth, then the ever-growing drawdown of future production in the form of credit and QE today will only lead to an even greater collapse of our economies tommorow and, ultimately, our way of life. I think you can guess where I stand on this matter.

There's a storm coming. It will bring our civilisation down.

Is that one tin-foil enough dya reckon, Kurt?........

[babesagainstmachines]

[Guest Steve Cook]

The shape of this chart fits in with my anecdotal experience of the housing market in my own area. Prices began to stick around January and then held or rose slightly up till a month or so ago.

However, they are now definitely heading south again.

Referring back to my OP. I have a feeling in my water the stock markets are about to turn as well.

Then again, as I have also previosly mentioned...I may just have water on the brain.....

Edited September 20, 2009 by Steve Cook

[sleepwello'nights]

The elephant in the room in all of this is the question of the limits to growth.

There's a storm coming. It will surely bring our civilisation down. What we have experienced to date is merely the early squalls of it.

I wonder if we are anywhere near the limits of our growth?

We can be short-sighted in our exploitation of natural resources, but we are starting to becoming more aware of the need to keep to sustainable limits, and indeed I think we are getting better at husbanding our resources. I don't subscribe to the full warnings from the eco-warriors, if we look at climate change for instance I believe that most of the changes are natural phenomena attributable to sunspot activity. Mankind is pretty puny with its effect on the planet.

I do believe that there is a better way; a small example that springs to mind is using photo-voltaic cells to generate a proportion of the energy we use to heat and light our homes. Why can't investment be channeled into making these more affordable? Surely better for the planet in the longer term.

I'm sure there are many more ways that our activities could be channelled to improve our lot rather than letting the economy contract and squander our potential.

[Guest Steve Cook]

I wonder if we are anywhere near the limits of our growth?

We can be short-sighted in our exploitation of natural resources, but we are starting to becoming more aware of the need to keep to sustainable limits, and indeed I think we are getting better at husbanding our resources. I don't subscribe to the full warnings from the eco-warriors, if we look at climate change for instance I believe that most of the changes are natural phenomena attributable to sunspot activity. Mankind is pretty puny with its effect on the planet.

I do believe that there is a better way; a small example that springs to mind is using photo-voltaic cells to generate a proportion of the energy we use to heat and light our homes. Why can't investment be channeled into making these more affordable? Surely better for the planet in the longer term.

I'm sure there are many more ways that our activities could be channelled to improve our lot rather than letting the economy contract and squander our potential.

Time will tell whether my pessimism or your optimism proves to be correct.

As for global climate change, I do believe Man is having a significant effect. How significant is the question as is the timescale of that change. What is of much more pressing concern to me is the lack of easily and cheaply available resources necessary to run a twenty-first century civilisation. This crisis is now on our doorstep.

Mankind probably has a while yet more to run before his race is done. However, modern, hydrocarbon-driven civilisation's days are now surely numbered. Since I am quite fond of it, I find it terribly sad that we are about to lose it.

Edited September 20, 2009 by Steve Cook

[roy?]

I think people should live their lives and not be too concerned with where house prices are going. In general, prices rise for 10-14 years before a correction takes place for 2-3 years. I think there are members who have hovered and lurked for a 5 years for prices to collapse. Yes, they have declined, but why put your life on hold for that time to save money?

It’s not worth being consumed by this cycle. There is more to life.

There are people on this site who tend to live in this world where everything is negative and there is always a dark cloud loitering.

It seems people are losing sight of what really matters.

Just live and stop dawydreaming about an Armageddon.

[Guest Steve Cook]

I think people should live their lives and not be too concerned with where house prices are going. In general, prices rise for 10-14 years before a correction takes place for 2-3 years. I think there are members who have hovered and lurked for a 5 years for prices to collapse. Yes, they have declined, but why put your life on hold for that time to save money?

It’s not worth being consumed by this cycle. There is more to life.

There are people on this site who tend to live in this world where everything is negative and there is always a dark cloud loitering.

It seems people are losing sight of what really matters.

Just live and stop dawydreaming about an Armageddon.

I am bound to say, that it is the unquestioning blind optimism that you favour on the part of people that allowed this whole stinking pile of debt-ridden corruption to lead to the crisis we are currently experiencing. So, forgive me for not taking your advice. Indeed, the pessimism on this site that you appear to chide might be equally described as being evidence of a more realistic grasp of the gravity of the situation.

As for the comments "there is more to life" and "what really matters", of course I agree with these rather bland platitudes in terms of people's personal lives. However, how do you know that the people contributing here do not "live" their lives? It is actually possible for people to live their lives in a personally meaningful way and yet simultaneously have very real concerns about wider issues that will affect themselves, their families and the broader world.

Edited September 20, 2009 by Steve Cook

[i wanna house]

Just reading the Times this morning. National debt rising at £18k per second.

More borrowed last month than the entire 2012 olympics spend.

May I ask who the government borrow money from to have such a debt ?

And why does it matter ?

I really would like to understand the significance of such figures ..

Thanks

[Guest Steve Cook]

May I ask who the government borrow money from to have such a debt ?

And why does it matter ?

I really would like to understand the significance of such figures ..

Thanks

As I understand it....

Either the government borrows from other countries and the money markets.

Or, in the case of QE....

BOE prints up some QEd money

Governement prints up some IOUs

Government exchanges IOUs for QEd money

Hey presto. New magic money for Government.

Given that the BOE is merely an arm of government, the rather obvious question arises of why bother with the IOUs thing? Why not simply print up the money and spend it? My guess is that they do it that way in order to lend an appearance of "legitimacy" to the process.

Edited September 20, 2009 by Steve Cook

[sleepwello'nights]

Either the government borrows from other countries and the money markets.

Or, in the case of QE....

BOE prints up some QEd money

Governement prints up some IOUs

Government exchanges IOUs for QEd money

Hey presto. New magic money for Government.

And we're back to the issue I don't understand. Some new money is printed and off we go. I can't attach any real importance to the £bn's and $bn's that are bandied around. They're meaningless, just digits on a computer screen. They're not a store of wealth because they never existed in the first place. They were conjured into existence by a bankers sleight of hand, the stroke of a pen or whatever.

Oh God, do I sound like Injin?

[Giordano Bruno]

And we're back to the issue I don't understand. Some new money is printed and off we go. I can't attach any real importance to the £bn's and $bn's that are bandied around. They're meaningless, just digits on a computer screen. They're not a store of wealth because they never existed in the first place. They were conjured into existence by a bankers sleight of hand, the stroke of a pen or whatever.

Oh God, do I sound like Injin?

Eh... ... Yes.

[Guest Steve Cook]

And we're back to the issue I don't understand. Some new money is printed and off we go. I can't attach any real importance to the £bn's and $bn's that are bandied around. They're meaningless, just digits on a computer screen. They're not a store of wealth because they never existed in the first place. They were conjured into existence by a bankers sleight of hand, the stroke of a pen or whatever.

Oh God, do I sound like Injin?

Their value is embodied in the future production of you and me. They are a promise to pay in that future production. If that future production happens then their value is real. If it doesn't then they are a lie.

[dissident junk]

His work is discredited, and has been since it first came out. His multiplier theories are total ******. His is beloved by the statists for offering credibility to permanently increasing debt.

Can you tell me your reason why you think his multiplier theories are ****?

The reason being that they have started to appear in a lot of left-wing articles about cuts and the recession. So I actually sat down and tried to model out the reasoning behind the theory.

And I couldn't. The only way I could make the supposed theory work was through accounting for fractional banking. Just exactly how does a 'government pound' spent generate any more demand than a 'private pound' spent? Why is the government spending that money (which has been taken through tax or future tax) any better than not taxing the private citizen and him/her spending that money? Is it because it will be spent as opposed to being saved by the citizen? Or that it will be spent in a certain area?

But these last two queries don't even appear in the theory as I understand it.

I don't understand how government spend can boost consumption by more than the amount originally spent, unless you include some sort of fractional banking. And even it it did in a way I can't quite get at the moment, using debt to spend incurs a financial liability that surely would more than delete the extra benefit?

It's like there is something missing in my understanding of this theory. All I can see is that you account for the same amount of money moving through the system, a bit being saved and the rest being spent over and over until it comes to zero.

So can you explain why you think it is rubbish?

Edited September 20, 2009 by dissident junk